Sunday, November 5, 2017

Doing Business 2018: Nepal ranked 105 and India 100

Doing Business 2018 report ranks Nepal 105 out of 190 economies in terms of ease of doing business. In South Asia, Nepal ranked third, after Bhutan (75) and India (100). Nepal’s distance to frontier, which is the relative distance between Nepal’s score and the best preforming economy in a given indicator, score (59.95) is higher than the average for South Asia (53.64).

Due to change in methodology the rankings are not comparable by year, but the distance to frontier (DTF) score can be compared. DTF ranges from 0 to 100 and a score close to 100 is better. Bhutan improved its DTF score in 2014 and has continued to maintain it at the highest level in South Asia. Similarly, the recent push to ease business regulations in India (GST and construction reforms are not reflected in DB2018) paid off as well.

In South Asia, Bhutan has the best overall environment for doing business. India got a big boost in rankings as its distance to frontier score increased from 56.05 to 60.76. All the countries’, except for Afghanistan, had an improvement of DTF score in DB2018.

The DTF score for India in starting a business is the lowest in South Asia. Starting a business requires 11.5 documents, 29.8 men days and 14.8% of income per capita. In Nepal’s case, it is 7 documents, 16.5 men days and 24.9% of income per capita.

In dealing with construction permits, India ranked 181 out of 190 economies (with a DTF score of 38.8). This indicator tracks the procedures, time and cost to build a warehouse, including obtaining necessary licenses and permits. In Nepal, to open a standardized warehouse, it requires 12 procedures, 117 days and 16.6% of warehouse value. Nepal’s DTF score is 55.74 and rank 157. In India, to open a standardized warehouse, it requires 30.1 procedures, 143.9 days and 23.2% of warehouse value.

In getting electricity, India has made a remarkable progress. This indicator measures the procedures, time and cost required to obtain a permanent electricity connection for a newly constructed warehouse. In India, it requires 5 procedures, 45.9 days and 96.7% of income per capita. Reliability of electricity supply and transparency of tariff are also considered, in which Nepal’s performance is miserable. In Nepal it requires 5 procedures, 70 days and 993.7% of income per capita to obtain an electricity connection. This places Nepal in 133 rank among 190 economies.  

To register property, an entrepreneur in Nepal is required to fulfill 4 procedures, takes 6 days and costs 4.8% of value of the property. It places Nepal 84th among 190 economies (with DTF score of 64.82). In India, it takes 8 procedures, 53 days and 8.4% of value of the property. With a DTF score of 47.08, India is ranked 154. 

In the ease of getting credit (measures the strength of credit reporting system and the effectiveness of collateral and bankruptcy laws in facilitating lending), Nepal scored a DTF score of 50 (rank 90) and India 75 with rank 29. India has improved a lot since 2014 and currently it has the most favorable conditions for getting credit.

In protecting minority investors (measures the strength of minority shareholder protections against misuse of corporate assets by directors, governance standards and corporate transparency), Npeal ranked 62nd with a DTF score of 58.33. Meanwhile, India ranked 4th with a DTF score of  80. Again, India has the best system for protecting minority investors in the region.

In South Asia, paying taxes is easiest in Bhutan. Paying taxes indicator measures taxes and mandatory contributions that a company must pay or withhold in a given year and the administrative burden complying with the regulations. In Nepal, there are 34 payments per year, takes 339 hours per year and companies pay about 29.6% of profit for tax and contributions. It places Nepal at 146th position out of 190 economies (with a DTF score of 58.01). India is ranked 119th with a DTF score of 66.06. In India there are 13 payments per year, takes 214 hours per year, and tax and contribution rate stands at 55.3% of profit. India’s rank is improving in this category as well.

In trading across borders, which records time and cost associated with the logistical process of exporting and importing goods, Nepal ranks 76th with a DTF score of 77.17. India is ranked 146th with a STF score of 58.56. In Nepal, it takes 56 hours to comply with export regulations at the border, costs $288 and takes 43 hours to comply with documentary requirements (at a cost of $110). For import, these numbers are 61, $190, and 48 ($80), respectively. In India, it takes 106.1 hours to comply with export regulations, costs $382.4 and takes 38.4 hours to comply with documentary requirements (at a cost of $91.9). For import, these numbers are 264.5, $543.2, and 61.3 ($134.8), respectively.

The other two indicators are enforcing contracts and resolving insolvency. Nepal has fairly better standing than India on these but India is catching up. 

The data for DB2018 are as of 01 June 2017. The ranking includes ten indicators: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The data also includes labor market regulations but it is not included in the ranking. 

This a transit post (waiting in Delhi airport transit after 9 hours long flight). So, please ignore the typos! :-)