58382 Bangladesh © 2010 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org All rights reserved. 1 2 3 4 08 07 06 05 A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. 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ISBN: 978-0-8213-7960-8 E-ISBN: 978-0-8213-8630-9 DOI: 10.1596/978-0-8213-7960-8 ISSN: 1729-2638 Library of Congress Cataloging-in-Publication data has been applied for. Printed in the United States Current features News on the Doing Business project http://www.doingbusiness.org Rankings How economies rank-from 1 to 183 http://www.doingbusiness.org/rankings/ Contents Reformers Short summaries of DB2011 reforms, lists of reformers since DB2004 Introduction and a ranking simulation tool and Aggregate Rankings http://www.doingbusiness.org/reforms/ 5 - Year Measure of Historical data Cumulative Change Customized data sets since DB2004 http://www.doingbusiness.org/custom-query/ Starting a Business Methodology and research Dealing with The methodologies and research papers underlying Doing Business Construction Permits http://www.doingbusiness.org/Methodology/ Registering Property Download reports Access to Doing Business reports as well as subnational and regional Getting Credit reports, reform case studies and customized country and regional profiles Protecting Investors http://www.doingbusiness.org/reports/ Paying Taxes Subnational and regional projects Differences in business regulations at the subnational and regional Trading Across Borders level http://www.doingbusiness.org/subnational-reports/ Enforcing Contracts Law Library Closing a Business Online collection of business laws and regulations relating to business and gender issues Doing Business 2011 http://www.doingbusiness.org/law-library/ Business Reforms http://wbl.worldbank.org/ Local partners More than 8,200 specialists in 183 economies who participate in Doing Business http://www.doingbusiness.org/Local-Partners/Doing-Business/ Business Planet Interactive map on the ease of doing business http://rru.worldbank.org/businessplanet Doing Business 2011 : Making a Difference for Entrepreneurs is the eighth in a series of annual reports investigating regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies, from Afghanistan to Zimbabwe, over time. A set of regulations affecting 9 stages of a business's life are measured: starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Data in Doing Business 2011 are current as of June 1, 2010*. The indicators are used to analyze economic outcomes and identify what reforms have worked, where, and why. The Doing Business methodology has limitations. Other areas important to business such as an economy 's proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions, are not studied directly by Doing Business. To make the data comparable across economies, the indicators refer to a specific type of business, generally a local limited liability company operating in the largest business city. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. The data not only highlight the extent of obstacles to doing business; they also help identify the source of those obstacles, supporting policymakers in designing reform. The data set covers 183 economies: 46 in Sub-Saharan Africa, 32 in Latin America and the Caribbean, 25 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 18 in the Middle East and North Africa and 8 in South Asia, as well as 30 OECD high-income economies. The following pages present the summary Doing Business indicators for Bangladesh. The data used for this economy profile come from the Doing Business database and are summarized in graphs. These graphs allow a comparison of the economies in each region not only with one another but also with the "good practice" economy for each indicator. The good-practice economies are identified by their position in each indicator as well as their overall ranking and by their capacity to provide good examples of business regulation to other countries. These good -practice economies do not necessarily rank number 1 in the topic or indicator, but they are in the top 10. More information is available in the full report. Doing Business 2011 : Making a Difference for Entrepreneurs presents the indicators, analyzes their relationship with economic outcomes and recommends reforms. The data, along with information on ordering the report, are available on the Doing Business website (www.doingbusiness.org). * Except for the Paying Taxes indicator that refers to the period January to December of 2009. Note: 2008-2010 Doing Business data and rankings have been recalculated to reflect changes to the methodology and the addition of new economies (in the case of the rankings). 1 Economy Rankings - Ease of Doing Business Bangladesh is ranked 107 out of 183 economies. Singapore is the top ranked economy in the Ease of Doing Business. Bangladesh - Compared to global good practice economy as well as selected economies: Bangladesh's ranking in Doing Business 2011 Rank Doing Business 2011 Ease of Doing Business 107 Starting a Business 79 Dealing with Construction Permits 116 Registering Property 172 Getting Credit 72 Protecting Investors 20 Paying Taxes 93 Trading Across Borders 112 Enforcing Contracts 179 Closing a Business 101 2 Summary of Indicators - Bangladesh Starting a Business Procedures (number) 7 Time (days) 19 Cost (% of income per capita) 33.3 Min. capital (% of income per capita) 0.0 Dealing with Construction Permits Procedures (number) 14 Time (days) 231 Cost (% of income per capita) 558.1 Registering Property Procedures (number) 8 Time (days) 245 Cost (% of property value) 6.6 Getting Credit Strength of legal rights index (0-10) 7 Depth of credit information index (0-6) 2 Public registry coverage (% of adults) 0.6 Private bureau coverage (% of adults) 0.0 Protecting Investors Extent of disclosure index (0-10) 6 Extent of director liability index (0-10) 7 Ease of shareholder suits index (0-10) 7 Strength of investor protection index (0-10) 6.7 Paying Taxes Payments (number per year) 21 Time (hours per year) 302 Profit tax (%) 25.7 Labor tax and contributions (%) 0.0 Other taxes (%) 9.2 Total tax rate (% profit) 35.0 Trading Across Borders Documents to export (number) 6 Time to export (days) 25 Cost to export (US$ per container) 985 Documents to import (number) 8 Time to import (days) 31 Cost to import (US$ per container) 1390 3 Enforcing Contracts Procedures (number) 41 Time (days) 1442 Cost (% of claim) 63.3 Closing a Business Recovery rate (cents on the dollar) 25.8 Time (years) 4.0 Cost (% of estate) 8 The 5 year measure of cumulative change illustrates how the business regulatory environment has changed in 174 economies from Doing Business 2006 to Doing Business 2011. Instead of highlighting which countries currently have the most business friendly environment, this new approach shows the extent to which an economy's regulatory environment for business has changed compared with 5 years ago. This snapshot reflects all cumulative changes in an economy's business regulation as measured by the Doing Business indicators-such as a reduction in the time to start a business thanks to a one-stop shop or an increase in the strength of investor protection index thanks to new stock exchange rules that tighten disclosure requirements for related -party transactions. This figure shows the distribution of cumulative change across the 9 indicators and time between Doing Business 2006 and Doing Business 2011 0.14 0.12 0.10 Doing business has 0.08 become easier (DB 0.06 change score) 0.04 0.02 0.00 Doing business has -0.02 become more difficult or more -0.04 India Bangladesh Maldives Afghanistan Nepal Pakistan costly 6 1. Benchmarking Starting a Business Regulations: Bangladesh is ranked 79 overall for Starting a Business. Ranking of Bangladesh in Starting a Business - Compared to good practice and selected economies: 7 The following table shows Starting a Business data for Bangladesh compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of Min. capital (number) income per (% of income Economies capita) per capita) Denmark* 0.0 New Zealand* 1 1 0.0 Selected Economy Bangladesh 7 19 33.3 0.0 Comparator Economies Afghanistan 4 7 26.7 0.0 India 12 29 56.5 188.8 Maldives 5 9 9.4 3.7 Nepal 7 31 46.6 0.0 Pakistan 10 21 10.7 0.0 * The following economies are also good practice economies for : Procedures (number): Canada Cost (% of income per capita): Slovenia 8 2. Historical data: Starting a Business in Bangladesh Starting a Business data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 98 79 Procedures (number) 8 7 7 7 Time (days) 74 73 44 19 Cost (% of income per capita) 46.2 25.7 36.2 33.3 Min. capital (% of income per capita) 0.0 0.0 0.0 0.0 3. The following graphs illustrate the Starting a Business sub indicators in Bangladesh over the past 4 years: 9 Starting a Business Summary - Bangladesh This table summarizes the procedures and costs associated with setting up a business in Bangladesh. STANDARDIZED COMPANY Legal Form: Private Limited Liability Company City: Dhaka Registration Requirements: No: Procedure Time to complete Cost to complete 1 Verify online the uniqueness of the proposed company name with the 1 BDT 100 Registrar of Joint Stock Companies and Firms 2 Pay adhesive stamp fees at a designated bank 1 BDT 2,000 3 File documents with the Registrar of Joint Stock Companies and Firms 1 BDT 4,125 for registration 4 Make a company seal 1 BDT 40 5 Register with the tax authority 9 no charge 6 * Register for VAT 7 no charge 7 Obtain a trade license 6 BDT 5,000 * Takes place simultaneously with another procedure. 10 Starting a Business Details - Bangladesh Procedure 1 Verify online the uniqueness of the proposed company name with the Registrar of Joint Stock Companies and Firms Time to complete: 1 Cost to complete: BDT 100 Comment: The application for the name clearance of the company is now done on-line. There is no need anymore to provide an application on plain paper with a promoters' resolution proposing the corporate names. The proposed name needs to be sent on-line and clearnace certificate is provided via e-mail by the Deputy Registrar (Name Clearance), RJSC. A print out of the name clearance certificate is to be submitted to the RJSC alongwith the other documents and forms required for the incorporation of the company. The search for the company name was computerized in 2003. Procedure 2 Pay adhesive stamp fees at a designated bank Time to complete: 1 Cost to complete: BDT 2,000 Comment: Until recently, special adhesive stamps of value was affixed to the memorandum of association regardless of the company's authorized capital. Provision of Pay order in lieu of stamp was passed on 20 January 2010 (SRO # 21-Law) under The Stamp Duty (Additional Modes of Payment Act 1974). Applicants do not need anymore to buy physical special adhesive stamps. Payment can be made to the designated bank accounts of the Treasury. Previously all the fees were supposed to be deposited only in selected branches of Sonali Bank. RJSC has now allowed one of the leading private sector banks with extensive national coverage --the BRAC Bank---to collect fees. For an authorized capital of between BDT 100,000 to BDT 1,000,000 the adhesive stamps of total value BDT 2000 is required - BDT 500 is required for the memorandum of association and BDT 1500 for the articles of association. Procedure 3 File documents with the Registrar of Joint Stock Companies and Firms for registration Time to complete: 1 Cost to complete: BDT 4,125 Comment: For filing the memorandum and articles of association, the company pays fees based on the company's authorized capital. For a compnany with a capital of BDT 318320, the cost is BDT 4125 (BDT 2925 registration fees + 1200 registration filing fees). The fees are paid at the designated banks. The following documents are submitted to the registrar: (a) name clearance certificate; (b) memorandum of association; (c) articles of association (d) forms I, VI, IX, X, and XII; (e) proof of payment (i.e. receipt from the designated bank) for Treasury Stamps; (f) encashment certificate (for nonresident subscribers); and (g) tax identification number (for resident subscribers). Procedure 4 Make a company seal 11 Time to complete: 1 Cost to complete: BDT 40 Comment: Procedure 5 Register with the tax authority Time to complete: 9 Cost to complete: no charge Comment: To commence business, every company must register itself with the appropriate taxation authority (Deputy Commission of Taxes of Company Circle, Zonal Taxation Department) under the National Board of Revenue (NBR) and procure a tax identification number for the new company. Procedure 6 Register for VAT Time to complete: 7 Cost to complete: no charge Comment: For VAT purposes, companies may be registered separately with the Customs, Excise, and VAT Commission (under the NBR). The various VATs incurred while operating the business will be regulated by the area NBR Customs Department and VAT and Excise Department. Procedure 7 Obtain a trade license Time to complete: 6 Cost to complete: BDT 5,000 Comment: Companies may obtain a trade license from the City Corporation. The trade license application must be accompanied by the following documents: 1) a certified copy of the company's articles and memorandum of association, 2) a copy of the certificate of incorporation, 3) the company's statement of bank solvency, 4) the company's tax identification number certificate, 5) a copy of the rent agreement for the company's office, 6) three photographs (copies) and 7) particulars of the person in charge of the main corporate functions. 12 13 1. Benchmarking Dealing with Construction Permits Regulations: Bangladesh is ranked 116 overall for Dealing with Construction Permits. Ranking of Bangladesh in Dealing with Construction Permits - Compared to good practice and selected economies: 14 The following table shows Dealing with Construction Permits data for Bangladesh compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) income per Economies capita) Denmark 6 Qatar 0.8 Singapore 25 Selected Economy Bangladesh 14 231 558.1 Comparator Economies Afghanistan 13 340 11355.3 India 37 195 2143.7 Maldives 9 118 20.3 Nepal 15 424 192.1 Pakistan 12 223 575.7 15 2. Historical data: Dealing with Construction Permits in Bangladesh Dealing with Construction Permits data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 116 116 Procedures (number) 14 14 14 14 Time (days) 252 231 231 231 Cost (% of income per capita) 751.0 739.8 645.1 558.1 3. The following graphs illustrate the Dealing with Construction Permits sub indicators in Bangladesh over the past 4 years: 16 Dealing with Construction Permits in Bangladesh The table below summarizes the procedures, time, and costs to build a warehouse in Bangladesh. BUILDING A WAREHOUSE City: Dhaka Registration Requirements: No: Procedure Time to complete Cost to complete 1 Obtain cadastral survey map from Land Records Department 3 days USD 25 2 Obtain zoning clearance 45 days no charge 3 Obtain project clearance from the local authority (Ward Commissioner, 3 days no charge Dhaka City Corporation) 4 Obtain project clearance from the Environment Department of Rajuk 30 days USD 80 5 Obtain project clearance and building permit from the City Development 105 days BDT 30,000 Authority (RAJUK) 6 Receive excavation inspection 1 day no charge 7 Receive foundation inspection 1 day no charge 8 Tax inspector from Dhaka City Corporation inspects the completed 1 day no charge warehouse 17 9 Apply for electricity connection 1 day no charge 10 Receive electricity inspection 1 day no charge 11 Obtain electricity connection 40 days BDT 165,000 12 * Request telephone connection 1 day USD 50 13 * Telephone inspector makes the connection 7 days no charge 14 * Obtain water and sewerage connection 10 days BDT 30,000 * Takes place simultaneously with another procedure. 18 Dealing with Construction Permits Details - Bangladesh Procedure 1 Obtain cadastral survey map from Land Records Department Time to complete: 3 days Cost to complete: USD 25 Agency: Land Records Department Comment: Procedure 2 Obtain zoning clearance Time to complete: 45 days Cost to complete: no charge Comment: To obtain clearance, BuildCo must present proof of land ownership and the cadastral maps showing the exact site location. Anticorruption drive of the interim government of Bangladesh stemmed from massive violations of building regulations on one hand and collapse of buildings with casualties on the other hand impacted on the work of some areas of construction regulation. Obtaining zoning clearance before would take on average 2-3 months if no bribes paid, while by law it should be only 15 days. The Building Committee's drive is to make this procedure come as close to the official time-limit made this procedure possible to be completed in 45 days. Procedure 3 Obtain project clearance from the local authority (Ward Commissioner, Dhaka City Corporation) Time to complete: 3 days Cost to complete: no charge Agency: Dhaka City Corporation Comment: To obtain the local authority's approval, BuildCo must submit an application with the proposed design plans. The approval may take anywhere from 3 to 7 days. Procedure 4 Obtain project clearance from the Environment Department of Rajuk Time to complete: 30 days Cost to complete: USD 80 Agency: Environment Department of Rajuk Comment: The Environment Department of Rajuk issues three types of clearance, based on the type of establishment green (nonpolluting), orange (low polluting), and red (high polluting). For the green category, the environmental clearance is issued for a fee of USD 25. If unofficial payments are made, environmental clearance can be obtained in a week. For other categories, the cost and time to get clearance are higher. To obtain project clearance, the following documents are required, depending on the environmental category: - Approval from the Ward Commissioner, Dhaka City Corporation. 19 - Project profile, feasibility report, and drawings. - Land ownership documents. - Cadastral survey map and location map. - Trade license (copy). - Registration of the Board of Investment (copy). - EIA/ IEE/ EMP Report. - Fees payable to DOE. Total project cost Fees (USD) Renewal fees USD 0­0.08 million USD 25 USD 5 USD 0.08 million­0.16 million USD 50 USD 12 USD 0.16 million­0.8 million USD 80 USD 20 USD 0.8 million­1.6 million USD 160 USD 40 USD 1.6 million­32 million USD 400 USD125 USD 32 million­80 million USD 800 USD250 USD 80-million and above USD1,600 USD 400 Procedure 5 Obtain project clearance and building permit from the City Development Authority (RAJUK) Time to complete: 105 days Cost to complete: BDT 30,000 Agency: City Development Authority (RAJUK) Comment: The approving panel of the City Development Authority (RAJUK) meets weekly to discuss cases. In early 2007, officials in the Ministry of Works imposed a 30-day time limit on the process. As of August 2007 under the new Building regulation the RAJUK introduced a single window approach to procedures related to obtaining a building permit. However applicants have to still visit each agency responsible for different parts of construction approval separately due to inconsistencies in legislation. Fire Department raised its disagreement with RAJUK on building that do not require fire clearance. According to government regulation buildings higher 10 floors are subject to the clearance, however Fire Department uses the old regulations by which anything above 6 floors is subject to their supervision. Each agency that provides approval is given 7 day time-limit, which is still not complied with. Before building permit is issued the authorized officers have to visit the site to ascertain its location according to the drawings and maps. However with only a handful of officers and massive number of applications this becomes impossible to comply with an original 30 day time limit that government set. The procedure still takes on average 3-5 month. Procedure 6 Receive excavation inspection Time to complete: 1 day Cost to complete: no charge Agency: City Development Authority (RAJUK) Comment: Due to lack of sufficient manpower of the authority, it takes more than a week to visit site. Procedure 7 Receive foundation inspection Time to complete: 1 day 20 Cost to complete: no charge Agency: City Development Authority (RAJUK) Comment: Due to lack of sufficient manpower of the authority, it takes more than a week to visit site. Procedure 8 Tax inspector from Dhaka City Corporation inspects the completed warehouse Time to complete: 1 day Cost to complete: no charge Agency: Dhaka City Corporation Comment: A tax inspector from the Dhaka City Corporation visits the site to assess the completed building (1 day, no appointment or fee). From then on, the tax authority will send the annual tax bill which will arrive 30 days later. Procedure 9 Apply for electricity connection Time to complete: 1 day Cost to complete: no charge Agency: Dhaka Electric Supply Authority (DESA) or Dhaka Electric Supply Company (DESCO) Comment: Procedure 10 Receive electricity inspection Time to complete: 1 day Cost to complete: no charge Agency: Dhaka Electric Supply Authority (DESA) or Dhaka Electric Supply Company (DESCO) Comment: Procedure 11 Obtain electricity connection Time to complete: 40 days Cost to complete: BDT 165,000 Agency: Dhaka Electric Supply Authority (DESA) or Dhaka Electric Supply Company (DESCO) Comment: For electrical connections of 50 kW and over, the fee is BDT 165,000. This includes the cost of a transformer required for a high-volume connection. Procedure 12 Request telephone connection Time to complete: 1 day 21 Cost to complete: USD 50 Agency: Bangladesh Telegraph and Telephone Board Comment: The time usually depends on the availability of lines in the construction area. Mobile telephone connections may be obtained within a day. But it takes about 30 days to receive a fixed telephone connection from the Bangladesh Telegraph and Telephone Board. Procedure 13 Telephone inspector makes the connection Time to complete: 7 days Cost to complete: no charge Agency: Bangladesh Telegraph and Telephone Board Comment: Procedure 14 Obtain water and sewerage connection Time to complete: 10 days Cost to complete: BDT 30,000 Agency: Dhaka Water and Sewerage Authority (WASA) Comment: 22 23 1. Benchmarking Registering Property Regulations: Bangladesh is ranked 172 overall for Registering Property. Ranking of Bangladesh in Registering Property - Compared to good practice and selected economies: 24 The following table shows Registering Property data for Bangladesh compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) property Economies value) New Zealand* 2 Norway* 1 Saudi Arabia 0.0 Selected Economy Bangladesh 8 245 6.6 Comparator Economies Afghanistan 9 250 5.0 India 5 44 7.4 Maldives 6 57 16.9 Nepal 3 5 4.8 Pakistan 6 50 9.2 * The following economies are also good practice economies for : Procedures (number): United Arab Emirates Time (days): Saudi Arabia, Thailand, United Arab Emirates 25 2. Historical data: Registering Property in Bangladesh Registering Property data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 177 172 Procedures (number) 8 8 8 8 Time (days) 425 245 245 245 Cost (% of property value) 10.3 10.4 10.2 6.6 3. The following graphs illustrate the Registering Property sub indicators in Bangladesh over the past 4 years: 26 Registering Property in Bangladesh This topic examines the steps, time, and cost involved in registering property in Bangladesh. STANDARDIZED PROPERTY Property Value: 2,115,223.39 City: Dhaka Registration Requirements: No: Procedure Time to complete Cost to complete 1 * Verify the record of rights from the Land Office (also 15 - 60 days BDT 2,000 known as Land Revenue Office) (simultaneous with procedures 2 and 3) 2 * Conduct RS Mutation on property 60 days (simultaneous BDT 6000 approximately with procedures 1 and 3) 3 * Obtain inspection for RS Mutation 60 days (simultaneous included in procedure 2 with procedures 1 and 2) 4 Obtain the non-encumbrance certificate from the 2-3 days BDT 500-700 relevant Sub-registry office 5 Prepare deed of transfer and pay stamp duty 1 day 3% of property value (Stamp duty) 6 Pay capital gains tax, registration fee, VAT and other 1 day local government tax (1%) taxes at a designated bank + registration fee (2%) of property value 27 7 * Apply for registration at the relevant Sub-registry 180 days Already paid in Procedure 6 (simultaneous with procedure 8) 8 * Register the change in ownership at the Land 45 - 60 days BDT 5,000 Revenue Office (simultaneous with procedure 7) * Takes place simultaneously with another procedure. 28 Registering Property Details - Bangladesh Procedure 1 Verify the record of rights from the Land Office (also known as Land Revenue Office) Time to complete: 15 - 60 days (simultaneous with procedures 2 and 3) Cost to complete: BDT 2,000 Agency: Land Office or Land Revenue Office Comment: Parties check that land tax payments are up to date. The land administration system in Bangladesh separates records of ownership and those on revenue as such: a. Land Records Office for land records, surveys, publication and maintenance of records under the directorate of land records and survey (Ministry of Land). b. Land Office or Land Revenue Office under Ministry of Land. There are 11 administrative offices in each upajela (subdistrict) c. There are 64 districts in Bangladesh but 61 registration districts. 3 hill districts do not have registration centres. In Dhaka, the district land registration office has 11 subregistrar offices under the Ministry of Law. Procedure 2 Conduct RS Mutation on property Time to complete: 60 days (simultaneous with procedures 1 and 3) Cost to complete: BDT 6000 approximately Agency: Assistant Commissioner of Lands (Tahsil) Comment: Since the last survey on Dhaka was done, transfers of property titles created before then must be converted (mutated) to the new survey. This is requested at the Assistant Commissioner of Lands (Tahsil). In order to obtain this, an application is required to be made to the concerned Assistant Commissioner of Land with particulars of the property. The Assistant Commissioner forwards the same to the Tahsil Office, who are responsible for conducting the relevant survey and providing a report to AC Land. Upon receiving the report, AC Land renders the mutation certificate. The inspection is noted in procedure 3. In the future, properties will have to be converted to the Mahanagar survey, which is currently underway. Procedure 3 Obtain inspection for RS Mutation Time to complete: 60 days (simultaneous with procedures 1 and 2) Cost to complete: included in procedure 2 Agency: Assistant Commissioner of Lands (Tahsil) Comment: The permission is only mandatory when the property is under the control of either the Ministry of Works (National Housing Authority) or RAJUK (Dhaka Improvement Trust since 1952 until it was renamed Rajdhani Unnayan Kartripakkh ­RAJUK in 1982). Although the permission is usually always granted, unofficial payments are still paid in order to expedite the process and guarantee approval, which amount to BDT 20,000. The buyer also checks that the property is up to date with payments to the City Corporation 29 Revenue Department, gas utility service, electricity utility service, and the water utility service to make sure that there is no outstanding dues payable so that the those liabilities do not transfer to him. Each of these checks will cost around BDT 625. These are standard steps customary in Bangladesh and not mandatory for registration. Procedure 4 Obtain the non-encumbrance certificate from the relevant Sub-registry office Time to complete: 2-3 days Cost to complete: BDT 500-700 Agency: Sub-registry Comment: The buyer checks the legal status of the land (mortgaged or leased or ownership) at the relevant Sub-registry. Procedure 5 Prepare deed of transfer and pay stamp duty Time to complete: 1 day Cost to complete: 3% of property value (Stamp duty) Comment: A lawyer may prepare the transfer deed, but it can be prepared by the parties themselves. If a lawyer does it, the fees will be around BDT 6,000. The deed must be prepared in stamped paper that will cost 3% of the property value to get it. This represents the stamp duty. Procedure 6 Pay capital gains tax, registration fee, VAT and other taxes at a designated bank Time to complete: 1 day Cost to complete: local government tax (1%) + registration fee (2%) of property value Agency: Designated Bank Comment: Registration fee = 2% Local Government Tax = 1% The 2% registration fee is payable to the Bank in favor of the sub-registry office and the receipt is to be presented at the moment of applying for registration. Also, Capital Gains Tax = 2% (Not applicable in rural areas for agriculture. Applicable to land above 100 000 Takas, irrespective of when the transfer was made) and VAT = 1.5% (Applicable only for municipal corporation area payable by private housing and flat developers and commercial businesses) have to be paid at this stage. Procedure 7 Apply for registration at the relevant Sub-registry Time to complete: 180 days (simultaneous with procedure 8) Cost to complete: Already paid in Procedure 6 Agency: Municipal Deed Registry Office Comment: The buyer applies for registration at the Municipal Deed Registry Office, presenting the receipts of payment for the registration fees obtained in Procedure 6. 30 A certified registration document is obtained within a week for the buyer's record. The original sale deed/certificate require about 6 months to be obtained. Procedure 8 Register the change in ownership at the Land Revenue Office Time to complete: 45 - 60 days (simultaneous with procedure 7) Cost to complete: BDT 5,000 Agency: Land Revenue Office Comment: The change of ownership must be registered in the Land Revenue Office. The property is recorded under the name of the new owner, who is responsible for paying the land taxes from the day it is transferred. 31 32 1. Benchmarking Getting Credit Regulations: Bangladesh is ranked 72 overall for Getting Credit. Ranking of Bangladesh in Getting Credit - Compared to good practice and selected economies: 33 The following table shows Getting Credit data for Bangladesh compared to good practice and comparator economies: Good Practice Strength of Depth of Public Private legal rights credit registry bureau Economies index (0-10) information coverage (% coverage (% index (0-6) of adults) of adults) New Zealand* 100.0 Portugal 67.1 Singapore* 10 United Kingdom 6 Selected Economy Bangladesh 7 2 0.6 0.0 Comparator Economies Afghanistan 6 0 0.0 0.0 India 8 4 0.0 10.0 Maldives 4 0 0.0 0.0 Nepal 6 2 0.0 0.3 Pakistan 6 4 5.8 1.4 * The following economies are also good practice economies for : Strength of legal rights index (0-10): Hong Kong, China, Kenya, Kyrgyz Republic, Malaysia Private bureau coverage (% of adults): Argentina, Australia, Canada, Iceland, Ireland, Norway, Sweden, United Kingdom, United States 27 countries have the highest credit information index. 34 2. Historical data: Getting Credit in Bangladesh Getting Credit data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 69 72 Strength of legal rights index (0-10) 7 7 7 7 Depth of credit information index (0-6) 2 2 2 2 Private bureau coverage (% of adults) 0.0 0.0 0.0 0.0 Public registry coverage (% of adults) 0.7 0.6 0.9 0.6 3. The following graphs illustrate the Getting Credit sub indicators in Bangladesh over the past 4 years: 35 Getting Credit in Bangladesh The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit registries in Bangladesh. Getting Credit Indicators (2010) Indicator Private credit Public credit Private bureau coverage (% of adults) 2 bureau registry Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative data distributed? No Yes 1 Does the registry distribute credit information from retailers, trade No No 0 creditors or utility companies as well as financial institutions? Are more than 2 years of historical credit information distributed? No No 0 Is data on all loans below 1% of income per capita distributed? No No 0 Is it guaranteed by law that borrowers can inspect their data in the No No 0 largest credit registry? Coverage 0.0 0.6 Number of individuals 0 .. Number of firms 0 .. 36 Strength of legal rights index (0-10) 7 Can any business use movable assets as collateral while keeping possession of the assets; and any financial Yes institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, Yes without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without Yes requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, Yes proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements, so that all types of obligations Yes and debts can be secured by stating a maximum amount rather than a specific amount between the parties ? Is a collateral registry in operation, that is unified geographically and by asset type, as well as indexed by the No grantor's name of a security right ? Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? Yes Do secured creditors have absolute priority to their collateral in bankruptcy procedures? No During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? No Does the law authorize parties to agree on out of court enforcement? Yes 37 38 1. Benchmarking Protecting Investors Regulations: Bangladesh is ranked 20 overall for Protecting Investors. Ranking of Bangladesh in Protecting Investors - Compared to good practice and selected economies: 39 The following table shows Protecting Investors data for Bangladesh compared to good practice and comparator economies: Good Practice Strength of investor Economies protection index (0-10) New Zealand 9.7 Selected Economy Bangladesh 6.7 Comparator Economies Afghanistan 1.0 India 6.0 Maldives 5.3 Nepal 5.3 Pakistan 6.3 40 2. Historical data: Protecting Investors in Bangladesh Protecting Investors data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 20 20 Strength of investor protection index (0-10) 6.7 6.7 6.7 6.7 3. The following graph illustrates the Protecting Investors index in Bangladesh compared to best practice and selected Economies: 9.7 6.7 6.3 6.0 5.3 5.3 1.0 an a sh di nd al es an st e ep In iv ki ad ist a al d Pa N n l al Ze ng ha M Ba fg ew A N Note: The higher the score, the greater the investor protection. 41 Protecting Investors in Bangladesh The table below provides a full breakdown of how the disclosure, director liability, and shareholder suits indexes are calculated in Bangladesh. Protecting Investors Data (2010) Indicator Extent of disclosure index (0-10) 6 2 What corporate body provides legally sufficient approval for the transaction? 0 Whether immediate disclosure of the transaction to the public and/or shareholders is required? 2 Whether disclosure of the transaction in published periodic filings (annual reports) is required? 2 Whether disclosure of the conflict of interest by Mr. James to the board of directors is required? 0 Whether an external body must review the terms of the transaction before it takes place? Extent of director liability index (0-10) 7 1 Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller transaction causes to the company? 2 Whether shareholders can hold the approving body (the CEO or board of directors) liable for the damage that the Buyer-Seller transaction causes to the company? 1 Whether a court can void the transaction upon a successful claim by a shareholder plaintiff? 1 Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff? 42 1 Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff? 0 Whether fines and imprisonment can be applied against Mr. James? 1 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction causes to the company? Ease of shareholder suits index (0-10) 7 3 Whether the plaintiff can obtain any documents from the defendant and witnesses during trial? 0 Whether the plaintiff can directly question the defendant and witnesses during trial? 1 Whether the plaintiff can request categories of documents from the defendant without identifying specific ones? 1 Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the transaction? 1 Whether the level of proof required for civil suits is lower than that of criminal cases? 1 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before filing suit? Strength of investor protection index (0-10) 6.7 43 44 1. Benchmarking Paying Taxes Regulations: Bangladesh is ranked 93 overall for Paying Taxes. Ranking of Bangladesh in Paying Taxes - Compared to good practice and selected economies: 45 The following table shows Paying Taxes data for Bangladesh compared to good practice and comparator economies: Good Practice Payments Time (hours Total tax rate (number per per year) (% profit) Economies year) Maldives* 3 0 Timor-Leste 0.2 Selected Economy Bangladesh 21 302 35.0 Comparator Economies Afghanistan 8 275 36.4 India 56 258 63.3 Maldives 3 0 9.3 Nepal 34 338 38.2 Pakistan 47 560 31.6 * The following economies are also good practice economies for : Payments (number per year): Qatar 46 2. Historical data: Paying Taxes in Bangladesh Paying Taxes data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 87 93 Total tax rate (% profit) 37.0 36.1 35.0 35.0 Payments (number per year) 21 21 21 21 Time (hours per year) 400 302 302 302 3. The following graphs illustrate the Paying Taxes sub indicators in Bangladesh over the past 4 years: 47 Paying Taxes in Bangladesh The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year in Bangladesh, as well as measures of administrative burden in paying taxes. Tax or mandatory Payments Notes on Time Statutory tax Tax Totaltax rate Notes on contribution (number) Payments (hours) rate base (% profit) TTR Stamp duty on contracts 1 varies type of contract Vehicle tax 1 fixed fee Value added tax (VAT) 12 162 15.0% value added Tax on interest 0 withheld 10.0% interest 0.30 income Capital gains tax 1 15.0% On net gain 0.80 Municipal tax (property 1 10.0% rental value 9.20 tax) Corporate income tax 5 140 37.5% taxable profit 25.00 Totals 21 302 35.0 48 49 1. Benchmarking Trading Across Borders Regulations: Bangladesh is ranked 112 overall for Trading Across Borders. Ranking of Bangladesh in Trading Across Borders - Compared to good practice and selected economies: 50 The following table shows Trading Across Borders data for Bangladesh compared to good practice and comparator economies: Good Practice Documents to Time to Cost to Documents to Time to Cost to export export (days) export (US$ import import (days) import (US$ Economies (number) per (number) per container) container) Denmark* 5 France 2 2 Malaysia 450 Singapore 4 439 Selected Economy Bangladesh 6 25 985 8 31 1390 Comparator Economies Afghanistan 12 74 3865 11 77 3830 India 8 17 1055 9 20 1025 Maldives 8 21 1550 9 22 1526 Nepal 9 41 1960 10 35 2095 Pakistan 9 21 611 8 18 680 * The following economies are also good practice economies for : Time to export (days): Estonia 51 2. Historical data: Trading Across Borders in Bangladesh Trading Across Borders data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 110 112 Cost to export (US$ per container) 844 970 970 985 Cost to import (US$ per container) 1148 1375 1375 1390 Documents to export (number) 6 6 6 6 Documents to import (number) 8 8 8 8 Time to export (days) 28 28 25 25 Time to import (days) 32 32 29 31 3. The following graphs illustrate the Trading Across Borders sub indicators in Bangladesh over the past 4 years: 52 53 Trading Across Borders in Bangladesh These tables list the procedures necessary to import and export a standardized cargo of goods in Bangladesh. The documents required to export and import the goods are also shown. Nature of Export Procedures (2010) Duration (days) US$ Cost Documents preparation 14 290 Customs clearance and technical control 3 120 Ports and terminal handling 5 435 Inland transportation and handling 3 140 Totals 25 985 Nature of Import Procedures (2010) Duration (days) US$ Cost Documents preparation 22 455 Customs clearance and technical control 3 135 Ports and terminal handling 4 600 Inland transportation and handling 2 200 Totals 31 1390 54 Documents for Export and Import Export Bill of lading Certificate of origin Commercial invoice Customs export declaration Packing list Pre-shipment inspection clean report of findings Import Bill of lading Cargo release order Certificate of origin Commercial invoice Customs import declaration Packing list Technical standard/health certificate Terminal handling receipts 55 56 1. Benchmarking Enforcing Contracts Regulations: Bangladesh is ranked 179 overall for Enforcing Contracts. Ranking of Bangladesh in Enforcing Contracts - Compared to good practice and selected economies: 57 The following table shows Enforcing Contracts data for Bangladesh compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) claim) Economies Bhutan 0.1 Ireland 20 Singapore 150 Selected Economy Bangladesh 41 1442 63.3 Comparator Economies Afghanistan 47 1642 25.0 India 46 1420 39.6 Maldives 41 665 16.5 Nepal 39 735 26.8 Pakistan 47 976 23.8 58 2. Historical data: Enforcing Contracts in Bangladesh Enforcing Contracts data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 179 179 Procedures (number) 41 41 41 41 Time (days) 1442 1442 1442 1442 Cost (% of claim) 63.3 63.3 63.3 63.3 3. The following graphs illustrate the Enforcing Contracts sub indicators in Bangladesh over the past 4 years: 59 Enforcing Contracts in Bangladesh This topic looks at the efficiency of contract enforcement in Bangladesh. Nature of Procedure (2010) Indicator Procedures (number) 41 Time (days) 1442 Filing and service 30.0 Trial and judgment 1,047.0 Enforcement of judgment 365.0 Cost (% of claim)* 63.30 Attorney cost (% of claim) 36.5 Court cost (% of claim) 8.3 Enforcement Cost (% of claim) 18.5 60 Court information: Dhaka Assistant Judge's Court ("Dhaka Shohokari Judge Court") * Claim assumed to be equivalent to 200% of income per capita. 61 62 1. Benchmarking Closing Business Regulations: Bangladesh is ranked 101 overall for Closing a Business. Ranking of Bangladesh in Closing Business - Compared to good practice and selected economies: 63 The following table shows Closing Business data for Bangladesh compared to good practice and comparator economies: Good Practice Recovery rate Time (years) Cost (% of (cents on the estate) Economies dollar) Ireland 0.4 Japan 92.7 Singapore* 1 Selected Economy Bangladesh 25.8 4.0 8 Comparator Economies Afghanistan 0.0 no practice no practice India 16.3 7.0 9 Maldives 18.2 6.7 4 Nepal 24.5 5.0 9 Pakistan 36.5 2.8 4 * The following economies are also good practice economies for : Cost (% of estate): Colombia, Kuwait, Norway 64 2. Historical data: Closing Business in Bangladesh Closing a Business data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 107 101 Time (years) 4.0 4.0 4.0 4.0 Cost (% of estate) 8 8 8 8 Recovery rate (cents on the dollar) 23.2 23.2 23.2 25.8 3. The following graphs illustrate the Closing Business sub indicators in Bangladesh over the past 4 years: 65 Since 2004 Doing Business has been tracking reforms aimed at simplifying business regulations, strengthening property rights, opening access to credit and enforcing contracts by measuring their impact on 10 indicator sets . * Nearly 1,000 reforms have had an impact on these indicators. Doing Business 2011, covering June 2009 to June 2010, reports that 117 economies implemented 216 reforms to make it easier to start a business. 64% of economies measured by Doing Business have reformed this year, focusing on easing business start-up, lightening the tax burden, simplifying import and export regulations and improving credit information systems. The top 10 most-improved in Doing Business 2011 Dealing with Construction Trading Across Borders Positive Change Registering Property Enforcing Contracts Protecting Investors Starting a Business Closing a Business Negative Change Getting Credit Paying Taxes Permits Economy Kazakhstan Rwanda Peru Vietnam Cape Verde Tajikistan Zambia Hungary Grenada Brunei Darussalam * For Doing Business 2011 the Employing Workers indicator is not included in the aggregate ease of doing business ranking. 66 Summary of changes to business regulation in top 10 most improved economies in Doing Business 2011 and selected comparator economies. Bangladesh Bangladesh made business start-up easier by eliminating the requirement to buy adhesive stamps and further enhancing the online registration system. Bangladesh reduced the property transfer tax to 6.7% of the property value. Brunei Darussalam Brunei Darussalam made starting a business easier by improving efficiency at the company registrar and implementing an electronic system for name searches. Brunei Darussalam reduced the corporate income tax rate from 23.5% to 22% while also introducing a lower tax rate for small businesses, ranging from 5.5% to 11%. The introduction of an electronic customs system in Brunei Darussalam made trading easier. Cape Verde Cape Verde made start-up easier by eliminating the need for a municipal inspection before a business begins operations and computerizing the system for delivering the municipal license. Cape Verde eased property registration by switching from fees based on a percentage of the property value to lower fixed rates. Cape Verde abolished the stamp duties on sales and checks. Grenada Grenada eased business start-up by transferring responsibility for the commercial registry from the courts to the civil administration. The appointment of a registrar focusing only on property cut the time needed to transfer property in Grenada by almost half. Grenada's customs administration made trading faster by simplifying procedures, reducing inspections, improving staff training and enhancing communication with users. Hungary Hungary implemented a time limit for the issuance of building permits. Hungary reduced the property registration fee by 6% of the property value. Hungary simplified taxes and tax bases. Amendments to Hungary's bankruptcy law encourage insolvent companies to consider reaching agreements with creditors out of court so as to avoid bankruptcy. India India eased business start-up by establishing an online VAT registration system and replacing the physical stamp previously required with an online version. India reduced the administrative burden of paying taxes by abolishing the fringe benefit tax and improving electronic payment. Kazakhstan Kazakhstan eased business start-up by reducing the minimum capital requirement to 100 tenge ($0.70) and eliminating the need to have the memorandum of association and company charter notarized. Kazakhstan made dealing with construction permits easier by implementing a one-stop shop related to technical conditions for utilities. Kazakhstan strengthened investor protections by requiring greater corporate disclosure in company annual reports. Kazakhstan speeded up trade through efforts to modernize customs, including implementation of a risk management system and improvements in customs automation. Maldives Maldives now allows registered companies to own land as long as all company shares are owned by Maldivians. Pakistan Pakistan made registering property more expensive by doubling the capital value tax to 4%. Pakistan reduced the time to export by improving electronic communication between the Karachi Port authorities and the private terminals, which have also boosted efficiency by introducing new equipment. Peru Peru eased business start-up by simplifying the requirements for operating licenses and creating an online one-stop shop for business registration. Peru streamlined construction permitting by implementing administrative reforms. Peru introduced fast-track procedures at the land registry, cutting by half the time needed to register property. Peru made trading easier by implementing a new web-based electronic data interchange system, risk-based inspections and payment deferrals. Rwanda Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and implementing new time limits for the issuance of various permits. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that loans of all sizes be reported to the central bank's public credit registry. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with Uganda and other neighbors, leading to an improvement in the trade logistics environment. 67 Tajikistan Tajikistan made starting a business easier by creating a one-stop shop that consolidates registration with the state and the tax authority. Tajikistan strengthened investor protections by requiring greater corporate disclosure in the annual report and greater access to corporate information for minority investors. Tajikistan lowered its corporate income tax rate. Vietnam Vietnam eased company start-up by creating a one-stop shop that combines the processes for obtaining a business license and tax license and by eliminating the need for a seal for company licensing. Vietnam made dealing with construction permits easier by reducing the cost to register newly completed buildings by 50% and transferring the authority to register buildings from local authorities to the Department of National Resources and Environment. Vietnam improved its credit information system by allowing borrowers to examine their own credit report and correct errors. Zambia Zambia eased business start-up by eliminating the minimum capital requirement. Zambia eased trade by implementing a one-stop border post with Zimbabwe, launching web-based submission of customs declarations and introducing scanning machines at border posts. Zambia improved contract enforcement by introducing an electronic case management system in the courts that provides electronic referencing of cases, a database of laws, real-time court reporting and public access to court records. 68 69