Washington DC, February 13, 2007
– Doing business became easier in India and Pakistan in 2005-2006, according
to a new regional report released today by the World
Bank and its private sector
Business in South Asia 2007.
The report covers eight countries in the World Bank’s South Asia region
and examines 12 major cities in India, six in Pakistan, and four in Bangladesh.
Within India, Hyderabad has the most business-friendly regulations. Mumbai
is in 11th place, ahead of Calcutta. Typically, large urban centers such
as Mumbai and Calcutta have a high volume of business, so regulatory and
administrative bottlenecks create serious congestion. Karachi is at the
top in Pakistan, while Dhaka ranks best in Bangladesh.
Five reforms in India and two in Pakistan
reduced the time, cost, and hassle for businesses to comply with legal
and administrative requirements. No other South Asian economies improved
business regulations in 2005-2006, ranking the region last in the pace
of global reforms.
The report compares business regulations
in the region with 175 economies around the world. The top-ranked countries
are the Maldives (53) and Pakistan (74), followed by Bangladesh (88), Sri
Lanka (89), Nepal (100), India (134), Bhutan (138), and Afghanistan (162).
Doing Business in South Asia 2007
is the third report in a series of South Asia regional reports based
on the methodology of the annual global Doing
Business report. Doing
Business tracks a set of regulatory indicators related to business
start-up, operation, trade, payment of taxes, and closure by measuring
the time and cost associated with various government requirements. It does
not track variables such as macroeconomic policy, quality of infrastructure,
currency volatility, investor perceptions, or crime rates.
The report finds that entrepreneurs
in South Asia face large regulatory obstacles to doing business. For example,
it takes 18 months of salary, on average in the region, to dismiss a redundant
worker. More than a year (425 days) is needed to register property in Bangladesh.
Taxes are high: a standard company in India pays 81% of commercial profits
in taxes, while in Pakistan, it takes 560 hours per year to comply with
all tax regulations.
Good practices exist within Bangladesh,
India, and Pakistan. The report team finds that if each city in these countries
mimicked the best practices followed in other cities within the country,
the country ranking and ease of doing business would improve drastically.
For India to jump 55 places in the ease of Doing Business rankings,
the country would need to adopt for example Jaipur’s regulations on starting
a business, Bhubaneshwar’s rules on contract enforcement and taxes, and
Chennai’s trade practices. Adopting these would move India’s current
global ranking from 134th to 79th. In Pakistan, implementing each city’s
best practice would result in a 22-place jump in the global Doing Business
rankings, from 74th to 52nd place.
In 2005-2006, the pace of reform was
slower in South Asia than in any other region, with only India and Pakistan
starting to improve their business environment. “Countries are competing
for investment, enterprises, and the jobs that come with them. Some improvements
are underway in the region, but the pace of reform must increase if South
Asia wants to keep up with the rest of the world,” said Simon Bell, World
Bank Manager for Financial and Private Sector Development in South Asia.
As a region, South Asia performs comparatively
well in business start-up and protecting investors. It lags far behind,
however, on the ease of employing workers, enforcing contracts, and trading
across borders. For example, resolving commercial disputes through the
courts is more time-consuming in South Asia than in any other region. On
average it takes almost three years (969 days).
The report finds that complex and costly
business regulations push workers into the underground economy. In India,
over 8 million workers have formal jobs in the private sector—in a country
of over 1 billion people and a workforce of 458 million. Sri Lanka has
over 4 million workers in formal private sector jobs—out of a workforce
of about 7 million. In Bangladesh, 7 million workers have formal jobs in
the private sector. In northern European countries, where it is easy to
do business and people benefit from social protection, less than 8% of
all economic activity occurs in the underground economy.
“The structure and detail of information
captured by the Doing Business indicators allow governments to pinpoint
regulatory bottlenecks and make international comparisons to identify best
practices. As a result, Doing Business has been recognized by governments
and has already generated over 50 reforms in nearly 40 countries,” said
Caralee McLiesh, one of the authors of the report.
The Doing Business project is
based on the efforts of more than 5,000 local experts – business consultants,
lawyers, accountants, government officials, and leading academics around
the world, who provide methodological support and review. The data, methodology,
and names of contributors are publicly available online.
For more information on the Doing
Business report series, please visit: www.doingbusiness.org.
For copies of the Doing Business
in South Asia report, please visit: www.doingbusiness.org/southasia.