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COLUMN

Regulatory reforms for business growth

No doubt, suggesting reforms of the existing and oftentimes ambiguous, ineffective or conflicting laws and regulations in Bangladesh is a daunting task. This is more important and tough, when most of our business leaders, civil bureaucrats, regulators and civil society members are not even aware of where the shoe pinches'.

MAMUN RASHID
Reforms leading to a better environment to support business growth was pledged by the incumbent government and rightly to that end, institutions and mechanisms have been created. The Bangladesh Better Business Forum (BBBF), led by the Chief Adviser (CA) with experts from the private and public sector, was set up some months ago. It has reportedly made significant progress since its existence. Five thematic working groups under this body have drawn up over 100 recommendations with the aim of facilitating business activities.
Another positive development is the establishment of the Regulatory Reforms Commission ((RRC) and added to that -- putting Dr Akbar Ali Khan, a freedom fighter and one of the most committed public servants, for driving changes and reforms in this country to head that. The aim of the RRC is to identify archaic and unsuitable laws related to business in order to amend, upgrade or replace them, as required. The RRC has reportedly identified 202 such laws or rules and regulations and the same were sent to trade bodies for sounding out their opinion on the same. No doubt, suggesting reforms of the existing and oftentimes ambiguous, ineffective or conflicting laws and regulations in Bangladesh is a daunting task. This is more important and tough, when most of our business leaders, civil bureaucrats, regulators and civil society members are not even aware of where the shoe pinches'. Foreign Exchange Regulation Act, 1947 (FERA) and related Bangladesh Bank Guidelines, circulars and directives are an exam-
pie. These do not reflect the market reality of Bangladesh economy. These also do not go hand in hand with the March 24, 1994 declaration on convertibility of Taka. FERA equivalent laws have been scrapped or gone through significant modifications over the last 60 years in neighboring countries. Our regulations including the Import Policy and Export Policy effectively require Letters of Credit, the costliest means of trade, whereas the world has moved to other cost effective forms like the Open Account and Documentary Collection. Borrowing from overseas is extremely restricted. It is effectively barred for the short-term trade-related borrowing. Exporters also don't have the option to get discounting facilities from overseas institutions.
Various laws can be converged to establish single window for foreign investment and foreigners working in Bangladesh. Long delays take place in fulfilling requirements of various agencies. A foreign company for establishing a branch office or a foreigner for working needs permissions from the Board of Investment and Bangladesh Bank. Our market does
not even have rudimentary level of derivative products. Availability of hedging products is one of the cornerstones for Foreign Investment, both direct and institutional, in a country.
Tax assessed on turnover, instead of profits, leads to concoct financials / books and informal economy There are ambiguities on tax/vat for diplomatic missions. Land registration process does not address serious undervaluation or overvaluation or sale to multiple parties through forged documents. The stamp act can be improved to facilitate use of adhesive stamps instead of non-judicial stamps for agreements and oilier documents. This will help banks use preprinted documents. Government can introduce stamping machines like India. Negotiable Instruments Act (NI) allows filing suits only in case of checks returned for insufficient funds. It needs further improvement to encourage widespread use of checks, electronic payment systems, automated clearing systems, etc. Easy and fast settlement of NI Act and bad debt recovery cases are paramount for the strength and effective-
ness of the financial system. Misuse of the tax holiday provisions hampers efficiency of the economy. Labour law covers workers only. A large executive class continues to grow in the private sector whose employment does not get coverage under the law.
Corporate Governance and fiduciary related laws and regulations are at a very nascent stage. Regulatory oversight, except for the banking sector, has a lot to be desired. In a number of cases necessary regulator or regulatory framework is either absent or has skeletal presence. Agencies contemplated under the Information and Communication Technology Act is an example.
Both the BBBF and RRC are seen to be capable of providing considerable stimulus to the country's business environment. Some of its recommendations for improving the business environment can be implemented immediately; others are meant for implementation over the short term and the remaining, over a longer period. It is very important in this connection to keep the operational time frame into consideration, unfailingly. T he most urgent imple-
mentation of some of the reforms, according to reports in the media, has already crossed the earlier set schedule. Therefore, the need is to expedite completion of these tasks with no further delay.
The goals of the RRC should be similarly pushed forward. The tenure of this body is only for a year and out of it six months are already over. Thus, there is the need for the RRC to work with greater speed and single-minded devotion for the timely attainment of its objectives. If the overhauling of the regulations is completed in time, the same will be found helpful and supportive by the members of the business community. There are emerging areas of the economy where invest ments remain below the potentials because investors -foreign as well as local ones-are constrained by a legal vacuum or the outdated nature of the laws covering the same. The completion of the RRC's tasks will certainly give a boost to investment operations in these fields.
There is no denying that both the BBBF and RRC will gain from focused attention to achieving their opera tional efficiency. The government should allocate adequate resources and manpower* to them as well as extend all other kinds of enabling supports. Same, if not more commitment as well as engagement is needed from our chamber bodies, business leaders and regulatory agencies. Together only, we can create a better Bangladesh, respected for its cohesive and business-friendly policies.
The writer is a banker and economic analyst