Hasina govt's empty promises: Starting business still a nightmare
Although Bangladesh did make some progress, improving to 168th place in 2019 from 176th the previous year, the overall situation remained frustrating
Highlights:
- Businesses require up to 190 types of documents for starting or operating
- Businesses urge the interim govt to reduce licensing requirements
- The paperwork is significantly easier in other countries like China and Indonesia
- Because of complexities, many foreign investors gave up on their venture
Despite the previous Awami League government's strong commitment to simplifying business procedures during its nearly 16-year tenure, businesses still face a mountain of paperwork and bureaucratic hurdles just to get started.
Some businesses might even need to gather up to 190 documents to get the necessary permission before they can start operations.
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The Bangladesh Investment Development Authority (Bida) and Salman F Rahman, then private industry and investment adviser to the former prime minister, had repeatedly pledged to enhance the country's ranking on the World Bank's Ease of Doing Business index.
Although Bangladesh did make some progress, improving to 168th place in 2019 from 176th the previous year, the overall situation remained frustrating.
"If I have to collect 190 types of documents, I need to visit 190 places, which leads to either delays, corruption [bribery], or both."
The challenging part, according to businesses, is not primarily financial, operational, or regulatory — it is the numerous paperwork for various licences that feels like navigating a labyrinth. Corruption remains another major issue, with extra payments required at almost every step — whether obtaining a document, securing a licence, or renewing one.
The question they ask is simple — how long will it take for Bangladesh to truly simplify its business processes?
190 docs for 23 licences
For instance, starting a footwear factory in Bangladesh requires up to 23 different licences or certificates, some needing annual or semi-annual renewals.
Businesses must provide up to 190 documents for these licences, including around 30 common documents and 160 as new submissions.
The paperwork process is largely similar in Bangladesh's other sectors, starkly contrasting with countries like China, Indonesia, and Vietnam.
Money eases everything
But this load of paperwork is a mere formality. The real challenge isn't about meeting safety standards or environmental regulations — the approvals depend on money.
The more one can pay, the smoother the process becomes — an unpleasant reality accepted by all.
Despite obstacles, Bangladesh's private sector has grown, with entrepreneurs taking significant risks, creating thousands of jobs, and contributing billions to government revenue, which surged to nearly Tk4 lakh crore in FY24 from Tk 52,000 crore in FY09. Their perseverance is commendable.
Foreign investors frustrated
Consider a foreign fast-moving consumer goods company that, after over two years of planning and significant investment, still cannot operate due to delays in obtaining necessary licences. With no clear timeline, it remains uncertain whether the business will start within the next six months.
"The delay in starting our operations is 99% due to bureaucracy. It took an excessive amount of time to obtain the necessary licences from the Department of Environment, as well as utility connections, including electricity, water, and gas," the company's senior official told TBS on condition of anonymity on 16 October.
Expressing his frustration with the extensive documentation and licensing requirements, the investor said, "Oh my god... there's an overwhelming amount of paperwork. In Bangladesh, we need to manage over 70 types of documents, which is about three times more than in other countries."
"In Bangladesh, a manufacturing company needs at least a year to begin operations, whereas in other countries, it takes about three months. For a trading business, it can be run within just a month," he added.
A Vietnam-based leather manufacturer arrived in Bangladesh in 2019 with plans for a substantial investment. However, after learning about the extensive documentation licensing requirements and hassles, he decided to leave and abandon the project.
Nasir Khan, managing director of Jenny's Shoes Ltd who had contacted the Vietnamese businessman to showcase Bangladesh's investment potential, told TBS, referring to the investor, "It is quite hard to start a business here given the overwhelming number of documents that need to be managed."
"The Vietnamese investor told me, 'Your government may not want foreign investment here'," Nasir Khan shared.
While these two case studies illustrate challenges for foreign investors, local businesses face similar hurdles, which increase the time and cost of doing business, ultimately undermining confidence, said local business owners.
The Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEA) suggests that the number of required licences or certificates could be reduced to streamline the entire process.
Paperwork is simpler in other countries
On 22 September, leather sector leaders met with Chief Adviser Muhammad Yunus to address these issues and presented a comparison of competitive scenarios in other countries.
According to the association, while Bangladesh requires up to 190 types of documents for 23 types of licences and certificates to start a business, China only needs 17, Indonesia requires 20, Vietnam has 21, and Cambodia needs about 23.
In Vietnam, starting the same type of business requires only five certificates compared to Bangladesh's 23. Investors need 10 documents for an investment registration certificate, seven for an enterprise registration certificate, two for tax registration and opening a bank account, one for capital contribution, and one for a sub-license or permit, allowing them to establish a business with just 21 documents.
LFMEA President Syed Nasim Manzur urged the interim government to implement necessary measures to reduce the number of licensing requirements from 23 to 10, which will reduce the total number of required documents to around 90.
He told TBS, "If I have to collect 190 types of documents, I need to visit 190 places, which leads to either delays, corruption [bribery], or both."
"In Bangladesh, it takes about two years to start a manufacturing business. Why does almost every licence requirement need to be renewed every year?" he asked.
Nasim, also the former president of the Metropolitan Chamber of Commerce and Industry, said, "Bangladesh is scheduled to graduate from least developed country (LDC) status to a developing country in 2026, which will lead to the loss of certain benefits and present us with challenges. In this context, we need to reduce the cost of doing business and ensure ease of doing business to maintain competitiveness in the global market."
Similar to the footwear and leather sector, the RMG requires 22 types of licences, said Mohammad Hatem, a garment exporter and president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
He told TBS, "To manage these licences, we need to go to every door, which also involves issues such as bribery."
Zaved Akhter, president of the Foreign Investors Chamber of Commerce and Industry (FICCI), also emphasised the complexity and multitude of approval requirements, stating, "In my count, it was 29 authorities and 141 approvals needed for anyone to get clearance to invest in Bangladesh."
Bangladesh Securities and Exchange Commission (BSEC) Chairman M Masrur Reaz termed the extensive number of documents and licensing requirements "problematic."
He said, "The more licences and documents required, the higher the formal and informal costs. In this case, both local and foreign investments may be hindered."
Which licence or certificates can be binned?
The country's leather goods manufacturers believe that 13 out of the 23 required licences and certifications are unnecessary, including the widely debated warehouse licence, which has been a key focus for the association's leadership.
The 13 licences or certificates are — clearance from the Registrar of Joint Stock Companies And Firms (RJSC), partnership deed, fire safety plan for multi-storied buildings, factory or establishment licences both from the Department of Inspection for Factories and Establishments (Dife) if there is already a separate licence from the same authority, VAT registration certificate, bank solvency certificate, bonded warehouse licence, work permit for foreign nationals, Export Promotion Bureau (EPB) enrolment certificate, and registrations for patents, trademarks, and copyrights.
If the government responds to businesses' demands, it could eliminate the need to submit about 100 different documents, according to LFMEA.
"The 23 types of licences are unnecessary, as they increase both cost and time," Syed said its President Nasim Manzur.
Bonded warehouse licence: Pay up or wait it out
TBS spoke with four exporters who had to obtain a bonded warehouse licence from the Customs Department of the National Board of Revenue (NBR). They shared their frustrating experiences, both in acquiring and renewing the licence.
BKMEA's Mohammad Hatem said, "If you pay money [bribe], you can get the licence in the expected timeframe. Otherwise, it will take much longer."
An exporter, speaking to TBS on condition of anonymity, said, "To obtain a new bonded warehouse licence, an exporter needs to pay about Tk25 lakh extra (as a bribe)."
Businesses attribute these challenges mainly to extra document requirements and conditions. According to the LFMEA, obtaining a bonded warehouse licence requires about 31 documents and four conditions.
"This is unnecessary. Why do we need an environmental licence to obtain a bonded warehouse licence?" questioned Syed Nasim Manzur.
He added, "To simplify doing business, they should establish a value addition criterion based on annual imports of raw materials and exports."
A bonded warehouse is a licensed facility that allows eligible exporters to store imported goods and inputs without paying import duties and taxes.
What do the authorities say about unnecessary paperwork?
Meanwhile, government officials claim they are working to simplify the process of doing business.
Moazzem Hossain, NBR's member of customs bond, export, and IT, told TBS, "We are reviewing the current documentation requirements for obtaining a bond licence. If we find any redundant documents, we will definitely consider eliminating them."
"We are working to reform the NBR and aim to implement measures logically so that honest businesses are encouraged while dishonest ones are discouraged," he added.
However, a senior customs official, on condition of anonymity, said, "The problem is not only on the customs officials' side; it is also present on the businesses' side."
Bida's one-stop service remains inactive after five years
Bida launched one-stop services in 2019 to serve as a single window for 150 types of services, acting as the sole point of contact between the government and investors for investment-related matters.
However, after five years, investors have yet to receive the expected level of service, which government authorities attribute to a lack of proper cooperation from other government and non-government entities.
A senior Bida official, speaking to TBS on condition of anonymity, said, "Bida's system is ready, but other government entities like the NBR, RJSC, City Corporation, and Department of Environment are not yet fully prepared to offer services."
Md Ariful Hoque, director general of Bida, claimed that, since starting in 2019, Bida has provided about 160,000 services (Bida-related), with 98% of them delivered on time.
He, however, acknowledged that the one-stop service could not be fully operational due to the lack of preparation by other institutions.
