labels: industry - general, economy - general, governance
Global business survey 2006 news
14 September 2005

Exactly how difficult doing business in India still remains is revealed by World Bank's 2006 Ease of Doing Business survey released yesterday. The survey ranks India 116th among 155 countries (incidentally, far behind neighbours Pakistan and Bangladesh, not to speak of China). The results have been calculated on the basis of a simple average of country percentile rankings on each of 10 parameters.

Among South Asian countries, only Afghanistan at 122 has been ranked below India. Pakistan (Rank 60), Bangladesh (65), Sri Lanka (75) China (91) and Bhutan (104) have been judged by the report as easier destinations for doing business.

The index ranks economies from 1 to 155 and is calculated as the ranking on the simple average of country percentile rankings on each of the 10 business parameters. The ranking on each parameter is the simple average of the percentile rankings on its component indicators.

The 10 parameters are: starting a business, dealing with licenses, hiring and firing workers, registering property, getting property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business, and reflects the position as it obtained in January this year.

Though the 187-page report says the time taken to start a business in India has come down from 89 days in the last report to 71 days, it still remains double the South Asia average of 35 days.

On the other hand, it takes just 12 days to start a business in New Zealand, the top-ranked country, six days in Singapore, which is ranked second, and five days in the US, ranked third.

The report also says it takes 270 days to obtain a licence in India, against a regional average of 195 days. In China, a company spends 363 days to obtain a licence, though it takes 48 days to start a business. The report also estimates that it takes 10 years to close a business in India, nearly double the regional average of 5.1 years. It takes less than half a year to shut shop in Ireland, which has the shortest insolvency process globally.

To conduct foreign trade, China takes the lead with just six documents, seven signatures and 20 days to export, and 11 documents, eight signatures and 24 days to import. On the other hand, in India, it takes 10 documents, 22 signatures and 36 days to export and 15 documents, 27 signatures and 43 days to import.

In terms of protection of investors, Bangladesh tops the South Asian countries with an index of 6.7 (on a scale of 10), followed by Pakistan (6.3), and India (6). China, with an index of 4.3, is at the bottom of the index.

On the tax front, however, India has the least tax incidence of 43.2 per cent of gross profits among its neighbours, while it is 57 per cent in Pakistan, 46.9 per cent in China, 49.4 per cent in Sri Lanka and 50.4 percent in Bangladesh. Though tax rates were moderate, businessmen had to pay 59 taxes in India and spent 264 hours paying them because of lack of automation and having to deal with the bureaucracy.

India has fared better on the legal rights index, fetching 5 on a scale of 10, compared with the regional average of 3.8, though it is far below Singapore, Hong Kong and the United Kingdom, each scoring a perfect ten.

Pakistan is ranked among the top ten reformers globally for reducing the cost to register property, increasing penalties for corporate governance violations and simplifying shipment licensing norms. India was among the top reformers last year.

The 2006 report has lauded India for setting up a credit information bureau and putting in place a new system for enforcing collateral. These moves have resulted in the enforcement time falling from 10 years to 6 months. The reduction of stamp duty for property registration, from 10 per cent to 5 per cent, has also been cited as a way forward for other countries as revenues have increased due to better compliance.

However, as the report states, the survey was limited in scope, and did not account for a country's proximity to large markets, quality of infrastructure services, security of property and macroeconomic conditions or strength of institutions. Thus, while Jamaica, at 43, ranks above France (44) on the index, it did not mean that businesses are better off in Kingston than in Paris.

also see : Global Rankings
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Global business survey 2006