Originally posted in The Financial Express on 9 January 2023
Sorry State of RJSC Reform-I: Middlemen dominate company registration corridors
They make hay out of RJSC digitizing dilemmas
A curious person comes up just as a likely one crosses the road in front of a building in Dhaka’s Karwanbazar. “Were you looking for any service for company registration?” He asks.
On queries from this correspondent, the person says he gets services done from the Registrar of Joint Stock Companies and Firms (RJSC) office in exchange for charge.
He happens to be among hundreds of such do-gooders roaming around the RJSC corridors. They have separate chambers or office rooms near the RJSC headquarters.
The person, who requested not to be named, rode the elevators up to gate of the RJSC to know whether this correspondent is his potential customer.
Such hordes of middlemen are making hay out of dilemmas over digitizing company-registration services, resulting in escalation of time and cost of doing business.
A study conducted by BUILD in collaboration with USAID has found RJSC registration requires 89 per cent of third-party engagement in opening firms which enhances the cost up to 49.22 per cent.
Registrar of the RJSC Sheikh Shoebul Alam says they are trying to stop entry of such middlemen into the RJSC office but find it difficult as they come in the guise of common man.
“RJSC is a service-providing entity to all citizens. It cannot restrict entry of any service-seekers,” he says.
To thwart such intermediaries’ intervention, the RJSC allows service-seekers to visit concerned officials to resolve problems from 11 am to 1.0 pm daily in working days, he adds.
He mentioned that the RJSC has undertaken a reform initiative with the support of USAID to digitize its services and ensure its smooth operation.
Dr Ahsan H Mansur, Executive Director of Policy Research Institute (PRI+) says, “The RJSC could not perform up to expectation after automation as it remains partial.”
The economist, however, feels that the intermediaries could be brought under discipline through licensing to remove harassment.
Former Dhaka Chamber of Commerce and Industry (DCCI) president Rizwan Rahman mentions that such brokers are delivering services across the world through legal process.
“The RJSC can give them licence to legalize their activity and earn additional revenues,” he says in his suggestion for a remedy.
The leading businessman, however, presumes that RJSC-insiders who may have “underhand dealings” with the intermediaries would resist such effort.
Distinguished fellow of the Centre for Policy Dialogue (CPD) Prof Mustafizur Rahman discourages legalizing the ‘dalals’ or intermediaries through licensing.
“The RJSC should intensify its effort on digitization and improve its service delivery rather than legalizing the middlemen,” he says.
Efficiency of the entity would not improve if it remained dependent on intermediaries, he adds.
The USAID Feed the Future Bangladesh Trade Activity is supporting RJSC to automate its services.
Md Shahtabul Islam, team leader, business-enabling-environment component of USAID trade activity, says the RJSC is now running with partial automation with so much manual intervention.
Its automation is running with the software prepared and handed over by the International Finance Corporation (IFC), an arm of the World Bank (WB), way back in 2006.
However, the RJSC started using the software after three years in 2009.
“The software turned a backdated one now. Currently, it requires uploading many scan copies,” he says about an Achilles’ heel in the vital regulatory body for business, industry, trade and commercial startups.
The US development-aid agency, USAID, started the project in October 2019 with a main objective to reduce time and cost of starting businesses.
“In December 2021, we signed a memorandum of understanding (MoU) with RJSC. Thereafter, Registrar of the entity changed thrice that caused delay in launching reform initiative,” he adds.
Through business-process reengineering, the USAID detected the redundant and duplicate process to eliminate those already in place, he mentioned.
Nine types of businesses have to obtain registration from RJSC.
“We have prepared model Memorandum of Association and Articles of Association (AoA) for each business so that companies do not need to seek help of lawyers to know the legal procedures,” he says.
Any individual can start business using the model.
It is mandatory to prepare the documents as per the Companies Act 1994.
It will also reduce the time, cost and unusual hassle of starting a business in Bangladesh.
“We are now preparing technical specification for software to automate RJSC. Hopefully it would be okayed by middle of January 2023,” he says.
Currently, there are a total of 277,442 companies registered under RJSC until November 2022. Until 2009, the number of registered companies was 132,653. Of the companies, some 3,648 are public limited companies, 201,210 private companies, foreign companies (liaison office) 1,036, partnership firm 54,576, trade organizations 1,166, societies 15,615 and one-person company (OPC) 191.