The reforms that improved Bangladesh's position in the World Bank's Doing Business Index, have, in reality, had little to no impact on easing the business process, said business leaders and economists.
Although all of the reforms have helped reduce the cost of starting a business, neither of these have addressed the bureaucratic and administrative hurdles that companies face while operating in the country.
Even government officials and policymakers said these reforms were specifically intended to quickly improve the country's score in the Index.
According to the report published on Thursday, the Bangladesh government reduced the cost of registration and clearance for new firms, removed the fee for acquiring digital certificates, reduced security deposit fee for new electricity connection, and widened the coverage of the Credit Information Bureau.
Last year, the Office of the Registrar of Joint Stock Companies and Firms eliminated the registration fee for companies with capital of up to Tk10 lakh. Previously, the fee was Tk700 for capital of first Tk20,000, and then an additional Tk100 per Tk1 lakh for larger companies.
Recently, the Registrar reduced the registration fee to Tk80 for each Tk1 lakh of capital and by 20 percent for larger firms.
It also eliminated the fee for online clearance certificates of companies, which was Tk1,000 previously.
Business leaders, however, claimed that reduction or elimination of registration fees has no significant impact on investment.
Even without the registration fee, a small company has to pay a sum of Tk11,570 for several costs, including fees for filing registration, stamp of memorandum of association and articles of association, and for a certified copy of the registration.
However, firms with capital of Tk50 lakh will require an additional Tk2,000 only for the fees.
Dr Zahid Hussain, former lead economist at the World Bank Dhaka office, said reducing registration costs alone cannot attract investors – unless red tape is removed.
According to the World Bank report, more people were employed to increase efficiency of the power sector last year in Dhaka. Moreover, the amount of security deposit required for a new electricity connection was also reduced.
Chief Engineer of Dhaka Electric Supply Company Limited AKM Mahiuddin said, "No deposit money is required for a new connection – except for the cost of wire and accessories – which will save Tk5,000 for a 10-kilowatt connection."
Despite this initiative, it still takes 125 days to get a new connection.
Siddiqur Rahman, vice-president of the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI), said investors do not care about saving such little amounts of money. "In fact, they are willing to pay extra for reliable supply of electricity."
He added that private investors are losing competitiveness by using generators to run factories, which is increasing their cost of operation.
Siddiqur, also former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said in order to help investors, the government should reduce the number of hoops that they have to go through to get a new connection.
He also suggested automating the process to prevent bribery.
Last year, Bangladesh ranked 179 in "getting electricity," but moved up three notches this year.
Bangladesh still lags behind in some important categories. The country scored 45 out of 100 points in "getting credit," and 5 out of 12 in the strength of legal rights index.
Despite large amount of non-performing loans, liquidity crisis and slow growth in private sector credit, Bangladesh made a significant improvement in "getting credit."
A Bangladesh Bank source said, "Currently, the CIB covers data for two years for any amount of loan – both funded and non-funded – which was previously for one year only for funded loans worth Tk50,000 and above."
On Bangladesh getting a low score in credit availability and resolving insolvency, Finance Secretary Abdur Rouf Talukder said, "Non-performing loans are being calculated here – including principal, accommodative interest, penal interest and imposed interest – making the total amount very high.
He also said the finance ministry is conducting an initiative to calculate non-performing loans without interest, which will significantly reduce the total number.
Dr Zahid Hussain said the government should maintain discipline in the banking sector and maintain liquidity at a sufficient level. He said the calculation of non-performing loans should not be distorted by deviating from international standards just to score high on an index.
However, distinguished fellow of the Center for Policy Dialogue Professor Mustafizur Rahman told The Business Standard that going up eight notches on the index in just one year is a remarkable achievement for Bangladesh.
But the government should prioritise areas that can enhance the business environment and ensure sustainable development.
In the index of registering land, the position of Bangladesh is 184th and the registration here requires 271 days to meet eight procedures.
In enforcing contact Bangladesh placed at the 189th position just followed by one country, and enforcement of a contact requires 1,442 days costing 66.8 percent of the claim value.