Changing Times

Samir Asaf outlines the progress and recommendations of the Regulatory Reforms Commission

AFP

Government regulation is necessary for the orderly functioning of civil society. Governments moving from a socialistic governance paradigm to a market-based capitalistic one find it necessary to progress towards more efficient, and yet less, regulation.

In Bangladesh, the current non-party caretaker government's ambitious and wide-ranging regulatory reform agenda officially began with formation -- by official gazette notification on October 30, 2007 -- of the high-level Regulatory Reforms Commission (RRC), with 17 members -- four from private sector business, two economists, and eleven from the government (including the chairman who is a former secretary to the government). In this article, I share with you the progress and the achievements made by the RRC thus far.

Of the four sub-committees formed under RRC, three have already submitted their recommendations. One of the sub-committees is working on utility service related reforms. One task force has been formed for land registration and related reforms. This task force and some other members of RRC are scheduled to go to three regions of India for a study visit. Currently, core groups are being formed by RRC, comprising representatives from both government ministries and the private sector.

It has been recognised by the caretaker government that there is an urgent need to review and rationalise the entire gamut of government regulations, many of which are a century old but are still in effect today. Thus, the RRC is contemplating a significant overhaul of redundant, outdated, and inefficient regulation.

Although the RRC is a temporary body by design, it should be made permanent because of the long-term nature of its mandate, and the importance of sustainability of reforms. For example, The Regulatory Reforms Committee in the Republic of Korea is a permanent council. UK Department for Business, Enterprise and Regulatory Reform (BERR), a permanent body which leads UK's regulatory reform agenda across government, follows five principles of better regulation. According to BERR, any regulation should be transparent, accountable, proportionate, consistent, and targeted -- only at cases where action is needed.

In an era of globalisation and regional economic cooperation, it is imperative to modernise public administration and minimise regulatory complexity, thereby creating the right enabling environment for foreign as well as domestic investment. These administrative and regulatory reforms facilitate economic growth and development, foreign direct investment, and, in particular, enhance the business and investment climate in the country. Chaired by Dr. Akbar Ali Khan, former advisor to the caretaker government, the RRC's tenure is one year from the date of formation, with the Board of Investment (BOI) as its secretariat.

The RRC is mandated to review all government rules and regulations, and identify those that should be annulled, modified, or left unchanged, and make suitable recommendations to the government to infuse dynamism into governance, administration and the economy. The working areas of RRC include identifying all rules, by-laws, and government orders in force in Bangladesh, identifying unnecessary rules/sub-rules, and making recommendations for repealing those that should be scrapped. Upon examining the existing regulations, especially those pertaining to domestic business and commerce, RRC will, under due cognisance of their merits or otherwise, identify any unnecessary complexity or regulatory burden imposed by these that can be avoided, and make appropriate recommendations.

The RRC will ensure that the citizens of this country get the benefits of regulatory reforms that they deserve, and that a modern and progressive regulatory climate exists. It also has to make recommendations for establishing a modern and dynamic administration suitable to a democratic system of government. The RRC may also propose new regulations or ordinances where required. In order to expedite this process, the RRC proposes its recommendations to the government on an ongoing basis, and refers to the Law Commission for legislative modifications.

RRC has access to regulatory information from all government agencies and departments, may form special task-forces, and accept suggestions relating to regulatory best practices from international development organisations. RRC may arrange information, dialogue, and discussion sessions with concerned ministries, relevant organisations, and civil society representatives. RRC also takes due cognisance of the recommendations of the Bangladesh Better Business Forum (BBBF).

As per its scope of work, the commission can co-opt any experienced person for accomplishing its task for a particular period for the particular purpose mentioned in the notification. RRC is currently employing two external consultants for advisory services. For implementation of the final recommendations, RRC presents an action plan to the government. RRC currently has a full-time staff of 50 people, including five deputy secretaries and a joint secretary. Until now, the RRC has held seven meetings. RRC monitors implementation of its recommendations by the government. The chairman has had several post-meeting briefing sessions with the media.

RRC has approached 67 domestic business chambers and 12 foreign chambers for their suggestions and feedback on regulatory issues. Only 14 domestic and 2 foreign chambers have responded with their suggestions, wherein most of the feedback did not contain specific actionable recommendations. All such recommendations received have been placed in a matrix, and the RRC is currently working on processing and drafting these. RRC has advertised in radio and television for suggestions and grass-roots recommendations from civil society members in the area of regulatory reform. In response, the RRC has received more than 300 letters with various suggestions for reform from the general public, which are currently being reviewed.

The RRC has selected 202 ness-related laws and regulations for review and suitable amendment, and drafted their synopses. With support from Syed Ishtiaque and Associates, further compilation work is currently ongoing. For this purpose, the RRC sent notification/information letters to 47 ministries/departments back in November 2007. In each ministry, a focal point has been assigned for regulatory matters in dealing with RRC. However, only nine ministries/departments have replied or responded to RRC's request for assistance and cooperation. For budgetary purposes, the Ministry of Finance has allocated Tk. 50 lakh to RRC in the current fiscal.

The RRC has made nine specific recommendations thus far, the majority of which are in the implementation process already. RRC is focusing on 20-30 most important regulatory areas, and by October 2008, shall finalise its comprehensive reform recommendations by way of a final report. RRC will recommend that the government rescind unnecessary laws and regulation, amend certain regulations, simplify certain government forms, and reduce the time required to process applications and licenses by government departments. The nine recommendations and their implementation status are highlighted in the box on the next page.

Regarding all RRC recommendations, the Chief Adviser's Office has already referred them to the concerned line ministries. The RRC is also creating a comprehensive computerised database of Supplementary Regulatory Orders (SROs) with cooperation from the Ministry of Law, Justice, and Parliamentary Affairs. Currently, there are approximately 8,000 SROs in effect, and around 1,700, or 21%, have been already been entered in the RRC database.

RRC has signed an MOU and a cooperation agreement with IFC-BICF for facilitating the various tasks. In this connection, two workshops and a presentation on the e-Registry has been concluded. Based on an IFC-BICF recommendation, the interim government has announced the establishment of an electronic register, launched in February, in order to centrally collect and publish information about regulatory requirements imposed on businesses and citizens. For this purpose a scoping mission had presented its preliminary findings to the RRC members. The e-Registry is expected to reduce regulatory transaction costs and risks, improve regulatory transparency and accountability, and provide a platform for further regulatory reform. One of the recommendations in this connection is to enforce "positive legal security" (PLS) -- a law-based guarantee that the information in the registry is exhaustive and exclusive. PLS means that if a regulation is not duly filed in the e-Registry, the regulation will have no legal effect, validity, or enforceability on the business activity, and that the regulation cannot be applied in a way different from the one established and posted in the e-Registry. Other countries that have e-Registries for regulations include Kenya, Finland, Hungary, Korea, United States, Australia, Italy, Spain, and Norway.

The RRC and the BBBF complement each other in terms of function. And both these instruments of public-private partnership and dialogue are meant to reinforce each other. OECD country experience shows that the establishment and maintenance of high quality regulatory standards require effective regulatory management. Excessive and low-quality regulation and administrative procedures are a major impediment to private sector development. "Regulatory Reform" denotes a multifaceted reform approach that includes deregulation, reregulation, simplification of regulation and institution building, including public sector reforms.

Regulatory reform is among the most difficult reforms facing governments, and results are not achieved by a single reform.

Many developed countries utilise a tool called Regulatory Impact Analysis (RIA) to improve understanding of the likely impacts of proposed laws and other forms of regulation on business costs and opportunities. The RRC has already held a workshop on RIA, conducted and facilitated by IFC-BICF.

The RRC has been taking a variety of initiatives to move forward with its agenda of improving the overall regulatory climate in Bangladesh. The final report of the RRC shall be submitted to the government on October 31.

Samir Asaf is a member of the BBBF.

The Committee's 9 Recommendations
1. All gazette notifications must be published on the website, which has already been implemented with technical assistance from Bangladesh Investment Climate Fund (BICF) -- a multi-donor initiative managed by the International Finance Corporation (IFC).

2. All proposed regulations must be published in draft form for feedback from civil society members before finalisation. The Ministry of Law, Justice, and Parliamentary Affairs has vetted the amendment of the government's "Rules of Business, 1996" to include "Rule 16," and this recommendation now awaits approval of the council of ministers.

3. The investment registration process of the Board of Investment (BOI) must be simplified. According to Section 10(1) of Investment Board Act, 1989, BOI will introduce speedy online investment registration process through its website. Paper registrations must be processed within 24 hours. According to section 11(5) of the Investment Board Act, 1989, investment enquiries must be answered within 15 days unless otherwise advised. BOI registration service fee is being contemplated to be set at a flat rate, regardless of the proposed investment amount.

4. Sub-committee on "processing and approval of foreign private loans", under the leadership of Bangladesh Bank's governor, proposed that the sole responsibility and authority for approval of foreign private loans be vested with the Bangladesh Bank. The BOI and BB have been directed by the Chief Adviser's Office to implement the RRC recommendation within two months.

5. The legalisation of "courier service" in the country, by amending the Post Office Act 1898. The Ministry of Post and Telecommunications is taking steps to implement this.

6. The Directorate of Land Registration should be transferred from the Law Ministry to the Ministry of Land to allow a "one-stop service" for land registration. The High Court has placed a writ and stay order against this executive decision for a period of three months.

7. Sub-committee on location and environmental clearance recommended that the "Bangladesh Environment Conservation Act, 1995" and "Environment Conservation Rules, 1997" be amended by the Department of Environment, so that the time taken to issue Location Clearance Certificates and Environmental Clearance Certificates can be halved.

8. Sub-committee on duty drawback and exemption system, capital machinery import clearance system, and bonded warehouse licensing system recommended the National Board of Revenue (NBR) to simplify the duty drawback application form by June 30 and move to an industry-based instead of enterprise-based coefficient identification system to streamline the process. NBR is advised to introduce "risk-based inspection and clearance" system for capital machinery imports, where about 5%-10% consignments will be inspected by September 30. In addition, NBR is advised to improve Bond Warehouse Licensing Process by allowing non-association members to apply for such licenses without referrals from members.

9. The proposals to annul the "Sarais Act 1867," and updating of “The Bangladesh Hotels and Restaurants Ordinance 1982" are pending before final recommendation.