India top reformer in South Asia: United Nations

New Delhi, Feb 14: The World Bank has commended India for creating an investment climate conducive to growth, saying that doing business became easier in 2005-2006 with Hyderabad having the most business-friendly regulations.

In a new regional report released by the World Bank and its private sector arm IFC titled 'Doing Business in South Asia 2007', Mumbai has been listed at the 11th place in India, ahead of Kolkata, in terms of easier business regulations.

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.

Typically, large urban centers such as Mumbai and Kolkata 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.

Reforms in India and Pakistan have helped reduce the time, cost and hassle for businesses to comply with legal and administrative requirements.

The report, however, says other South Asian economies improved business regulations in 2005-2006. But the region ranked last in the pace of global reforms.

The World Bank 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.

According to the report, 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 per cent of commercial profits in taxes, while in Pakistan, it takes 560 hours per year to comply with all tax regulations. Good practices exist within India, Bangladesh, and Pakistan. The report team has found 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,'' says 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 an average it takes almost three years (969 days).

It has said 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 one billion people and a workforce of 458 million.

Sri Lanka has over four million workers in formal private sector jobs out of a workforce of about seven million.

In Bangladesh, seven 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 per cent 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 recognised by governments and has already generated over 50 reforms in nearly 40 countries,'' according to Caralee McLiesh, one of the authors of the report.

UNI