MNCs find it tough to do business in India due to corruption and uncertain laws

[Oracle]

MNC in India are finding themselves on the wrong side of norms. Is that because doing business in India without indulging in corruption is close to impossible?

More @ EconomicTimes

In India, 51 # of licences are required to start a retail store (source), and this is just one of the examples. Multiple windows of clearances breed corruption. The Government knows this, but does nothing.

Two years back, myself and a mutual friend started a 'Research & Consulting' firm. Right from getting the company registered, to obtaining TIN - we had to bribe our way through. This was a side job, the cash flow was good, we sold our social lives to work (endless tele-conferences, f2f meetings, powerpoint presentations, spreadsheets), had to face a very competitive market dominated by MNCs such as Deloitte, Accenture and even local Indian firms coupled with a very negative business environment. Files doesn't move from one table to another, unless bribe is paid. To get my passport done way back in early 2000s, I had to shell out almost 60K. These people don't even listen unless they are bribed. A child is born in a family, bribe needs to be paid to obtain the birth certificate. Someone is dead, bribe needs to be paid for the death certificate. It cannot even be imagined how corrupt Indian administration is. And it's frustrating to read this kind of news in the morning newspaper.

India is at a dismal ranking of # 132 in ease of doing business.

Anyone from this board had a similar experience doing business in India(?) or in any other country?

[Double Edge]

I got my passport done in the mid 2000's and paid nothing. Course i stood in line for half a day. The people paying bribes want a rush job most of the time. They don't want to stand in line, they want their file moved to the top of the list. They don't want to follow procedure. They don't know or care to know. In this sense India offers you the option where as elsewhere you would just have to wait in line whether you liked it or not.

The only time i've ever paid a bribe is in the land registry office. I wanted the paperwork done immediately, i could have waited longer and got it done for nothing but waiting wasn't an option.

Setting up a business anywhere is tough if you don't know how the system works. You can spend years trying to figure it out or just get a fixer to do it for you. The n00bs tend to complain the most

Many people have business in India and they get on just fine. With money you can get anything done in India. It could be faster and easier but this is what we have and deal with it. Setting up a business in just the first step, can't whine about that, ensuring its profitable is the bigger challenge. And there is where MNC's have a serious edge, with deeper pockets they can absorb losses for years before they need to become profitable. That's why they are feared so much.

[Doktor]

That list says absolutely nothing.

Macedonia is on #23. There is a bureaucracy all over the place, hence the room for corruption. The only thing you can do easy is the start up. Going all the way to make the profits and actual RoI... I'd better shut up now

[Oracle]

DE,

I applied for the Tatkal Scheme, for my passport. The notice read '7 days' to delivering the passport. I waited for more than a month, and then was done in 2 days after palms were greased. I was in line too and not in any hurry. That didn't work well for me. Ofcourse, I did not apply from Bangalore, but from a NE state. I had to fly from Mumbai and back. Same thing happened during passport renewal. What I want to emphasize is the culture of corruption in India and how it affects common people and business. Ofcourse MNCs can find their way, always. I found it out too.

Yeah Dok, you're correct. However, start-up brought much headache as far as I have encountered (we're no MNC, just a 2 guy team). Once running (which reads **after all hands are greased**), business is smooth.

[Doktor]

Oracle, my point was if you try to go by the book. If you grease hands it never stops.

All kind of officials will ask for all kind of documents, and then some more. They all make sense, in a way. Just to hard to follow all the procedures when you are a small company < 10 employees.

[Oracle]

Dok, I understand your point. Going by the rule book is fine, provided that services are delivered on time. Some unforeseen circumstances and a little late, fine, even then. But, it's almost always, that even when one goes by the book, services are deliberately delayed by sarkari babus for earning cash from under the table. It doesn't matter if one follows protocol, or doesn't, bribe has to be paid for services to be delivered.

[Double Edge]

Just to hard to follow all the procedures when you are a small company < 10 employees.

Actually this is a problem in India. Companies with < 10 employees have it far easier than those with more. Whereas it should not be the case. Much harder to let workers go with bigger companies, more employees means more voice and political support.

The only industries that get away are export sector service jobs where hire-fire can be applied. Not surprisingly they tend to be very profitable. Recall how a friend who owned a garment company in the city had it much harder than the IT cos. Garments employs 25% of the city, software is in the single digits but the politicos never cared about the garment owners, and swooned over the IT lot.

[Doktor]

Dok, I understand your point. Going by the rule book is fine, provided that services are delivered on time. Some unforeseen circumstances and a little late, fine, even then. But, it's almost always, that even when one goes by the book, services are deliberately delayed by sarkari babus for earning cash from under the table. It doesn't matter if one follows protocol, or doesn't, bribe has to be paid for services to be delivered.

Outsource the services. Private companies will do things faster. No bribe, all for one, higher price ;)

[Doktor]

Actually this is a problem in India. Companies with < 10 employees have it far easier than those with more. Whereas it should not be the case. Much harder to let workers go with bigger companies, more employees means more voice and political support.

The only industries that get away are export sector service jobs where hire-fire can be applied. Not surprisingly they tend to be very profitable. Recall how a friend who owned a garment company in the city had it much harder than the IT cos. Garments employs 25% of the city, software is in the single digits but the politicos never cared about the garment owners, and swooned over the IT lot.

Profit margin should be higher in IT sector. More money for gifts.

[Tronic]

When I was in highschool, I once visited Canada for a tad bit too long and when I returned to India to get admitted into a new school (since before, I was studying in a boarding school at Sanawar); I had my first experience of overt bureaucratic corruption. The school authorities, being a bit more strict than usual, told me I had to go to Chandigarh to the CBSE (Cental Board of Secondary Education) office to get a written permission before they would let me enroll this late into the school year. When I visited the CBSE office in Chandigarh, I came across this very rude middle aged woman who refused to even look up while talking to me. She started scowling at me for being late for the school year and than told me nothing could be done and I would have to miss that year. I was shocked and asked if there were any other 'formalities', for however she construed that word, which I could fulfill to be able to get a written letter. She just kept staring down and didn't utter a word. I sort of figured that she wanted money but I just walked out at that moment. I came back another day with an uncle and this time it was someone else sitting in the office. When I told him what had happened earlier, he told me he was very surprised to hear that since +1/grade 11 students don't require CBSE permission and it only applies to board years (grade 10).

Now, this does leave room for interpretation, but this is usually how corruption in Indian bureaucracy works; it is very subtle. No one will guide you, and the moment they figure out you are clueless about something, they will try to milk the cow for money.

Atleast when the Police in India extort money from you, they're a lot more open about it...

[Oracle]

Outsource the services. Private companies will do things faster. No bribe, all for one, higher price ;)

I am all for it. However, the government lets very little things go off control as to mine them for election funds.

[Parihaka]

Anyone from this board had a similar experience doing business in India(?) or in any other country?

It's rampant here but it's not direct so the govt./authorities claim it doesn't exist. an example is permissions for building. Your plans will pass through a series of offices, each of which will need to approve it and each of which charges a fee.
ALWAYS, irrespective of the architect/engineers knowledge of bylaws, at some point in the chain you will be required to modify the plans. You then start again from the beginning, again being charged for each step (they have to re-examine them as the plans have changed) and again some part of the process will require a change. Back to the start again.
A single change to plans that moved the edge of a roof line 11 millimetres meant I had to pay the Wellington City Council over $25,000 in fees. That's just one example out of many. It's a cooperative bureaucracy from the point of view they cooperate to fleece you, all perfectly legally by local bylaw.

[Firestorm]

The only industries that get away are export sector service jobs where hire-fire can be applied. Not surprisingly they tend to be very profitable. Recall how a friend who owned a garment company in the city had it much harder than the IT cos. Garments employs 25% of the city, software is in the single digits but the politicos never cared about the garment owners, and swooned over the IT lot.

Which city is this? My city, Mumbai was once India's textile capital. Textile mills could be found all over the city and drew in workers from across India. The whole industry was destroyed because of of the unions. They orchestrated a city-wide strike in 1982. The mills closed during the strike and never opened up again. More than 200,000 workers were instantly left jobless. There was nothing the politicians or the bureaucrats could do. All the textile mills are defunct now, having been replaced by malls and housing complexes.

IT hasn't been afflicted by unionism yet. No wonder the politicians like it. Indian bureaucrats are scumbags. The politicians even bigger ones. But they are not responsible for all the ills. After all, we elected them.

[Doktor]

I am all for it. However, the government lets very little things go off control as to mine them for election funds.

Over here a private company produces the IDs. They are charged by the Gov heavily, and then some.

The scheme is kind of simple. The gov collects money from whatever, wherever, whenever, all legal. Then they spend it in ads how the gov is good or how your life will become so easy with this new service... The gov is single biggest ad buyer in the country. All the media then "owes" them when elections come. All legal o/c.

[lemontree]

More @ EconomicTimes

In India, 51 # of licences are required to start a retail store (source), and this is just one of the examples. Multiple windows of clearances breed corruption. The Government knows this, but does nothing.

Two years back, myself and a mutual friend started a 'Research & Consulting' firm. Right from getting the company registered, to obtaining TIN - we had to bribe our way through. This was a side job, the cash flow was good, we sold our social lives to work (endless tele-conferences, f2f meetings, powerpoint presentations, spreadsheets), had to face a very competitive market dominated by MNCs such as Deloitte, Accenture and even local Indian firms coupled with a very negative business environment. Files doesn't move from one table to another, unless bribe is paid. To get my passport done way back in early 2000s, I had to shell out almost 60K. These people don't even listen unless they are bribed. A child is born in a family, bribe needs to be paid to obtain the birth certificate. Someone is dead, bribe needs to be paid for the death certificate. It cannot even be imagined how corrupt Indian administration is. And it's frustrating to read this kind of news in the morning newspaper.

I have a run a business too in India and did not have to pay any bribes. I paid all my taxes and dues to the government and kept well maintained records.

I never paid a bride to get my PAN (permanent account number) or passport or drivers license.

The only exception was when I got bought a flat and got it registered, there the registration amount is taken in cash and the bride amount is fixed, it is handled through the brokers and you can really do nothing about it. It is institutionalised.

It is not that I came across only honest officials, but I stuck to my principles as far as possible.