Licence raj still makes doing business in Bangladesh hard

Infograph: TBS

When a large Vietnamese investor visited Dhaka in 2018 to explore opportunities in Bangladesh's footwear and leather processing sector, he asked a simple question: How many licences and approvals are needed to run a factory?

"Around 30 to 35," replied Nasir Khan, managing director of Jennys Shoes, an export-oriented factory.

What followed ended the conversation. The visitor was told that securing all approvals could take up to two years and that some licences might expire before renewal is processed. The investment idea was dropped on the spot.

The Vietnamese entrepreneur exports around $1 billion worth of leather and footwear annually from Vietnam. Meanwhile, Bangladesh, despite having abundant rawhide and a long history in leather processing, has remained stuck at around $1 billion in footwear exports for nearly 25 years.

The story is not an outlier. It captures the persistent regulatory drag that has long defined the cost of doing business in Bangladesh and continues to do so even after the political change in August last year.

Businesses say that while Bangladeshi entrepreneurs remain burdened by numerous licences and documentation requirements, Vietnam has streamlined its business procedures to be more investor-friendly, with factories needing just five licences that require no renewal. The contrast is reflected in export performance: Vietnam earned about $400 billion from exports in 2024, nearly equal to its GDP, whereas Bangladesh's exports accounted for less than 12% of its GDP in FY2024–25.

Little change on the ground

When the interim government took office after the ouster of Sheikh Hasina in August last year, it promised to improve the business climate, ease regulatory bottlenecks and restore investor confidence.

As part of that move, Chowdhury Ashik Mahmud Bin Harun has been made the executive chairman of the Bangladesh Investment Development Authority (Bida) and the Bangladesh Economic Zones Authority (Beza), two key investment promotion agencies under the Chief Adviser's Office. Ashik also leads the Public-Private Partnership Authority (PPPA) and the Moheshkhali Integrated Development Authority (Mida).

Businesses say that the promise has not translated into meaningful change.

"We expected that the interim government would take initiatives to ease business processes. But that did not happen," said Nasir Khan.

"We need so many licences and renew many every year, while Vietnam needs only five licences and there is no renewal issue," he added.

Licences everywhere, renewals every year 

On the ground, the licensing burden is even heavier.

Operating a textile mill requires at least 20 licences, a spinning mill 22, an LPG plant 26, and a pharmaceutical factory at least 24. Moreover, some of these licences must be renewed every six months, while others require annual renewal.

"Forget reducing the number of licences for spinning mills, ours has actually increased by two," said Mohd Khorshed Alam, director of the Bangladesh Textile Mills Association (BTMA) and president of the Bangladesh China Chamber of Commerce and Industry.

The two new licences – a generator licence and a generator inspection licence – must both be renewed every six months, he said.

Now, another may be added.

"The Department of Inspection for Factories and Establishments (Dife) is considering a new licence for workers' toilets," Khorshed Alam said. "They want to verify how millers manage toilet facilities."

Paperwork that never ends

The licensing maze comes with an avalanche of documentation.

A footwear manufacturer must submit around 190 documents to obtain or renew all required licences."We don't see any headway in easing the process of doing business," said Nasir Khan.

"Bida held a meeting after learning how many licences a footwear factory needs, but nothing has improved," he added.

Large firms struggle, SMEs suffer more

For large firms, the cost is high. For small and medium enterprises, it can be crippling.

Rubina Akter Munni, owner of Design by Rubina, said SMEs face mounting challenges despite rising demand in leather, jute, handicrafts and ceramics.

"The main challenges are VAT, compliance and licensing," she said.

After relocating her factory to Gazipur, she spent two months trying to obtain a trade licence.

"I had to run around for two months. Those who issue licences do not understand SMEs. One lawyer failed, and another somehow managed to get the licence after a lot of effort."

VAT issues compound the problem.

"It's the same business and the same VAT. But simply changing location creates new VAT complications. I have been paying taxes for years," she said.

"If these issues were simplified, we could perform much better."

Costs beyond the rulebook

Beyond formal requirements, businesses point to informal costs.

A textile mill owner in Ashulia said that when officials from regulatory agencies visit factories, owners are often expected to send cars, arrange food and pay Tk5,000-Tk10,000.

Economist Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), said the cost of doing business remains high, aggravated by corruption and harassment.

"That is why new investments have slowed down," he said.

He pointed to the Seventh Five-Year Plan (2016-2020), which targeted $31 billion in FDI, but achieved only $11 billion – barely one-third of the goal.

What the World Bank warned years ago 

The concerns raised by businesses today echo warnings flagged by the World Bank in its last Doing Business report before the index was discontinued.

In Doing Business 2020, Bangladesh ranked 168th out of 190 economies. The World Bank noted that while some reforms had been undertaken, progress was too slow to significantly boost competitiveness.

Improving the business environment is essential for Bangladesh to support private sector development, which will create more jobs and foster sustainable economic growth, the report said, adding that the country would need to "accelerate the reform pace" to remain competitive.

The data pointed out the scale of the problem: obtaining factory construction permits required 16 procedures and 274 days, getting an electricity connection took nine procedures and 125 days, and registering property involved eight procedures and 271 days. Each "procedure" represented a separate interaction with an authority – effectively a licence, clearance, or approval.

Bida's response 

A TBS reporter sought comments from Chowdhury Ashik Mahmud Bin Harun, executive chairman of Bida and Beza, regarding the challenges businesses face in obtaining and renewing licences. However, the response came from Nahian Rahman Rochi, executive member and spokesperson of BIDA, which acknowledges that licensing complexity is a long-standing concern.

According to Nahian Rahman Rochi, executive member and spokesperson of Bida, the authority has reviewed licensing requirements with global experts and identified priority areas for reform.

He said Bida has published a consolidated list of required licences on its website to address confusion and claims that the footwear sector actually needs 11-17 licences, not 23, with many documents being repetitive.

However, he said Bida also plans to move licensing online with real-time tracking, issue five-year trade licences instead of annual renewals and launch a digital "Starter Pack" for business licences by January 2026.

"While there is still progress to be made, we remain closely engaged with the private sector," Nahian said.