Legal Issues

The pharmaceutical industry has many regulatory and legislative restrictions. There is also a growing culture of litigation in many countries. The evolution of the internet is also stretching the legislative boundaries with patients demanding more rights in their healthcare programmes.
Every company in every country must comply with local legal system and regulations regarding operations (Daniels et al., 2009). The legal environment has a great impact on doing business in any country. According to the World Bank (2009) reports Bangladesh is ranked 119 out of 183 economies on ease of doing business whereas India ranked 133.

Figure 9 Bangladesh Compared to global good practice economy as well as selected economies
National Drug Policy The Bangladesh governments Director of Drug Administration (DDA) has an essential monitoring and supervisory role on all activities related to import, procurement of raw materials, production and import of finished drugs, export, sale, pricing, etc. for all kinds of medicine. The National Drug Policy (2005) states that the WHOs current Good Manufacturing Practices (GMP) should be strictly followed and that manufacturing units will be regularly inspected by the DDA. Other key features of regulation are restrictions on imported drugs (where these are produced by four or more local firms); a ban on the production in Bangladesh of around 1,700 drugs which are considered non-essential or harmful; and strict price controls, affecting some 117 principal medicines. TRIPS The World Trade Organizations (WTO) Trade Related Aspects of Intellectual Property Right (TRIPS) agreement permits 49 Least Developed Countries (LDCs) including Bangladesh to reverse-engineer, manufacture and sell patented generic pharmaceutical products locally as well as for export to other developing and Least Developed Countries (LDCs) until 2016 (World

Bank, 2008, p. 15). Bangladesh is unique among the 49 LDCs as it has a strong pharmaceutical base. This sector is the second largest sector in terms of national revenue and it exported drugs to over 50 countries in the world (Azad, 2006). Novartis are enjoying the benefit of TRIPS as it has manufacturing based in Bangladesh.

Industry and Investment Fortunately for Bangladesh, many new jobs--1.8 million, mostly for women--have been created by the country's dynamic private ready-made garment industry, which grew at double-digit rates through most of the 1990s. The labor-intensive process of shipbreaking for scrap has developed to the point where it now meets most of Bangladesh's domestic steel needs. Other industries include sugar, tea, leather goods, newsprint, pharmaceutical, and fertilizer production. The country has done less well, however, in expanding its export base--garments account for more than three-fourths of all exports, dwarfing the country's historic cash crop, jute, along with leather, shrimp, pharmaceuticals, and ceramics. Despite the country's politically motivated general strikes, poor infrastructure, and weak financial system, Bangladeshi entrepreneurs have shown themselves adept at competing in the global garments marketplace. Bangladesh exports significant amounts of garments and knitwear to the U.S. and the European Union (EU) market. As noted, the initial impact of the end of quotas on Bangladesh's ready-made garment industry has been positive. Downward price pressures, however, mean Bangladesh must continue to cut final delivered costs if it is to remain competitive in the world market. The Bangladesh Government continues to court foreign investment, something it did fairly well in the 1990s in private power generation and gas exploration and production, as well as in other sectors such as cellular telephony, textiles, and pharmaceuticals. In 1989, the same year it signed a bilateral investment treaty with the United States, it established a board of investment to simplify approval and start-up procedures for foreign investors, although in practice the board has done little to increase investment. Bangladesh also has established export processing zones in Chittagong (1983), Dhaka (1994), Comilla (2000), Mongla (2001), Iswardi (2005), Uttara (2006), and Karnafully (2007). The most important reforms Bangladesh should make to be able to compete in a global economy are to privatize state-owned enterprises (SOEs), deregulate and promote foreign investment in high-potential industries like energy and telecommunications, and take decisive steps toward combating corruption and strengthening rule of law.

The TRIPS Agreement was the brainchild of an industry coalition of developed nations including the United States of America, the European Union and Japan. The main impetus for the agreement came from the pharmaceutical, software and entertainment industries with the CEO of Pfizer playing a lead role as Chairman of the Intellectual Property Rights Committee (IPC). 2 The Committee was created during the Uruguay Round of negotiations with the goal of putting TRIPS firmly on the agenda.3 One of the arguments advanced by the developed countries for the adoption of TRIPS was that stronger IPRs would create an incentive for innovation

and would stimulate the development of new technologies, such as patent protection for pharmaceuticals. This incentive for innovation would consequently encourage greater domestic and foreign investment in research into new pharmaceuticals and tropical diseases.4 The argument propounded was that the foreign investments and technology transfer would, in turn, benefit developing and least developed countries. pharmaceutical industry now caters to 96 percent of the countrys pharmaceutical needs. It is worth noting that Bangladesh now exports a wide range of pharmaceutical products (therapeutic class and dosage forms) to 72 countries 19 in Asia, Africa and Europe and in 20062007 total exports were US$28.12 million with a growth rate of some 47 percent.20 Bangladesh is also exporting specialized products like HFA inhalers, suppositories, hormones, steroids, oncology and immunosuppressant products, nasal sprays, injectibles and IV infusions.21 Many of the bigger firms in Bangladesh are now venturing into the production of anticancer drugs, anti retroviral drugs for the treatment of HIV/AIDS 22 and antiBirdFlu drugs. Some of the most stringent regulatory authorities in the world have approved Bangladeshi pharmaceutical companies for export. However, the ability to produce generic pharmaceuticals is reliant upon a countrys particular legal and regulatory environment. Also important is the countrys overall political will and leadership. Government policies and regulatory agencies have a significant impact on pharmaceutical innovation. In Bangladesh two of the relevant regulatory agencies are the Department of Patent Design and Trademarks and Directorate of Drug Administration (DDA). The Department of Patents, Designs and Trademarks The present patent protection regime in Bangladesh based on the century old Patents and Designs Act of 1911 and the Patent and Design Rules of 1933. Bangladesh inherited its patent law from the then British Government in India, and continues with (essentially) the same law. A few minor amendments have been enacted such as the establishment of Department of Patent Design and Trademarks. The Department is charged with determining patent applications. Although not directly specified the patent laws of Bangladesh, Bangladesh does follow other countries by applying a criterion of novelty, inventive step and industrial application for patentability. 27 A patent application is required to be accompanied with either a complete28 or provisional29 specification. If an applicant applies with a provisional specification, a complete specification is required to be submitted within nine months. If not, after a period of ten months the application is deemed to have been abandoned. A complete specification is required to include following particulars, such as: The name and address of the inventor, The title of the invention, An abstract or summary of the invention, A description of the invention, The process of invention with drawings and A claim or claims defining the scope of the invention for which protection is sought. The Directorate of Drug Administration (DDA) The Manufacturing of pharmaceutical products is regulated by international

standards. International standards are a precondition for worldwide trade with pharmaceutical products. National Drug Regulatory Authorities (DRAs) are responsible for licensing the production of medicines, controlling ongoing production and if necessary, the withdrawal of licenses. International standards include the Good Manufacturing Practices (GMP)38 for medicinal products of the EU, the Code of Federal Regulations of the American Food and Drug Administration39 and the Pharmaceutical Inspection Convention 40 which are aims at maintaining quality and efficacy of medicines worldwide.

DRAs in developing countries are often described as weak and inefficient, sometimes even corrupt. 41 The same description is affected to the DDA in Bangladesh. In Bangladesh the DDA is the national drug regulative authority, it regulates pharmaceutical manufacture, pharmaceutical importation and the quality control of pharmaceuticals in Bangladesh. The DDA sits within the Ministry of Health and Family Welfare. The DDA is responsible for the registration of pharmaceuticals as well as for inspection of premises, and for licensing medicines for the Bangladesh market and exporting to overseas. The DDA also issues licenses for import of raw materials for different pharmaceuticals and packed pharmaceuticals. It also monitors quality control parameters of marketed pharmaceuticals through an agency called the Drug Testing Laboratory, which is located in the Institute of Public Health at Mohakhali, Dhaka and is equipped with standard testing facilities. The DDA in Bangladesh shadows the workings of Australian Therapeutic Goods Administration as it has the specific role of maintaining the quality, safety and efficacy of pharmaceuticals produced and imported in Bangladesh. The Therapeutic Goods Administration (TGA) which is a unit of the Australian Government Department of Health and Ageing empowered by the Therapeutic Goods Act 1989 42 is responsible to ensure the quality, safety and efficacy of medicines and ensure the quality, safety and performance of medical devices. The regulatory framework is based on a risk management approach designed to ensure public health and safety, while at the same time freeing industry from any unnecessary regulatory burden for administering the provisions of the legislation. This role is different to the broad scope given to the United States Federal Drug Administration.

Legislation The Narcotics Control Act of 1990 (Act no XX of 1990) covers the control of narcotic drugs and psychotropic substances, including provision for the treatment and rehabilitation of drug dependent people. Bangladesh has amended the narcotics act and allows the Director General of the Department of Narcotics Control to send drug addicts for treatment. Drug use is considered as a treatable condition rather than a criminal offence. The 1990 Drug Control Act was amended in 2002 and 22 precursor chemicals, as stated in Tables I and II of the 1988 Convention, were included. Section 19 and 20 of the Act prohibits any kind of illegal operations regarding narcotic drugs, psychotropic substances as well as precursor chemicals. Additionally, rules relating to the licensing of precursor chemicals were framed and adopted. Institutions and policy

In Bangladesh, the Department of Narcotics Control (DNC) administered by the Ministry of Home Affairs, is responsible for implementing drug law enforcement and drug abuse control programmes guided by a ministerial level National Narcotics Control Board (NNCB). DNC has an intelligence-gathering and operational role and oversees the implementation of demand reduction initiatives. It is also charged with co-coordinating the efforts of the other Bangladesh enforcement agencies (police, customs, Bangladesh Rifles and coastguard). The DNC does not collate national arrest and seizure statistics, in part because the other agencies are reluctant to disclose the necessary material. The Department of Narcotics Control has recently initiated a community level of coordination to streamline the activities of the non-governmental organizations to strengthen existing and future drug prevention activities in the country. With assistance from UNODC, the process of formation of a national network of GOs and NGOs has been initiated through training for stakeholders held in March 2004 in Dhaka. Four network formation meetings have been held in the divisions of Chittagong, Dhaka, Khulna and Rajshahi.
Medicinal Drugs and Drug Policy The per capita consumption of Western drugs in Bangladesh was about US$1 per year in the late 1980s. According to a government statement in 1982, although most people had no access to lifesaving drugs, a large number of wasteful and undesirable medicinal products were manufactured and marketed mostly under commercial pressure. A national drug policy promulgated in 1982 was aimed at simplifying the range of drugs available and at improving the logistics of drug distribution at reasonable prices. The policy identified sixteen guidelines for the evaluation of medicinal products for the purpose of registration. The registration of more than 1,700 products was canceled and these were gradually withdrawn from use. Unani, ayurvedic, and other homeopathic medicines were also brought under this policy. Under the new policy, in order to promote local enterprise, foreign companies were no longer allowed to manufacture antacid and vitamin preparations. The policy identified 150 essential drugs for therapeutic purposes. Attempts to increase local production of drugs continued, and the government provided Bangladeshi firms with generous industrial loans and other assistance. Some essential drugs were also being manufactured at government plants. As the 1980s came to a close, Bangladeshi society had made some remarkable advances in social development, education, and health care. Severe national disasters, however, in addition to political discontent, contributed to the negation of any net advances. Ever optimistic, Bangladeshis continued their age-old struggle against the land and sought ways to accommodate the burgeoning society.

Waste Management The National Drug Policy 2005 of Bangladesh states that the pharmaceutical plants must need to comply with environmental legislation like disposal of waste streams. Environment may have hazardous impact if the wastages of manufacturing plants are not managed properly. Novartis takes care of all their toxic and non toxic waste to make sure that all the disposable water is properly treated and disposed.

The Narcotics Control Act 1990:

The Narcotics Control Act, 1990 was passed in 1990 by repealing all previous laws for control of narcotics, treatment and rehabilitation of drug addicts. The government has enacted the Narcotics Control Act, 1990 as amended in 2000, 2002 and 2004 in order to update the law.

Features of the Narcotics Control Act, 1990:

The Narcotics Control Act, 1990 (as amended in 2000, 2002 and 2004) has got the following salient features reflecting the growing needs for effective encounter against drug smuggling on the one hand and corroborating on the other the international efforts to contain this problem.

1. 2.

The Narcotics Control Act. 1990 came into force on 2nd January, 1990. It is a special law having predominance over other laws in respect of its ambit and jurisdiction on drugs and drug related issues. 3. Interception of illicit drug trafficking through law enforcement, control of narcotic drugs and psychotropic substances used in medical, industrial and scientific purposes coupled with treatment and rehabilitation of the drug addicts underlie the propriety of this law. 4. It provides legal coverage for establishment of the Department of Narcotics Control (DNC) as the Nodal Agency of the government to fulfill the objectives of the law in question. It also provides the legal basis for formation of the National Narcotics Control Board (NNCB) as the highest policy-making body of the government for formulating necessary policies and strategies to combat drag problem in the country. 5. The Narcotics Control Act. 1990 empowers not only the Department of Narcotics Control but also the other agencies of the government like the Police, the BDR (the border security force), the Customs and the Coastguard for drug enforcement activities. 6. Further the law provides for mutual cooperation among the different law enforcement agencies as and when required for conduct of search, seizure and arrests. 7. The law introduces an effective licensing system for controlling import, export, manufacturing, processing, distribution, sale, transport, possession and use of licit narcotic drugs, psychotropic substances and precursor chemicals. The Narcotics Control Rules, 1999 is the legal instrument for carrying out the licensing provisions enshrined in the law. 8. This law prescribes deterrent punishment for various categories of drug offences as well as for breach of the conditions of the licenses issued under the law. 9. The law prescribes the highest penalty of death sentence for the offenders accused of possessing either heroin or cocaine or cocaine derivatives exceeding the quantity of 25 grams. Similarly the illegal possession of pethidine or morphine or possession of tetra-hydro-canabinal exceeding the quantity of 10 grams renders the offender or offenders concerned liable to death sentence or life-long imprisonment. Death sentence has also been prescribed for certain other drug offences of serious nature (Section 19 of the law). 10. The law takes the wisdom of the three major UN Conventions and the SAARC Convention on narcotic drugs and psychotropic substances particularly in regard to forfeiture of sale proceeds of illegal drug business, freezing of bank accounts and properties, sending of juvenile offenders to the correction centre in lieu of imprisonment, inclusion of the controlled delivery technique, compulsory maintenance of accounts of licit drugs by the license holders, incorporation of the 22 precursor chemicals and so on. 11. The law provides the legal basis for the Chemical Laboratory of the Department of Narcotics Control and its proper functioning in respect of forensic analysis of

12. 13. 14.

15.

16.

17.

all seized drugs and suspicious substances. This lab, established in Dhaka, caters to the needs of all the agencies charged with the responsibilities of drug enforcement and thereby it plays an important role in quick disposal of drug cases under trial. The amendment of 2000 to the law brings about the government first foray into the control of precursor chemicals from drug control point of view. An amendment of 2002 has introduced the minimum time limit of 15 days for completion of investigation of drug cases filed under this law. Another amendment in 2004 redefines alcohol by reducing the lowest limit of alcoholic strength from 5% to only 0.5%. Any liquid preparation containing more than 0.5% alcohol shall fall within the purview of the law. This amendment is intended for safeguarding our young generations from the clutches of the so called energy (alcoholic) drinks and their bad impacts. The law has got 61 Sections in all. It has got two Schedules of which the first schedule lists the narcotic drugs and psychotropic substances including the 22 precursor chemicals. The second schedule on the other hand lays down the rates of excise duties to be imposed on the domestically produced liquor and alcoholic spirit. The law is a unique combination of legal provisions comprising violation sections, penal sections, hybrid sections (prescribing violation and punishment together), modus operandi sections and administrative sections. Adorned with the foregoing features, the Narcotics Control Act. 1990 (as amended in 2000, 2002 and 2004) stands to be adequate and enabling enough to meet the challenge of the time.

National science and technology policy An important step in the improvement of S&T infrastructure in Bangladesh was taken with the announcement by the government of a National Science and Technology Policy in 1986. With a view to identifying research priorities and coordination of research activities among various sectors and institutions, a high level National Council for Science and Technology (NCST) was set up in 1975. After several changes in structure it was One of the priority tasks to which the SCST devoted its attention was the formulation of a National Science and Technology Policy aimed at attaining scientific and technological competence and self-reliance to enhance productivity and generate employment in various sectors of the economy. A draft policy document was circulated in early 1985 to elicit public opinion. It was generally well received by the scientific community and was finally adopted and announced by the Government in early 1986. The Narcotics Control Act of 1990 (Act no XX of 1990) covers the control of narcotic drugs and psychotropic substances, including provision for the treatment and rehabilitation of drug dependent people. Bangladesh has amended the narcotics act and allows the Director General of the Department of Narcotics Control to send drug addicts for treatment. Drug use is considered as a treatable condition rather than a criminal offence. The 1990 Drug Control Act was amended in 2002 and 22 precursor chemicals, as stated in Tables I and II of the 1988 Convention, were included. Section 19 and 20 of

the Act prohibits any kind of illegal operations regarding narcotic drugs, psychotropic substances as well as precursor chemicals. Additionally, rules relating to the licensing of precursor chemicals were framed and adopted. In Bangladesh, the Department of Narcotics Control (DNC) administered by the Ministry of Home Affairs, is responsible for implementing drug law enforcement and drug abuse control programmes guided by a ministerial level National Narcotics Control Board (NNCB). DNC has an intelligence-gathering and operational role and oversees the implementation of demand reduction initiatives. It is also charged with co-coordinating the efforts of the other Bangladesh enforcement agencies (police, customs, Bangladesh Rifles and coastguard). The DNC does not collate national arrest and seizure statistics, in part because the other agencies are reluctant to disclose the necessary material. The Department of Narcotics Control has recently initiated a community level of coordination to streamline the activities of the non-governmental organizations to strengthen existing and future drug prevention activities in the country. With assistance from UNODC, the process of formation of a national network of GOs and NGOs has been initiated through training for stakeholders held in March 2004 in Dhaka. Four network formation meetings have been held in the divisions of Chittagong, Dhaka, Khulna and Rajshahi.

Following the Drug (Control) Ordinance of 1982, some of the local pharmaceutical companies improved range and quality of their products considerably. The national companies account for more than 65% of the pharmaceutical business in Bangladesh. However, among the top 20 companies of Bangladesh 6 are multinationals. Almost all the life saving imported products and new innovative molecules are channelled into and marketed in Bangladesh through these companies. Multinational and large national companies generally follow current good manufacturing practices (cGMP) including rigorous quality control of their products. The Drug Act of 1940 and its rules formed the basis of the country's drug legislation. Unani, ayurvedic, homeopathic and biochemic medicines were exempted from control under the legislation. The pharmaceutical industry was dominated by the foreign companies at that time. Even in the allopathic market there were extemporaneous preparations dispensed from retail pharmacies. The pharmaceutical industry, however, like all other sectors in Bangladesh, was much neglected during Pakistan regime. Most multinational companies had their production facilities in West Pakistan. With the emergence of Bangladesh in 1971, the country inherited a poor base of pharmaceutical industry. For several years after liberation, the government could not increase budgetary allocations for the health sector. Millions of people had little access to essential life saving medicines. With the promulgation of the Drug (Control) Ordinance of 1982 many medicinal products considered harmful, useless or unnecessary got removed from the market allowing availability of essential drugs to increase at all levels of the healthcare system. Increased competition helped maintain prices of selected essential drugs at the minimum and affordable level.

In 1981, there were 166 licensed pharmaceutical manufacturers in the country, but local production was dominated by eight multinational companies (MNCs) which manufactured about 75% of the products. There were 25 medium sized local companies which manufactured 15% of the products and the remaining 10% were produced by other 133 small local companies. All these companies were mainly engaged in formulation out of imported raw materials involving an expenditure of Tk 600 million in foreign exchange. In spite of having 166 local pharmaceutical production units, the country had to spend nearly Tk 300 million on importing finished medicinal products. A positive impact of the Drug (Control) Ordinance of 1982 was that the limited available foreign currency was exclusively utilised for import of pharmaceutical raw materials and finished drugs, which are not produced in the country. The value of locally produced medicines rose from Tk 1.1 billion in 1981 to Tk 16.9 billion in 1999. At present, 95% of the total demand of medicinal products is met by local production. Local companies (LCs) increased their share from 25% to 70% on total annual production between 1981 and 2000. In 2000, there were 210 licensed allopathic drug-manufacturing units in the country, out of which only 173 were on active production; others were either closed down on their own or suspended by the licensing authority for drugs due to non compliance to GMP or drug laws. They manufactured about 5,600 brands of medicines in different dosage forms. There were, however, 1,495 wholesale drug license holders and about 37,700 retail drug license holders in Bangladesh. Anti-infective is the largest therapeutic class of locally produced medicinal products, distantly followed by antacids and anti-ulcerants. Other significant therapeutic classes include non-steroidal anti-inflammatory drug (NSAID), vitamins, central nervous system (CNS) and respiratory products. A most remarkable progress the local industry has made in recent time is the phenomenal increase in the local production of basic chemicals. There are now 13 drug manufacturing units, which also manufacture certain basic materials. These include Paracetamol, Ampicillin Trihydrate, Amoxycillin Trihydrate, Diclofenac Sodium, Aluminium Hydroxide Dried Gel, Dextrose Monohydrate, Hard Gelatin capsule shell, Chloroquine Phosphate, Propranolol Hydrochloride, Benzoyl Metronidazole, Sodium Stibogluconate (Stibatin) and Pyrantel Pamoate. However, most of these are confined to the last stage of synthesis. There are three public sector drug manufacturing units. Two of them are the Dhaka and Bogra units of Essential Drug Company Ltd. (EDCL), which is functioning as a public limited company under the Ministry of Health and Family Welfare. EDCL produced medicines worth Tk 964 million in 2000. There are separate vaccines and large volume IV fluids production units under the Institute of Public Health (IPH). The productions of both EDCL and IPH are mostly used in government hospitals and institutions. In 2000, there were 261 unani, 161 ayurvedic, 76 homeopathic and biochemic licensed manufacturing units. They produced medicines worth Tk 1.2 billion in 2000. One of the major positive impacts of Drug (Control) Ordinance is the rapid development of local manufacturing capability. Almost all types of possible dosage forms include tablets, capsules, oral and external liquids (solutions, suspensions, emulsions), ointments, creams, injections (small volume ampoules/dryfill vials/suspensions and large volume IV fluids), and aerosol inhalers are now produced in the country. In recent years, the country has achieved self-sufficiency in large volume parenterals, some quantities of which are also exported to other countries. The development of local manufacturing capability helped contain dependence on the import of

pharmaceutical products (raw material and finished product) around pre-1982 level. Under the Drug (Control) Ordinance government fixes the maximum retail prices (MRP) of 117 essential drug chemical substances. Drugs other than these essential ones are priced through a system of indicative prices. This rule applies on the locally manufactured products only. For imported finished products, a fixed percentage of markup is applied on the C&F price to arrive at the MRP, regardless of whether they are within the list of essential 117 molecules or not. It is interesting to note that, even with withdrawal of price control from many products, prices have not shot up; healthy competition has been keeping the prices within affordable levels. Physical distribution of pharmaceuticals in Bangladesh has evolved in a unique way. Unlike other countries Bangladesh pharmaceutical industry is more retail oriented and bulk of distribution is done by the companies themselves. Pharmaceutical companies distribute their products from their own warehouses located in different parts of the country, as no professional distribution house is available. Wholesalers play a limited role in this regard since companies supply goods to both retailers and wholesalers. Export of pharmaceutical products is still in an infant stage, although a number of private pharmaceutical companies have already entered the export market with their basic materials and finished products. They export their products to Vietnam, Singapore, Myanmar, Bhutan, Nepal, Sri Lanka, Pakistan, Yemen, Oman, Thailand, and some countries of Central Asia and Africa. The primary responsibility for drug quality control lies with the manufacturers. However, the government's drug testing laboratories (DTL) and the Directorate of Drug Administration (DDA) have the monitoring and supervising role. There are two government drug testing laboratories. DTL at Dhaka is in the Institute of Public Health and the regional DTL at Chittagong is under DDA. Drug administration is responsible for registration of drugs for marketing in Bangladesh and for inspection of premises and licensing. With its present set up and inadequate strength, DDA often finds it difficult to carry out its very large volume of assigned work. The national drug policy and the regulatory control policies are yet to achieve best results for a healthy growth of the pharmaceutical industry. Because of the limited capacity of the government's drug testing laboratories, the quality of products manufactured locally cannot be uniformly ensured. Restrictions on patent rights discourage foreign investors to come up actively in the pharmaceutical market in Bangladesh. Introduction of new research molecules is difficult due to slow registration process and restrictions on patent protection. Although the fixed mark-up system of pricing helped keep the prices of pharmaceutical products low, this made it difficult to cover costs of marketing and distribution. The fixed mark-up system also discourages some companies to invest for cGMP and assurance of high quality production. Some important therapeutic classes of the pharmaceutical market (antacids and oral vitamins) are only open to the local companies even after 20 years of the drug ordinance. This policy is discriminatory and also contrary to the announced investment policy of the government. The annual per capita drug consumption in Bangladesh is one of the lowest in the world. However, the industry has been a key contributor to the Bangladesh economy since independence. With the development of healthcare infrastructure and increase of health awareness and the purchasing capacity of people, this industry is expected to grow at a higher rate in future. Healthy growth is likely to encourage the pharmaceutical companies to introduce

newer drugs and newer research products, while at the same time maintaining a healthy competitiveness in respect of the most essential drugs.

Business laws and regulations in general

The Commissions as well as this working papers targeted constituents in the informal sector comprise mainly tiny, micro and household businesses. Currently there doesnt exist a legal framework that could gradually lead to formalization of such businesses. In the absence of such a legal framework, this working paper makes recommendations regarding new legal tools, institutions, organizations and mechanisms for transition from informal to formal sector.

A survey of current business laws and regulations makes it evident that poor informal entrepreneurs cannot easily be brought within the existing legal framework. Instead, a feasible way to afford legal protection to such entrepreneurs would be to put in place a new regulatory regime. As noted below, the current business laws and regulations place a special strain on small businesses, and they are prohibitively expensive and burdensome for tiny and micro businesses, which are the targeted constituents of the Commission and this working paper. The legal framework that applies to businesses in Bangladesh is burdensome, inter alia, because of lack of public information about relevant laws and regulations, the fragmentation of legal and regulatory requirements among different ministries and offices, and the delays and demands for informal payments that plague virtually every registration or certification requirement.

All businesses need to obtain a trade license from the relevant city or Municipal Corporation or other local authority. Depending on the circumstances, a small business may also need to register as a company with the Registrar of Joint Stock Companies, or as a cooperative society with the Directorate of Cooperatives. Businesses need to obtain a tax identification number (TIN) from the National Board of Revenue (for incorporated companies this requirement is compulsory), obtain registration for purposes of Value Added Tax and register with the Department of Inspection of the Ministry of Labor and Employment. Industrial enterprises also need to obtain an environmental clearance certificate from the Department of Environment of the Ministry of Environment and Forests.

To take advantage of certain industrial incentives, such as tax exemptions or access to land in an industrial estate, businesses need to register with the Board of Investment (BOI) or Bangladesh Small and Cottage Industries Corporation (BSCIC), in the case of a small or cottage business. Businesses engaged in any import or export activity also need to obtain an import or export registration certificate, respectively. Depending on the nature of the business, other regulatory requirements may apply. The time and expense involved in complying with these multiple requirements place a special strain on small businesses, especially at the start-up phase and for micro entrepreneurs in the informal sector, who are the targeted constituents of the Commission these requirements are prohibitively burdensome. Various donors are currently supporting

projects to simplify and automate some of the regulatory requirements, and to publicize the requirements through brochures.

Trade license
Legislation relating to city corporations and municipalities (paurashava) prohibits any person from carrying on or maintaining within the local limits of city corporations or municipalities any trade or business without obtaining a trade license from the city corporation or municipality concerned.6 Informal enterprises operating within the local limits of city corporations or municipalities violate this legal requirement. However, there is no similar requirement for trade license for enterprises operating outside the local limits of city corporations or municipalities, e.g. rural enterprises. For poor entrepreneurs in the informal sector the procedure for obtaining trade license is both too cumbersome and too costly. Applications for a trade license are required to be accompanied by copies of rent receipt or rental agreement and holding tax payment receipt.

Informal enterprises which do not have any legal title to the occupied land or premises cannot fulfill this requirement. There are also additional requirements for incorporated entities and for entities in specific sectors. The cost of obtaining a trade license may vary depending on where the license is obtained. The cost of obtaining a trade license from the Dhaka City Corporation could be up to BDT 5,000, of which governmental fee is BDT 2,000. 5 For example, Aus AID is supporting simplification of the Dhaka City Corporations procedures for issuing trade licenses, and DFID is assisting the National Board of Revenue to streamline and computerize tax procedures and to make tax information and forms available on its website. The Dhaka City Corporation Ordinance 1983, sections 67, 70; the Chittagong City Corporation Ordinance 1982, sections 66, 69, 160; the Khulna City Corporation Ordinance 1984, sections 64, 67, 159; the Rajshahi City Corporation Act 1987, sections 66, 69, 159; the Sylhet City Corporation Act 2001, sections 74, 77, 167; the Barisal City Corporation Act 2001, sections 74, 77, 167; the Paurashava Ordinance, 1977, sections 54, 57, 151.

Incorporation
Incorporation is not essential to formally operate a small business. Thus it may be possible to operate formally by obtaining necessary tax and VAT registrations and trade license but without incorporation. Yet, it is recognized that incorporation whether in the form of company, society or partnership does provide certain business advantages.

For poor informal entrepreneurs existing procedures for different modes of incorporation are prohibitively cumbersome and expensive. For instance, to incorporate a company the following requirements must be fulfilled: verification of the uniqueness of the proposed company name from the Registrar of Joint Stock Companies and Firms (RJSC); obtaining forms for incorporation; submitting to the RJSC an application in plain paper along with a resolution approved by the promoters/sponsors of the proposed company regarding proposed name of the company to be formed, authorized share capital of the proposed company and the names of the proposed chairman/ director(s)/ shareholders who have agreed to subscribe shares of the proposed company; preparing the memorandum and articles of association of the company; paying stamp duty; filing required documents with the RJSC for registration. The cost of incorporation (excluding legal fees) could be up to BDT 10,000.

SME Policy
Accordingly, the targeted constituents are referred to as informal businesses rather than as Small and Medium Enterprises (SMEs). Yet, it may be useful to briefly discuss the policy framework regarding SME development in Bangladesh, because the Government has attached particular importance to SME development as a means of poverty reduction. The Bangladesh Poverty Reduction Strategy Paper (PRSP) approved by the Government in October 20057 attaches importance to SME development and the Government has also adopted an SME Policy.8 At the institutional side a National Task Force and an Advisory Panel have been established. Recommendations regarding legal tools for transition from informality to formality need to duly take into account these SME development strategies because, inter alia, some micro entrepreneurs operating informally can possibly make a transition to the formal economy as SMEs.

Furthermore, in formulating policies for the informal sector, the SME Policy and experience gained under that Policy can be of some help. The PRSP provides a policy framework for reducing poverty and pursuing equitable development. It synthesizes a wide range of law and policy initiatives and aims to reduce poverty through four strategic channels: (1) economic growth initiatives including private sector investment, employment generation and trade; (2)propoor sector initiatives including agriculture and rural development, SME development, infrastructure development and development of information and communication technologies (ICT); (3) strengthening of social safety net programs; and (4) human development programs related to education and vocational training, health care and food safety, water and sanitation. To ensure that these initiatives produce equitable and sustainable results, the PRSP also includes several supporting strategies, including womens rights and advancement.

Key elements of the SME Policy include: (1) surveying SMEs to identify industries with growth potential; (2) strengthening the role of public agencies such as BSCIC to provide more effective support to SMEs; (3) providing tax incentives to SMEs; (4) simplifying relevant laws and regulations; (5) fostering subcontracting and other linkages between SMEs and larger enterprises; (6) promoting e-commerce to 7 Government of Bangladesh, General Economics Division, Planning Commission, Unlocking the Potential: National Strategy for Accelerated Poverty Reduction, 16 October 2005. 8 Government of Bangladesh, Ministry of Industries, Policy Strategies for Small & Medium Enterprises (SME) Development in Bangladesh, January 2005, available at support SME production and marketing; and (7) establishing an information bank to improve marketing and trade opportunities. External agencies such as ADB, the World Bank, Aus AID and DFID are supporting elements of the new policy through various project and programs. For example, ADB and the World Bank have provided loans to the Government for on lending to SMEs through a Small Enterprise Fund. The SME Sector Development Program supported by ADB also includes a gender action plan, which provides for (a) representation of women entrepreneurs in the preparation and implementation of the SME policy; (b) inclusion of sexdisaggregated data in the SME information bank; (c) earmarking of at least 10% of the Small Enterprise Fund for women borrowers; and (d) targeted training programs designed to meet the specific needs of women entrepreneurs.

The current laws of Bangladesh mirror their Western origins, but maintain their own cultural and religious values. A recent change in the laws of Bangladesh separated the judicial branch from the executive, aiding the further removal of political corruption. Although the laws of the Bangladesh constitution inspire high-minded ideas of democracy and freedom, many citizens simply do not have access to these protections and have no idea of their guaranteed rights. Similar to the American Bill of Rights, the laws of Bangladesh enumerate 23 fundamental rights, most of which are covered in the American Constitution or subsequent legal jurisprudence. Many Muslim leaders feel that democracy contradicts the laws of religion, but Bangladesh has managed to maintain their form of parliamentary democracy while observing their religion obligations. Some laws of Bangladesh included in the 23 fundamental rights are; the right to property, protection of right to life and personal liberty, and equality before law. The judiciary system relies on a Supreme Court as its highest court to deliberate on the laws of Bangladesh. Until recently, the executive branch wielded great control over the Supreme Court making it a political body subjected to posturing and corruption. The great writers on democracy consistently recognized the necessity of a separate judicial branch to objectively rule on the laws of the land. The Bangladesh constitution originally intended for this separation, but as a result of widespread corruption, elected leaders sought to control this wing of government as well. Widespread poverty and illiteracy limits the ability for the Constitution to guarantee equal protection of law to all Bangladesh citizens. The problem does not rest in the intent of the document, but the lack of trust the citizens have in governmental officials and law enforcement. Underlying the laws of Bangladesh is an insurgence of corruption that leaks injustice and favoritism, creating the perpetual sense of distrust. The Bangladesh legal systems Western roots come from the English, as the core of South Asian governmental infrastructure was created over the 300 year span of British colonialism. Instead of disposing of all draconian colonist thinking that contains inherent racism and disregard, the textual laws of Bangladesh integrate the Western philosophy of democracy with their values. As a document, the Bangladesh Constitution offers a mix of nationalism and individual freedom that resembles the historical struggles. Yet, in practice, the laws of Bangladesh fail to sift out incessant corruption and deliver equality to every citizen.