LinkBack URL
About LinkBacks
Reply With QuoteThats a good article and finally some constructive rivallary between the countries
Commentary: South Asia's red-tape rivalry
By Andy Mukherjee Bloomberg News
TUESDAY, SEPTEMBER 27, 2005
There's no reason why India and Pakistan should restrict their rivalry to Kashmir and cricket. The feuding neighbors now have the ammunition to start a brand-new fight about whose bureaucracy is more business-friendly.
Helping them in this endeavor is an objective assessment of red tape released this month by the World Bank.
The Washington-based lender and its private investment arm, the International Finance Corp., have for the first time ranked 155 economies globally according to the ease with which investors can do business in those countries.
The findings are available at http://www.doingbusiness.org.
Prime Minister Shaukat Aziz of Pakistan should make use of this nonpartisan research to highlight to investors - with some relish - the following facts:
Only 10 official signatures or stamps are required to export cargo out of Pakistan, compared with 22 in India.
Buying a plot of land in India with a warehouse on it means shelling out 9 percent of the value of the property in stamp duties, legal fees and other charges.
In Pakistan, investors can get their titles registered for a third the cost.
It takes 10 years to close down an unprofitable business in India. That is triple the time that bankruptcy procedures take in Aziz's country.
Pakistan ranks 60th globally, according to the World Bank's index for ease of doing business. At 116, India is behind Iraq and Indonesia. Even China fares worse than Pakistan at 91.
There's no denying that the size of the market matters, as does availability of scientific and managerial talent. India trumps Pakistan by those measures, which were not covered in the study.
That does not mean India is immune to bureaucratic excesses just because 700,000 software engineers in the nation are riding the global demand for outsourced services.
"Red tape," the World Bank says, "is estimated to cost more than 10 percent of the value of exports in developing countries." Inefficient customs procedures force businesses to hold large inventories, adding 4 percent to 6 percent to production costs, the study estimates.
Both India and Pakistan inherited the same traditions of civil service and rule of law from their former British colonial overseers.
So why should the smaller nation (Pakistan has a population of 159 million) be able to resolve a contract dispute in 7 percent less time than its neighbor?
Why is it that claimants on a bankrupt Indian company - creditors, employees and the tax authorities - get back 13 cents on the dollar compared with 44 cents in Pakistan?
An editorial in the Times of India rejected the World Bank report's finding that the bureaucracy in Pakistan - or China - may be more business-friendly than in India.
"Non-democratic states are by definition adhocracies run not on principles of social equity and respect for law but on the whims of the ruling elite," the Indian newspaper said.
"The very fact that democratic India has codified norms for doing business is a guarantee for fair trade practice which can't arbitrarily be short-circuited by all-powerful vested interests," the editorial said.
At best, it's a spurious argument. At worst, it's an excuse for doing nothing.
If there were a conflict between democracy and rule of law on the one side and ease of doing business on the other, New Zealand, the United States, Canada, Norway, Australia, Denmark and Britain would not figure among the 10 most business-friendly economies.
Seven out of 20 countries that are ranked as most tolerant of political and civil freedoms by the Washington-based independent researcher Freedom House also are among the top 20 on the "doing business" list.
India does not need to be ruled by a military dictator like President Pervez Musharraf of Pakistan for its bureaucracy to become more accommodating for business.
It doesn't take a leader in army fatigues to slash the number of procedures required to register a new business. The same goes for reducing customs paperwork.
Rather than hiding behind tired excuses, India would do well to acknowledge the challenge posed by Pakistan's progress.
Pakistan, meanwhile, should focus on areas where it is clearly behind India. One such concern is taxation.
The government in Islamabad claims 57 percent of a midsized company's gross profit in taxes, compared with 43 percent in India.
Adding a business dimension to their rivalry may not solve the 58-year-old territorial dispute between India and Pakistan over the territory of Kashmir.
It will have other benefits. If the two countries earnestly compete to remove bureaucratic red tape, both economies will gain new investment and add jobs.
And that will be good news for Indian cricketers. The way they're playing, they may need new jobs pretty soon.
http://www.iht.com/articles/2005/09/...berg/sxmuk.php
Last edited by Neo; 27 Sep 05, at 19:08.
Thats a good article and finally some constructive rivallary between the countries
Yes India has red tape to die for, noone does it better but there is no competition in terms of attracting business, if one were to try to look for one, India would have already won.
Pakistan will be limited to Arab and other similar investors in muslim countries or non resident Pakistanis shifting their moneys back home post 911. Western companies for the large part will prefer to flood the Indian market rather than to invest in what has been portrayed in the western media as an unstable Islamic state.
Besides foreign investors have discovered venture capital and the BSE in order to enter the Indian market.
Streamlining of all above mentioned laws have already sarted last year and things are changing but to claim that Pakistan is being able to compete in any way is not based on numbers and reality.
Although I agree with the last line of the article, the Indian cricket team might as well find another past time. :(
I dont understand this fetish of every writes in Indian economy. Get it numb nuts, Software and outsourcing is not the main bread winner for India, there are lots more.Originally Posted by Neo
Andy Mukharjee shouldve known it. Like India, none of the above mentioned countries have communists who draw their blood everytime the govt relaxes some procedures or invite investments. Like India, none of the countries mentioned in the list have 5 year plans with a socialist agenda.At best, it's a spurious argument. At worst, it's an excuse for doing nothing.
If there were a conflict between democracy and rule of law on the one side and ease of doing business on the other,
So, Andy, your comparision is absurd.
Last edited by Jay; 28 Sep 05, at 07:06.
A grain of wheat eclipsed the sun of Adam !!
No, ganguly would need to find a new profession b'coz his godfather will lose the BCCI election in 2 months time & dungarpurkar has said he would be kicked outAnd that will be good news for Indian cricketers. The way they're playing, they may need new jobs pretty soon..
Hala Madrid!!
In all honesty, there is NO challenge.Rather than hiding behind tired excuses, India would do well to acknowledge the challenge posed by Pakistan's progress.
A Nation that is so scared to open its markets to India is not a challenge.
With all respect, thats a misconception often repeated here. Much of the investment is coming from western countries!
KSE is doing well aswellBesides foreign investors have discovered venture capital and the BSE in order to enter the Indian market.
Although I agree with the last line of the article, the Indian cricket team might as well find another past time. :(
You're underestimating us...but thats okay for now.
Just wait a little longer...
vs. India its a political ploy.
Pakistan has adopted a policy of openness to foreign investment and offers a package of incentives to attract foreign investors.
1. Relaxation of foreign exchange controls, and a policy of permitting foreign investors to participate in local projects on a 100 percent equity basis.
2. Allowing of foreign companies registered in Pakistan to undertake export and import trade.
3. Full safeguards to protect foreign investment.
4. Withdrawal of work permit restrictions on expatriate managers and technical personnel working in industrial undertakings and easing of remittance restrictions.
5. Abolition of the ceiling on payments of royalties and technical fees.
6. Elimination of the requirement of obtaining a "No Objection Certificate" from the appropriate provincial government.
7. No requirement of government approval to set up an industry in any field, place and size.
Of course some dumping and other environmental restrictions apply.
Neo you cannot compare the KSE and BSE, not that it is not doing well but one is an index made up of 8500 companies and the other made up of some 730+ companies.
If you want to look at ROEs, then you will have to look at data, as risk managers do, for the last 10 years.
This Pakistan comparing itself to India thing is a political ploy which is probably good for Pakistan, thre is nothing wrong with economic competition.
India has started to do it too with China recently especially in equities.
What I find wrong in this article is that it talks about 700000 engineers as if only IT is riding the 7% GDP average of the Indian economy. Construction, Finance and Trade, Manufacturing, Retail etc are growing at near double digit figures, even mining is doing well.
India has also moved beyound your typical outsourcing, it is engaged in R&D.
About my comment about western investment, if you look at investment into Pakistan , yes there arewestern companies involved, there always will be, even in Zimbabwe you will find western companies still operating, I am talking about large long term investment, much of the foreign money comming into Pakistan has come from pakistanis living in the west themselves.
In order to compete with India Pakistan will need a 1000 company waitlist, companies desperate to enter and get permission to set up shop, as is the case in India, that will not happen until Pakistan's investment rating and perception changes and what will necessitate a big change in attitudes, probably peace with india, the death of Al Queda and the lack of conservatives in the pakistani parliament.
this year except for agriculture in every other sector india has achieved tremendous growth,manufacturing-12.7% and almost all other sectors have achieved double or near double digit growth(india's gdp this year is expected to be in excess of 7.5%) and that too despite the asian tsunami and the various floods.and this in comparison to the previous years 7% growth rate.
I have said this before and I am going to repeat it,
About the Indian software exports and the outsourcing business India does, here we go:
India's projected GDP for 2005 (As per IMF & World Bank) - $750 Billion
(http://www.answers.com/topic/list-o...by-gdp-nominal).
Share of services in India's total GDP is 51% or roughly $383 billion.
Software exports of India for the year 2004-05 - $22Billion or less than 3% of total GDP and 6% of services component of GDP.
Anticipated to grow by 32% to $29billion for 2005-06 or 3.9% of projected GDP for 2005.
The outsourcing business of India for the year 2004-05 was $5.2Billion, or less than 1% of GDP and expected to grow by 35% to $7Billion in 2005-06 or almost 1% of GDP.
(http://www.nasscom.org/artdisplay.asp?Art_id=4377)
So you can see what portion of outsourcing and IT is India's GDP.
Regarding beaurcracy, I am not a big fan of this but there is a reason so many of these safeguards are in place. India is a very large country with absolutely massive transaction volume (you got to see it to believe it) and you can't check everything and the red-tapism is sort of a built in protection against fraud. Wait till the first fraud happens and there is massive destruction of public wealth and you will understand why these safeguards are in place.
I can go into a detailed discourse about the legal system and compare it with other nations but i will refrain since this is not the time or place.
"Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of Government except all those others that have been tried from time to time. "
"Although prepared for martyrdom, I preferred that it be postponed."
Sir Winston Churchill
There seems to be a disparity between what the RBI and IMF etc are repotting for GDP of around 705B for 2004 and what the Finance Ministry is saying, it puts the GDP at 800B.
It would appear that the Finance Ministry has done preliminary price basket update to more recent prices and the RBI etc has yet to fully certify the new basket.
One should remember that the only reason why India did not go through an Asian crisis in 1997 was because of capital immobility. In 1997 manufacturing and company saw big slow downs as there was too much supply and too low demand, ie suppliers had not yet gotten the Indian consumer right yet.
Before one can open up markets and so on, the set up of regulators and auditors is quite necessary, India is doing just that, remember the recent raids on some stock brokers, now constrast this to what happened to the KSE a few months ago due to a speculative attack.
The only posetive for Pakistan in the field of rules is the bankrupsy scheme it has, 3 compared to 10 in India, in deed Indian performance in bankrupsy and even setting up businesses suffers from massive corruption and i would not be surprised if Pakistan was ahead on this field.
There are currently 1 users browsing this thread. (0 members and 1 guests)
Posting Permissions
Share this thread with friends: