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How to Setup Transport Business in Bangladesh

In the last two decades, Bangladesh has seen an enormous growth in the Road transport sector. In the bustling metropolitan city that is Dhaka, there resides a constant need for various forms of transportation system that aids in the exchange of goods and services. 

Bangladesh’s GDP from Transport Industry

Transportation can be divided into two sectors; movement of passengers and movement of goods. The Bangladesh Road Transport Corporation (BTRC) provides a countrywide network of bus services while Bangladesh road Transport Authority (BRTA) is the regulatory body to govern, regulate and warrant discipline and safety in the road transport sector in Bangladesh. The issuance of licenses, rout permit, vehicle registration, fitness and tax token issuance, fixing speed limits and signal, fixing fare of the public transport, classification of the vehicle are all controlled by BRTA. 

Passenger Transportation, essentially on roads, comprises of both local and international bus services as well as local movement of motor vehicles. Local and foreign private organizations like Uber, Pathao, Shohoz etc tap into Bangladesh economy providing services like ride sharing, home services, food delivery and e-commerce - services are usually constrained to Dhaka region only. They are looking to unlock the potential of logistics industry in the country and thus grow to become the key players in the sector.

Traditionally, for domestic or intra-city and inter-city modes of delivery; the most popular mode of transportation for goods were and continue to be covered vans and lorries.  So, how is logistics connected with transportation? The logistics companies assist in the process of transportation, handling & storing goods and materials, from the commencement till the end of the production in order to ease the business for the owner and the service provider. Though separate but both their services are interconnected with each other and integration of these two, gives out an outcome of enhanced efficiency for transportation and improved overall performance of the logistics system. Also, a good transport system could promote better efficiency in logistics activities by reducing operation cost, and enhancing improved quality.


How to Setup Transport Business in Bangladesh

LICENSE AND REGISTRATION PROCESS 

A well operated transport and logistics enterprise would enhance competitiveness in the industry and encourage more and more investors, both national and internationally to invest in this sector for a profitable return. So, obviously before and above everything, its is essential to establish an entity in accordance with the laws of Bangladesh. The options available are; public or private limited company, sole proprietor and partnership. 

Company
The company can be set up after submission of all the relevant documents along with the government fees at the Company House, Registrar of Joint Stock and Companies (RJSC). Upon finding all correctness and the authenticity of all the documents, the RJSC shall issue a certificate of incorporation. 

Partnership 
A partnership business can be established by executing a partnership deed between the partners and registering the partnership at the Registrar of Joint Stock Companies And Firms (RJSC). 

Sole Proprietorship
This type of entity is established by one person only and has no partners. In order operate business through such entity, one has to obtain trade license from the relevant city corporation. 

Other licenses:
Once the choice of entity has been established, there are variety of licenses which needs to be obtained depending on the type of services that it desires to deliver to the customers. The list of licenses mentioned below is a non-exhaustive list which vary depending on each service provided.

1. Obtain TIN (Tax identification number) Certificate from National Board of Revenue (NBR)

2. Obtain Trade License

3. Obtain Vat Registration Certificate from NBR

4. Obtain Driving license from BRTA (this is applicable for those individuals who are willing to drive vehicles in the public roads)

5. Obtain Permission for public transport from BRTA

6. Obtain Conductor license from BRTA (this is applicable for the conductors of the motor vehicles)

7. Obtain Vehicle registration from BRTA

8. Obtain Vehicle fitness from BRTA

9. Obtain Vehicle Tax token from BRTA

10. Obtain Route permit from BRTA

11. Obtain Enlistment Certificate for ride sharing from BRTA (in case of ride sharing service provider such as Uber, Pathao etc. under the Ride Sharing Guidelines 2017)

12. Vehicle enlistment certificate from BTRA (in case of ride sharing service provider such as Uber, Pathao etc. under the Ride Sharing Guidelines 2017).

Legal Issues 

Even though transportation and logistics appear to be a very lucrative business but there are a lot of challenges involved in this industry. One should carefully step into this sector since this industry is prone to occupational hazards leading to casualties and injuries to human life due to reckless driving. Reporters Forum (SCRF), a platform of journalists, prepared the report based on news carried by 22 national dailies, 10 regional newspapers and eight online news portals and news agencies, the said report stated that at least 2,329 people, including 291 women and 381 children, were killed and 4,361 others injured in 2,159 road accidents across Bangladesh in the January to June of 2019 . As a result, the Road Transport Act 2018 has been introduced with stricter punishment for transport workers.

Further, in accordance to the statistic of February 2017 by BRTA, Bangladesh had over 2.9 million registered vehicles, but only 1.9 million of them had driver’s licenses . As a form of repercussion of transport driver’s negligent action, BRTA exercised severe penalty of fines on the transport drivers, for driving without license, which are payable up to BDT 25000.Other penalties include fines payable within a range of BDT 1 lac to 5 lac for driving with a fake license, driving without a seatbelt and parking illegally carries a fine of BDT 5000, driving on the wrong side, speeding, breaking traffic signals and riding a motorbike without a helmet can get a transport worker fined up to TK 10,000 under the Road Transport Act 2018.

Also, separate punishments are available for crossing speed limit. Transport drivers are bound to adhere to the speed limit of every road that they are driving by and exceeding the speed limit shall take the vehicle owner or the vehicle corporation under the purview of penalty of 3 months imprisonment or 10,000 taka or both under the Road Transport Act 2018. As a punishment to the transport driver, one point shall be reduced from the 12 points that he will have endorsed to his driving license under the Road Transport Act 2018.

As a result of the casualties, BRTA decided to introduce a financial support fund for the victims of the Road Accidents wherefrom compensation or assistance for medical shall be given to the injured victims or the successor of the deceased person under the Road Transport Act 2018. The BRTA shall determine the rate and procedure through which the vehicle owner or the vehicle corporation, shall pay, as per the classification of the vehicle, annual or one-time contribution to that fund. 

As a precautionary step to safeguard themselves, it is advised that vehicle owners or the vehicle corporation to get his vehicle insured from an insurance company. 
Legal issues arise separately for noncompliance of the Ride Sharing Guidelines 2017 by the Ride Sharing Service Providers like Uber and Pathao. Uber and Pathao made commutation easier for the public but it has its own legal compliances. Firstly, the Ride Sharing Service Provider needs to obtain an enlistment certificate for their entity and the vehicle chosen for service must also have a vehicle enlistment certificate under the Ride Sharing Guidelines 2017. The transport workers must be trained in relation to the download and the use of the software application provided by the service provider and it is obligatory that this software application must first be approved by the BRTA before operating it . Upon acceptance of any trip by any customer, the software must show the name, location and registration no of the car along with the approximate fare of the trip. Upon the completion of the trip, the total costs and the distance must be shared with the customer.

The Ride sharing service provider as a safety measure must keep personal information of the driver including National Identification Number, phone number and present Address. Maintaining confidentiality is one of the pillars of “trust” shared between the Ride sharing service provider and the Transport driver and the Customer and the Ride Sharing service provider. Under any cost, the Ride sharing service provider is not allowed to breach confidentiality in relation to disclosure of any information received from the driver or customer unless the disclosure is required by the law enforcement agency or BRTA. 

All the employees of the Transport and Logistics Industry and the ride sharing service providers are subject to the Labour Laws of Bangladesh (Bangladesh Labour Act 2006) and as such in compliance with the laws, no transport owner shall appoint a driver in a road transport unless he has attained the age of 21 (twenty one) years.

Introduction of FMA and its services 
FM Associates is one of the leading law firm in Bangladesh comprising of a dedicated team of lawyers and Barristers. They have a separate department in their firm for each arena of law led by lawyers and barristers specialized in each field for eg employment law, company law, commercial law, property law and many more. 

FMA has gained the status of the best law firm in Bangladesh through their constant effort and sincerity in fulfilling their professional commitments. The motto of the firm is to the keep Client’s interest first and above everything.

FMA can also provide assistance in the entire procedure of the incorporation of the company starting from the drafting of the AOA and MOA including all other relevant forms to obtaining name clearance and submission of all the documents to RJSC. FMA supports companies in the renewal procedure of the Trade Licenses and as well as the Name Clearance, if required.

The Labour Laws in Bangladesh are labour friendly and as such the service providers must at every step while dealing with transport workers safeguard themselves from industrial disputes since any discrimination caused to transport worker will cause them unwanted harassment . The legal team of FMA, due to their years of experience in employment law, has attained proficiency in drafting and reviewing employment agreements/appointment letters of employees for such entities and they are also equipped powerfully to represent employers and employees both in the Labour Courts in case of any industrial dispute.

Anomalies are often found in agreements/contracts executed between parties which is great concern for the entities. FMA supports entities in reviewing and drafting service agreements between service providers and vendors who requires transport and logistics facilities for their goods in addition to reviewing and drafting of agreements to be executed between ride sharing service provider and the vehicle owner.

Effect of the COVID-19
An unwelcomed tragedy that has befallen upon Bangladesh through the spread of novel coronavirus. The transportation and logistics sector has been adversely affected due to existence of this disease. The government in order to flatten the curve of Covid 19 had introduced the concept of social distancing through strict measures of lock down and as such prevented all modes of transportation in Bangladesh. Due to the current lockdown in effect throughout the entire country, all types of vehicular movement are banned with only emergency vehicles being granted leeway. The transportation and logistics of essential items like medicine, food grocery and fuel shall be in demand but however the demand for passenger transport services has fallen drastically. Limited access to transportation and declaration of lockdown has halted ongoing projects related to mega infrastructure such as power plant projects, construction of bridges, etc since there is a restriction on the transfer of raw materials from location to other and secondly due to a restriction on the movement by people. 

The sudden outbreak of coronona virus has come as a surprise for all service providers in this industry. If the establishment has to remain shut, then the service providers as well as the employees, including drivers, managers, daily workers have to encounter huge financial losses. The Service Providers, specifically Pathao in this instance in order to survive this loss are depriving the employees by either not paying them or opting for a pay cut from their salary. Nevertheless, the correct procedure should be laying off the employees or going directly for retrenchment. Under the layoff scheme, the employees who have completed at least 1 (one) year of service shall be entitled to the compensation which shall be half of the total basic salary of the employees and full amount of housing allowances. If the employers do not wish to retain the employees, they may terminate them on the ground of redundancy. Or alternatively they may retain employees to work in a limited capacity for the transportation and logistics service of the essentials. 

Taxation
General rate of tax is 32.5% currently in the laws of Bangladesh. Nominal requirements for a limited company formed locally includes a number of reporting to be done to NBR, such as: Opening a TIN, Monthly Tax deduction statement, Half Yearly Withholding Tax statement, Yearly statement related to tax return submission of its employees, Yearly statement related to salary disbursed from company to its employees, Quarterly Advance tax deposition, Yearly Tax return submission, attending appeal/hearing session as required on behalf of the company, Monthly VAT return etc. FMA can advise and assist to satisfy all regulatory compliances to enable the company to run smooth and hassle free.  

Conclusion
Recently, we have seen government initiatives to bring about changes in the transportation infrastructure – like the development of Dhaka-Chattogram highway which has reduced transportation time and improved the efficiency in the supply chain for goods in this route. The Government has also been looking to explore this industry and may soon bring more its own ride services while also encouraging the public to use more public transport like Dhakar Chaka, Gulshan Chaka etc. While we have traditional logistics providers such as Sundarban and S.A Paribahan, who are operating for a long time all over the country, competition is provided by new logistic providers such as Pathao, Shohoz etc. They are looking to cover all sorts of goods such as grocery, medicine, laundry, etc.  This number is likely to increase more and seems to be positive for the logistics and transport industry. We have a growing need for logistics partners who have all modern logistics and warehousing facilities like warehousing, availability of different transport modes, facilities for packaging and material handling, security, database management, online tracking etc. 

Summary 
Road Transport Sector has turned out to be one of the most flourishing and profitable sector for the potential businessman in Bangladesh. A nation’s economy is facilitated by an efficient transport system. Dhaka includes a population of over 20 million with a population growth of approximately 3.56% annually, a result of which this sector has exponentially taken its height. 

Road Transportation can be classified by two categories mainly; Movement of passengers and movement of goods. Passenger Transportation includes in its ambit bus services, ride sharing service providers like Uber, Pathao and Shohoz whereas movement of goods and materials are mainly carried out by lorries cover vans and sometimes trucks. Logistics and Transportation share “interlinked relationships” with each other and they only aids in improving each other’s efficacy. Transportation is a core element in the logistics chain since it required to perform logistics activities from the beginning of production till the distribution to the end consumer and in the same manner logistic service is required  in terms management, handling storing, loading and unloading of the goods and materials to be transported to the final consumer. 
Service providers can establish a company by submitting all the relevant documents and fees at the RJSC. However, there is no requirement of registration at RJSC in regards to sole proprietor and attainment of only a trade license along with VAT certificate and TIN shall suffice for commencement of the business.

Service providers need to obtain all the operating licenses from the relevant government authority to run transport businesses, namely TIN Certificate, Trade License, VAT certificate, Driver License, Vehicle registration license, route permit, vehicle fitness certificate, Ride sharing enlistment certificate, vehicle enlistment corticate etc  
FM Associates, an international law firm is known as one of the best law firms in Bangladesh. They have assisted several clients in setting up an entity to obtaining all the required licenses from the relevant authority in the transportation and logistics industry. FMA has enormous experience of vetting and/or drafting agreements such as service contract between vendors and transportation and logistics entity as well as agreements between ride sharing service provider and vehicle owner. They also have a team dedicated to deal with employments matters in Bangladesh. 

The invisible existence of an Corona Virus- Covid 19 has dismantled  the lives of the people of Bangladesh, not only in the terms of casualties but also includes financial incapacities since all sectors including transport and logistics, RMG, health, export and import, trading, construction and infrastructure and tourism have been significantly hampered due to restriction on movement.