Business climate looks up, rank slips

The country’s business regulatory environment improved from last year but it was not enough to bump up Bangladesh’s ranking in the World Bank’s index on the ease of doing business.

Bangladesh came in at 173 among 189 nations on the Doing Business list, down from 170 last year. India stood at 142, Pakistan 128 and Sri Lanka 99.

Bangladesh slipped because of slower pace of reforms relative to other countries, said Zahid Hussain, lead economist at the World Bank’s Dhaka office.

Besides, new countries have been included in the list and they are ahead of Bangladesh in regulatory reforms, he said.

The ranking does not reflect how the business regulatory environment in the economy has changed since last year, and that is where the Distance to Frontier (DTF) score comes in.

This measure shows how far on average an economy is from the best performance achieved by any economy on each ‘Doing Business’ indicator.

Bangladesh’s DTF score this year was 46.84, up from last year’s 46.4, according to the report of the International Finance Corporation (IFC), the private sector financing arm of the World Bank Group.

The report that focuses on where businesses are best helped and least hindered by governments was released globally yesterday.

South Asia’s average DTF score stood at 54.56; India scored 53.97, Pakistan 56.64 and Sri Lanka 61.36.

At present, starting a business in Bangladesh takes 19.5 days and 9 procedures and costs 16.8 percent of income per capita. In contrast, it takes 28.4 days in India, 19 days in Pakistan and 11 days in Sri Lanka.

In Sri Lanka too, it requires 9 procedures to launch a business. In India, it takes 11.9 and in Pakistan 10.

Globally, Bangladesh stands at 144 in the ranking of 189 economies on the ease of dealing with construction permits. India came at 184, Pakistan 125 and Sri Lanka 60.

The country’s DTF score for construction permits was 61.9, also double of neighbouring India but lower than Pakistan and Sri Lanka, which managed 66.07 and 76.5, respectively.

Access to reliable and affordable electricity is vital for businesses, and according to the data collected by the Doing Business report, it requires 9 procedures, 428.9 days and costs 3,890.1 percent of income per capita to get power connection in Bangladesh.

The country stands at 188 in the raking of 189 economies on the ease of getting electricity.

Ensuring formal property rights is fundamental, and effective administration of land is part of that, the report said.

If formal property transfer is too costly or complicated, formal titles might go informal again.

And where property is informal or poorly administered, it has little chance of being accepted as collateral for loans — limiting access to finance. Registering property in the country requires eight procedures, takes 244 days and costs 7.2 percent of the property value.

Subsequently, its ranking out of 189 is 184 in this field, which is way below its neighbouring countries. Pakistan comes in at 114, followed by India at 121 and Sri Lanka 131.

Two types of frameworks can facilitate access to credit and improve its allocation: credit information systems and borrowers and lenders in collateral and bankruptcy laws, it said.

Credit information systems enable lenders’ rights to view a potential borrower’s financial history (positive or negative) — valuable information to consider when assessing risk. And they permit borrowers to establish a good credit history that will allow easier access to credit.

Sound collateral laws enable businesses to use their assets, especially movable property, as security to generate capital — while strong creditors’ rights have been associated with higher ratios of private sector credit to GDP, the report said.

The economy has a score of zero on the depth of credit information index and a score of 6 on the strength of legal rights index. Higher scores indicate more credit information and stronger legal rights for borrowers and lenders.

Bangladesh stands at 131 on the ease of getting credit. In contrast, India comes in at 36, Sri Lanka at 189 and Pakistan 131.

Protecting minority investors matters for the ability of companies to raise the capital they need to grow, innovate, diversify and compete, according to the report.

Effective regulations define related-party transactions precisely, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the company and set detailed standards of accountability for company insiders.

The economy has a score of 6.1 on the strength of minority investor protection index, with a higher score indicating stronger protections.

Bangladesh stands at 43 in the ranking of 189 economies on the strength of minority investor protection index.

In terms of ease of trading across borders, Bangladesh stands at 140.

Exporting a standard container of goods from Bangladesh requires six documents, takes 28.3 days and costs $1,281. Importing the same container of goods requires 9 documents, takes 33.6 days and costs $1,515, the study found.

Contract enforcement, ever so vital for businesses, takes 1,442 days, costs 66.8 percent of the value of the claim and requires 41 procedures in Bangladesh.

Subsequently, it came second from bottom in the rankings for the ease of enforcing contract. A robust bankruptcy system functions as a filter, ensuring the survival of economically efficient companies and reallocating the resources of inefficient ones, the report said. Fast and cheap insolvency proceedings result in the speedy return of businesses to normal operation and increase returns to creditors.