Bimaru states in India

States and regions also become sick besides companies and human beings. When they become sick, you get a doctor, then you dose the patient with some foul smelling medicine, and then you get better, and to stay better, you keep on doing good healthy things so that you do not fall ill. But then, there are some fellows who will smoke, drink, eat fatty foods, then get a heart attack, and then continue on with being a bad old egg.

But what's with Bimaru in the title? It is a play on words, the word itself stands for 4 Indian states, Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh. When you select those letters together, they mean sick (Bimar in Hindi means sick). And yes, Sir, they are sick in terms of almost every socio-economic indicator that is going.

Obviously, the reasons are multifarious, but mainly is because of the venality of the politicians of all stripes. Corruption is rife, illiteracy rampant, health is poor, economics horrible, generally a sad old reflection of what India's missed opportunities are. What makes it even worse is that these are poor states in a poor country, but other states have done much better. I realise that somebody has to come bottom, but when we are talking about poverty levels which are at or below starvation levels, then being at the bottom has severe implications for rest of the country. It does not also help that these states are some of the most populous in the country.

One would expect that every state would be hell bent in trying to improve its investment climate so that jobs are produced and better quality of life is achieved. But no, most of the leaders of these states are too busy being corrupt and feathering their own nests. By and large, they are a venal lot, seriously. And having had experience of living, studying, working, running firms in these states, I can personally say that the situation isnt improving fast. For entrepreneurs, it is tough, really tough. When you have borrowed money from your father's General Provident Fund (pension fund), and have invested in the anticipation that you will provide sufficient returns so that your old man is not left on the street, the last thing you need is your own government and its officials being like vultures, bent on capturing your hard earned money. Well, perhaps it is too much to expect, but what exactly are the problems facing entrepreneurs?

The World Bank recently released a paper comparing the investment climate in 16 Indian states for which they had data. Here's their main graphic which shows the investment climate in the 16 states.

So what did the author evaluate to make up the index? This is what I mean by saying that the issues with these states are simple but implementation needs just simple hard work. Nothing magical, just keep on plugging away at it. Here are some of the factors relating to infrastructure: Hours of power outages last year, Hours of telephone outages last year, Percentage of sales lost in transit, percentage of sales lost due to power outages, Days of inventories kept for main input (proxy for quality of transportation). What about inputs? Excess labor, Cost of finance: value of collateral required to obtain a loan, Proximity to raw materials (share of inputs bought by domestic sources) Proximity to domestic customers, Share of firms using new technology, Trade credit: share of sales sold on credit, Trade credit: share of inputs bought on credit.

Finally institutions make a huge amount of difference to the investment climate and the authors included security cost, losses due to theft , Manager time spent dealing with regulations, Days spent with officials to deal with regulations, consistent interpretation of rules, Tax evasion (% of sales not declared), Days to obtain a telephone connection, Days to obtain a electric connection, Days to obtain a construction permit, Bribes to "get things done", Share of firms reporting officials request gifts etc. etc.

While one can only exhort the states at the top to do much better, but its the stogy lump of undigested mass of states at the bottom which is the issue. Not only do the good state's get their tax revenues diverted to support these Bimaru states, the diversion of tax revenues is then not invested in productive matters. So, all in all, these are giant holes where a significant proportion of productive wealth generated by India disappears.

The concluding paragraph from the author is particular important but would not be particularly surprising.

The analysis of 46 investment climate variables shows that power, transportation, corruption, tax regulations and theft
remain the major bottlenecks policymakers need to address in order to improve the business environment in India.

Same old, same old. Long way to go, my friends, long way to go.

Technorati Tags: Corruption,Public Sector,Development,Economics,India,World Bank

Dramatic Increase in Private Schools in Pakistan

I quote:

A new report released today by the World Bank calls for a reevaluation of education policies in the context of a dramatic increase in private schools for primary education in Pakistan. Between 2000 and 2005, the number of private schools increased from 32,000 to 47,000, and by the end of 2005, one-third of enrolled children at the primary level was studying in a private school.

While overall enrollments increased by 10 percent between 2001 and 2005, the report says quality of education is lagging. Children in private schools score significantly higher than those in government schools, even when they are from the same village. In fact, it will take children in government schools 1.5 - 2.5 years of additional schooling to catch up to where private school children are in Class 3.

This is indeed good news, more schooling and enrolment can be nothing but good. See the problem of expecting the government to do something about this? even if they do, their performance is poorer comparatively to private education.

Technorati Tags: Schooling,Education,Pakistan,World Bank

Doing Business has just gotten better across the world

Very good news for many countries, they are listening to their people and others, and making it easier to do business. I was quite impressed by Egypt, which has made the biggest jump in rankings! It moved from 165th to 126th. And as the World Bank reports, it made starting a business simpler, slashing the minimum capital requirements, halving the startup time and costs. So you have better entrepreneurship help!. And there is nothing like getting entrepreneurs to kick off work. Make it easy for them and jobs, investment and better growth will follow.

See the example:

Starting a business is not easy in the Democratic Republic of Congo. It takes 13 procedures and 155 days—and it costs five times the annual income per capita. The situation is even worse for women: they need the consent of a husband. And if you are a single woman, a judge decides whether you can become a businesswoman. The result: Only 18 percent of small businesses are run by women in the DRC. Next door, in Rwanda, which has no such regulations, women
run more than 41 percent of small businesses.

See here for a great overview:

But not all were good. Venezuela, the great people's socialist wonderland fell to 172nd from 164th last year. But President Chavez is a ninny anyway and he is now the proud possessor of the title of being runner-up to the Democratic Republic of Congo for doing business in!.

India is mixed, it improved a bit but its still ranked 120th compared to 83 for China. In India, the time to obtain a business licence ranges from 159 days in Bhubaneshwar to 522 in Ranchi, compared to everything done and dusted and up and running in TWO days in Australia. I dont think the Australians are moaning are they?

Looking at the United Kingdom rankings, I am afraid the news is not that good either. Well, they are definitely better than India, but the competition for the UK is not against the Indians but against Singapore, New Zealand, USA, Hong Kong and Denmark. The UK is ranked 6th in terms of ease of doing business. The only place we hit the top is the ease of getting credit, but in all the other factors, we were rather bad. And some of them are really stupid (we can fix them very easily!)

We are 54th in terms of dealing with licences, 21st in terms of hiring workers, 19th on registering property, and 24th in terms of enforcing contracts, just to pick some of the most egarious aspects. Truly bureacracy gone wild, and these factors are gobsmacking. Why on earth are we 19th on the list of registering property? the land of the Domesday Book? And 24th in terms of enforcing contracts? the country which gave modern law to the world? Horribly Bizarre!. And the UK is getting worse if you look at the yearly progress instead of improving!

Read and Learn!

All this to be taken with a grain of piquant salt!!!

India climbs up the income ladder

Poverty is extremely distressing but one of the quiet aspects of the world development over the past decades is how poverty has been killed off. Based upon 2004 figures, the World Bank reports that "The proportion of people living in extreme poverty on less than $1 a day dropped by almost half between 1981 and 2001, from 40 percent to 21 percent of the global population. In absolute terms, this means that the number people living in poverty fell from 1.5 billion in 1981 to 1.1 billion in 2001. "

Can you imagine that? 400 million people have been lifted out of poverty in a mere 20 years!!!! that is like raising the WHOLE population of Europe up by a level of magnitude of income! And for all its faults, the increased trade, capitalism and increased opportunities are helping to do so. Look at the story referenced in this post, a poverty striken country like India is now moving into the middle of the income ladder of countries. For a billion population, that's a huge deal! But still a long way to go, check out the latest figures here.