Happy Doing Business With You | Business-Protecting Minority Investors
Jim Yong Kim
Business – Protecting Minority Investors – Fifteen years ago, the World Bank published the first Doing Business (DB) index. Few world leaders have since taken business regulation reforms as seriously as Prime Minister Narendra Modi.
I first met him in October 2014, just days before that year’s DB report was published, ranking India 142nd among 189 countries. An entrepreneur who wanted access to electricity had to then go through seven official procedures that took over 100 days and cost nearly five times India’s per-capita income.
Modi was dismayed. He shared his vision for achieving a top-50 ranking and asked the World Bank Group to provide knowledge and advisory support to help make that vision a reality. India, this year, has vastly improved its business regulations. Today, an entrepreneur can obtain an electricity connection in half the time and through half as many procedures as in 2014. It now costs less than 30% of per-capita income. These reforms have lifted India’s rank in that category from 111th in 2014 to 24th today.
For India’s entrepreneurs, that means they can get businesses up and running more quickly, and expand to new locations without disruptive power outages. For India’s workers, it means more jobs. Unstable electricity connections cause MNCs to move to other countries, reducing both production and employment.
India has made even larger improvements in the time and effort it takes to get construction permits. Convoluted permitting processes cost time and money — and lives. When procedures are long and complicated, an estimated 60-80% buildings in developing countries are constructed without proper permits. Too many countries have seen the tragic consequences of poor quality control when buildings collapse.
In 2016, India ranked 185th in dealing with construction permits. Today, it’s 52nd. One assistant engineer reported that he was able to correct an issue about inaccurately deposited fees in 20 minutes. The process used to take five working days.
The other categories where India scored the highest are ‘Getting Credit’ (24th) and ‘Protecting Minority Investors’ (7th). These complementary indicators are important for investor confidence. Countries that protect minority investors, typically, have bigger and more dynamic stock markets, while good practices for getting credit help business-owners and entrepreneurs access capital from banks.
Reforms, like the ones in India, can boost productivity, increase access to new technologies and lower interest rates. But for reforms to count, they have to improve both regulatory quality and efficiency. That means simultaneously cutting red tape and ensuring that the regulations include safeguards to sustain reform.
India has made tremendous improvements in both of those areas. But the work is far from over. GoI has committed to initiating deeper and wider reforms through a competitive process to promote reforms in all states. This approach is already helping spread the benefits of business reforms nationwide. India’s success at the state level has also attracted interest from officials in other federal or multi-tiered countries, who are now drawing on India’s experience.
In the coming years, it will be critical for India to build on this momentum.
The writer is group president, World Bank
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Tag: Business, Business-protecting minority investors, MSMEs