Bangladesh: A systematic approach to improving the investment climate
Overview
Poverty reduction needs a strong economy at its heart and in Bangladesh, the government faces numerous hurdles in attracting the investment it needs for a vibrant private sector that will provide jobs and raise incomes. The World Bank Group’s International Finance Corporation (IFC) has worked with Bangladesh and other partners from the development community in modernizing laws, rules and regulations, streamlining administrative procedures, improving working conditions and environmental performance.
Challenge
Investors in Bangladesh face a variety of constraints. Power supply is inadequate and unreliable. Clearing a consignment through the ports takes several days. The regulatory framework is cumbersome, unpredictable and non-transparent. Corruption is widespread. Access to the factors of production is limited - in a 2007 enterprise survey, almost half of the enterprises cited access to land as a major problem and one quarter found skilled labor to be in short supply. In the 2010 Doing Business Report, Bangladesh ranked 119 out of 183 countries.
Improving the investment climate is a daunting challenge for the government as its capacity to design and implement solutions is poor. Past donor efforts to catalyze change has often been ineffective. Behind this has been a failure to take a holistic view of things, to engage various stakeholders to create a voice for reforms, and to mobilize their knowledge and energy to help government bring about changes.
Approach
In contrast to past approaches, IFC has taken a path that stresses good donor coordination to achieve the best results. The Bangladesh Investment Climate Fund (BICF), managed by IFC in partnership with the UK’s Department for International Developmentand the European Union, has worked with the Government of Bangladesh and other stake-holders to put in place a systematic and holistic approach to improving the investment climate.
BICF’s main goal is to help create productive jobs by creating an environment conducive to investment. It provides technical assistance and advisory services in support of actions by government and other stake-holders to achieve the following results: transparent, predictable and streamlined regulatory engagement between government and the private sector, improved supply of industrial infrastructure through a modern economic zone regime, and enhanced private sector development-related capacity in government. This eight-year program—funded by the European Union and U.K. Department for International Development and managed by IFC—is helping to institute a holistic and systematic approach to improving the investment climate, replacing previous approaches that were partial and ad-hoc. A multi-track approach of engaging stakeholders, raising awareness, building capacity, and measuring results underpins its core program areas of regulatory reforms and economic zones. The programmatic approach supports client-centered and adaptive interventions.
Results
Because of its holistic nature, the BICF program has catalyzed a variety of results. Here are some notable examples:
Following automation and business process re-engineering, the company registration process has improved dramatically, the time taken to register a company has fallen from about 30 days in early 2009 to less than a week for most cases by the end of that year.
For the first time, a comprehensive Economic Zones Law was enacted in July 2010 and a Competition Act is close to being enacted. Far-reaching amendments were also made in July 2010 to the VAT (value-added tax) Law and Rules.
Property registration fees were reduced by more than a half in September 2009.
A group of about 100 mid-level officials have been formed and trained in private sector development subjects; several members of this group have started taking bottom-up reform initiatives.
Working conditions have been substantially improved in more than 200 factories in the country’s export processing zones.
Five universities have set up investment climate units to conduct courses and carry out research on investment climate.
Public-private dialogue platforms have been set up in four district towns-more than two dozen reform actions have been taken by local governments as a result of these dialogues.
Partners
EC and DFID together provided US$55.0 million for the eight-year program. There is no funding from the World Bank Group itself. The program works with multiple partners. Within the government, the Board of Investment is the main counterpart and there are engagements with a number of key ministries, such as the Ministries of Commerce, Law, Land and Establishment and agencies, such as the Bangladesh Bank (central bank), National Board of Revenue (the tax administration) and the Bangladesh Export Processing Zone Authority. Several chambers of commerce, industry associations and think-tanks are partners in BICF’s work.
Toward the Future
Several BICF-supported activities will be scaled up during its life time. For example, BICF has helped the government of Bangladesh lay the ground for an ambitious nationwide program of land record digitization, which the World Bank is likely to support through a sector loan. In some cases, other donors may pick up the agenda. BICF is also working to improve the measurement of private sector development efforts through the donors’ Private Sector Development Local Consultative Group, and the government’s own planning division. BICF, itself born out of donor coordination, is thus emerging as a useful instrument for further coordination between donors in the area of the investment climate. BICF is also working toward a model where many of its activities are gradually taken over by think-tanks and private sector chambers before the program ends in 2014. The BICF experience is also being applied beyond Bangladesh. A similar, albeit smaller, investment climate advisory facility has just been established for Nepal with DFID funding and managed by IFC. Insights and knowledge from BICF activities and approaches are now feeding into a number of World Bank Group initiatives, such as the “re-invention” of the World Bank Institute and the Financial and Private Sector Development network, and innovations in the advisory business of IFC.
http://www.worldbank.org.bd/WBSITE/...PK:217854~theSitePK:295760,00.html?cid=3001_7