adv-06 adv-06

Doing Business Index improvement in National Budget of FY 2019-20


AKM Asaduzzaman Patwary

Additional Secretary, R&D Dept. DCCI

national-budget-02National Budget is very instrumental evidence for the economy of Bangladesh as if unfolds the set of planning for a year. People across the country keeps an eye on the national budget evidence as it indicates the yearly account of estimated expenditure and revenue for the economic management. The recently declared finance Bill has been already passed in parliament with few changes and reforms in June. Different segment of stakeholders of the society perceive the national budget differently. In this assessment, effort, logical assessment and rationale will be exerted to portray to what extent the national Budget is business and doing business index friendly.

Bangladesh remains in the bottom rung of Doing Business index over last couple of years and ranking of Doing Business starts to nose downward from 2008. Now, consecutive fall in Doing Business index ranking warned and badly affected our trade and investment performance. Despite various potentials, trade and investment growth did not happen as expected. Since Doing Business Index is the major assessment and branding criteria of any economy with no exception in Bangladesh. Considering the trend of Doing Business, Investments are not getting encouraged. According to WB Doing Business Index 2018, Bangladesh ranks 177 of 190 economies. It is worth mentioning that Bangladesh ranked within 100 in 2007. Ironically, the position in doing business has become upside down over a decade. Economy of Bangladesh is progressing to a certain degree however the trend of doing business index does not improve as expected. GDP to Investment growth projected to 32.4% led by private sector is not very spontaneous and remarkable. However, to bring result oriented investment in line with this target, reforms and experiences of reforms are critical for Businesses.

This national budget was declared with philosophy and objective of improvement of Business environment, employment generation, Poverty alleviation, Human Resource Development and 8.2% GDP growth this year to solidify the base of being a High income developed economy by 2041. In addition, Investment to GDP ratio was aimed at 32.8% whereas private investment to GDP is projected to 24.2%.

The National Budget of FY2019-20 allows and provides some direct and indirect indications in reshaping the Doing business index roadmap.

National budget FY2019-20 indicated some guiding principles for Doing Business Index to gain the position of Bangladesh within 100 by 2021 to impress the local and foreign investors and gain the mobility of economic momentum. The salient features and issues brought into the finance bill of this fiscal year are to some extent remarkable to facilitate the local investment and trade growth.

The much talked “One Stop service” is going to be in force as it is effective now on trial basis and full-fledged virtual OSS connecting inter service agencies and extended OSS outlet can be significant. The plan of starting OSS facility across 64 districts can cause overwhelming impacts and positive changes in improving the local private investment registration irrespective of size.

Company can be formed with capital base of TK.50000. And, cost and process of business registration have been reduced to some extent. This may positively impact start up business criteria. And, Vat and SD act 2012 has been implemented with the provision of online VAT registration and payment opportunity. Multiple Vat rate has been enforced which will rationalise the cost-of-doing business. Vat exemption for BEZA investors as well as Income tax exemption of small and medium enterprises (SMEs) if the yearly turnover of the business is up to Tk. 36 lakh. Tax exemption limit from Dividend income from the listed companies shall be tax-free upto Tk. 50,000. This exemption will only be applicable for the individual taxpayers which will encourage the marginal investors to come under the umbrella of Capital market network.

In cross border trade criteria – Port development projects may ease the trade process and in Getting credit process no direction was given but NPL reduction concern has been addressed with some indications.

The down side of the finance bill 2019 may discourage the Doing business indirectly like increase corporate tax for mobile operator by 2% in next fiscal year. This budget does not indicate any clear instruction of full-fledged automation of corporate tax return submission.

The ADP allocation of Tk.202271 Crore which is 38.74% of total budget and 21.39% higher than revised Budget of last fiscal year. This huge ADP considers huge need of infrastructure development in our transformational economy which may contribute to improvement of doing business climate and growing industrial needs.

Taking into account the aforesaid issues and aspects of finance bill 2019, this budget cannot be clearly rated as pro Doing business index friendly but there are some positive indications linked with the Doing Business index. Overall, there are elements and aspects that can substantially improve the business environment of Bangladesh enabling local and foreign investment.

However, every single national budget is required to plan and work in view of doing business climate and indicator improvement in next few years. If it does not happen, Bangladesh will lose the demographic dividend and other economic strength and potentials down the line and investment hotspot branding image will phase out. This budget could offer and propose more on doing business criteria wise policy and institutional reforms and recommendations for both Government and private agencies to follow. National budget performance measurement should not be limited to ADP fund utilization and revenue target achievement. Rather, it should widen it focus on Doing business criteria improvement as apparently it is the root of many economic evils and blessings in Bangladesh.  We must not be late in consideration of the Doing Business improvement issues in national budget otherwise long-term economic trajectories of Bangladesh and dream and vision of visionary leader of Bangladesh may be hard to materialize.