Spectacular rise in World Bank EoDB ranking and the way forward

WorldBank EoDB2019 The World Bank releases its Ease of Doing Business ranking before the start of a calendar year. The rankings are based on a complex scoring process based on reforms carried out during the previous year and its implementation.

The bank cannot roam around every city of a country. For India for example, the rankings are based on performance scores of Delhi and Mumbai. In Bangladesh it is Dhaka and Chittagong and, in China Beijing and Shanghai.

The reason I am mentioning this is, implementation of any reform vastly differ in a Union of States like India than unitary countries like China or Bangladesh.

For example, as per Indian Constitution, States have a sizable role to play in land issues and electricity, both of which finally reflect on the complexity or simplicity of starting a business, which is a important denominator in EoDB ranking. Often pace of implementation varies depending on local work culture.

To cut the long story short, improvement in EoDB ranking is no guarantee that a businessman will face less trouble seamlessly across the country. Yet, it surely indicates a trend. Especially when reforms like GST takes place, which overrides the constitutional complexity to create an uniform taxation structure across the country. The removal of inter-state check posts and increasing use of digital platforms by tax authorities are significant game changers, and duly appreciated by the World Bank.

The latest study which was conducted between June 2017 and May 2018, ranked India at 77th - 23 steps up from 100th spot in EODB2018. India is now the first country from South Asia to come this close to the top 50 - a barrier that is broken by China in EODB2019 list by taking a leap from 78 to 46. It might give fodder to some Indian analysts may be tempted to belittle our achievements, but that would be unjustified.

China has initiated reforms a decade ahead of us. Unlike India they didn’t have to carry the holy cross of electoral democracy (that often works against national interests) and the Chinese leadership was consistent in maintaining the tempo of reforms. However, it is the very Chinese growth that has been the inspiration of India’s economic liberalisation and is now acting as a competitive pressure to improve.

And, we are improving and at a robust pace for last four years. In EODB2015 (which was based on performances in 2013-14) India’s ranking dropped from 134 to 142. And, since then we progressed 65 steps! This is no mean achievement. Incidentally India is not alone. In South Asia, Thailand is making fast progresses. Even the sub-Saharan Africa is coming up.

Coming back to India, after coming to power in 2014 Prime Minister Narendra Modi wanted India to make it to the top 50 in EoDB ranking (from the then 142). The way ahead was easy. Target each and every area which is measured in this ranking system. A detailed comparison of India’s score-sheets in EoDB2018 and EoDB2019 will prove this consistency. For example in both the years India earned high scores for lowering procedural barriers in cross-border trade.  Since international trade is a Central subject, the pace of implementation was faster.

Going by the 2019 list, we covered two-third way. But I presume, we are half way through the mark because the relative competitive pressure increases as you approach the top. The job is therefore half done. But the government deserves credit for coming so fast, so far.  

Nuanced Diplomacy: Bhutan election shows, Modi’s India reorienting strategies to deal with neighbours; set to undo mistakes of 2014, in Bangladesh

Pratim Ranjan Bose

The shock exclusion of the ruling, People’s Democratic Party (PDP), from the final run for power apart; the first phase of election in Bhutan (Bhutanese voters first pick up two contestants for the polls) brought one good news for Delhi. In a welcome change, India didn’t become an election issue in Bhutan in 2018.

Can India maintain this trend in Bangladesh - a key partner of India’s Act East programme - where the unpopular Shiekh Hasina government will seek re-election for the third term, in the next few months?

More precisely, can Delhi avoid public criticism and be more nuanced in ensuring India’s long-term goal of geopolitical stability in the neighbourhood?

The question is important. The region is showing strong democratic aspirations over the last one and a half decades. The situation demands India be crafty in its approach, so as to avoid public glare, which may potentially hurt its long-term interests.

The job is easier said than done. Nascent democracies with weak institutions have their own set of unpredictability. Legacy issues and fresh geopolitical complexities vis-a-vis China, add to the complexity.

Yet, there is no escape from the fact that changing times demands changed strategies to deal with neighbours, each of which has their own peculiarity.

The recent highs and lows indicate such strategies may still be wanting in India-Nepal relations. But, the dealings with Bhutan rekindle hope that India is learning from our mistakes.

Past mistakes

Indeed the mistakes were grave.

Take the case of Bhutan. The mercury rose in 2013 election, over the Jigme Thinley-led Druk Phuensum Tshogpa (DPT) government’s aspirations to build bridges with China, without keeping either the King Jigme Khesar Namgyel Wangchuck or India in the loop.

 This was surely against the spirit of the friendship shared by the two nations. The Manmohan Singh government wanted his officialdom (Please read my previous blog, "The 'babudom' and India's bad vibes with neighbours) to fix the problem. They went for a quick fix solution. Hurried trips were made to Thimphu. And a controversial ‘technical lapse’ in Delhi saw cooking gas prices soaring in Bhutan for a brief period.

Thinley lost the 2013 election. But India, China and the foreign policy took centre stage in the election. In contrast, the 2018 election was a quiet affair.

There was no high profile visits from Delhi, in the run up to the election. In the absence of any visible impression of the so called ‘Indian interference’ the election campaigns focussed on issues like corruption, rural development, health etc; over foreign policy.  

DPT finds a place in the final round of 2018 but, as a second choice. The limelight was stolen by the newcomer Druk Nyamrup Tshogpa (DNT) that aims to improve health services and bridge the rich-poor gap.

The final leg of the election of Bhutan is due in mid-October. But the ability of this tiny democracy to throw new options to voters is praiseworthy, which is still missing in a populous Bangladesh, where options are limited to two dynastic parties.

The ruling Awami League traditionally maintained good relations with India, while Khaleda Zia's BNP posed serious challenges to India’s security in the past, due to its association with radical, pro-Pakistan, Jamaat-e-Islami.

The circumstances deserved India to act during the last election (January 5, 2014) when Bangladesh was rocked by violence over the War Crimes trial and the BNP-led opposition was adamant to boycott the election, unless held by a caretaker government, as was the norm in Bangladesh since 1996. Hasina changed the law in 2011, armed with a Court order.

But the way India acted, left a lot to the public imagination. The foreign secretary Sujatha Singh visited Dhaka exactly a month before the election and met top leaders including BNP chief Khaleda Zia.

One opposition leader, HM Ershad of Jatiyo Party later told reporters that Singh was keen for his participation to keep Jamaat out of the context.

Indian establishment contradicted his statement. But the damage was done. “What was Sujatha Singh’s message?” asked The Daily Star, the most prestigious English daily of Dhaka in December 2013.

As it turned out, Hasina ‘won’ the election with paper opposition, like Ershad, in the fray, as BNP stuck to its boycott call. People of Bangladesh blamed India for subverting their democratic aspirations. 

Good signs

Things changed a lot in Bangladesh since. Hasina’s popularity is in a free fall. She definitely did a lot of good work. She broke the back of Jamaat, ensured peace in India’s North East and, triggered fast economic growth.

But corruption, nepotism and arrogance of party cadres, who rampage down the streets to suppress every dissent - including the recent movement by school children for traffic discipline in Dhaka - harmed her prospects seriously.

The most critical criticism came from the former Supreme Court Chief Justice Surendra Kukar Sinha for weakening the fragile democratic institutions of Bangladesh.

“In 2017, after the historic verdict upholding the independence of the judiciary, I was forced to leave the country and resign and exiled by the present government. It was unprecedented in the history of the judiciary (of Bangladesh),” Sinha said in his recent book A Broken Dream.

Under normal circumstances, the advantage should have gone to the Opposition. But the circumstances are far from normal.

BNP chief Khaleda Zia is imprisoned since February this year in a fund embezzlement case. She is unlikely to be released anytime soon. Her son and heir apparent at the BNP, Tarique Rahman, is also delivered a jail term. He is in exile. Sustained administrative pressure saw BNP suffering from a shortage of workers.

Two fronts, including one led by Leftists, recently came up but they have limited prospects to attract votes.

Yet, a free and fair election may see BNP throwing many surprises. They are trying for overarching seat sharing arrangements with both the fronts. With Jamaat derecognised by the Election Commission in 2013, BNP is temporarily free from the ‘radical’ baggage. Most important of all they shunned the path of India-basing and, is trying to mitigate the trust deficit.

Its a delicate situation for India. But chances are, it will not repeat the mistake of 2014.

So far the official stance remained extremely nuanced. While Delhi maintained ‘status-quo’ on its relations with the friendly government in Dhaka; it also insisted that India believes in ‘free and fair election’.

Due to intense relationship on all fronts and resolving of the old issues like the Land Boundary Agreement, over the last four years; anti-India sentiments are now ruling low in Bangladesh. Hopefully, India can retain this advantage in the days to come.

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 (Pictures used in this blog are taken from the web. Can be removed in case of any objection.)

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Unlocking BIMSTEC potential

Pratim Ranjan Bose

(Reproducing my presentation during a panel discussion on "Unlocking BIMSTEC potential: Trade, investment and connectivity", at the World Trade Centre - Mumbai, on September 5.)

On August 31, national newspapers carried Prime Minister Narendra Modi’s speech at BIMSTEC summit in Kathmandu with prominence. The Hindu made it a page1 lead story. But top five English and Bengali newspapers in Kolkata ignored it.
What does this prove? First, India is a country with many countries within. Some of these countries – which include as strategic a State like West Bengal, without which BIMSTEC will be non-contiguous -  are far detached from the national and international realities. Second, and this important, before BIMSTEC pitches for international recognition and visibility, it has to do a lot of legwork within.
With renewed thrust from the top leadership of member countries - especially from two largest economies of India and Thailand - and access to more resources, probably things will henceforth improve. BBIN, for example, has now found a place in media narrative in Bengal.

WTC - Mumbai

Many expect BIMSTEC to quickly emerge as a trade block. Will it? I am not clear. Trump and Brexit took the wind out of TTP (Trans-Pacific Partnership) and TTIP (Trans Atlantic Trade and Investment Partnership). RCEP has hit tariff roadblock. In India, NITI Ayog pointed out “exports to FTA countries have not outperformed exports to the rest of the world.” Delhi is dilly-dallying comprehensive FTA with Thailand, the only BIMSTEC country that has a positive trade balance with India. The reasons are well known. Protectionism returned. The same bug is working against BIMSTEC FTA.
Having said so, the good news is Trade between BIMSTEC countries is rising. Over the last 4 years, India’s total exports declined by 3.5%. But exports to BIMSTEC countries increased by 29.5%. Trade with BIMSTEC grew by 26%. In FY18 India-Thailand trade grew by 26%, higher than the average 10% growth in India's total trade with the world.
Over and above trade interests, there are strategic-economic common grounds between these nations - particularly between India and Thailand - pertaining to China. India has woken up from decade-long hibernation and is investing heavily in connectivity to Thailand through Myanmar, as well as to Nepal and Bangladesh. Connectivity to and in North East India is also getting a multi-billion dollar boost. Though most projects are taken up bilaterally, they should enhance connectivity in BIMSTEC, opening new opportunities to landlocked North East Region of India, Nepal and Bhutan.
Improvement in road conditions and, the recent opening of VISA facility through India-Myanmar land border, opened an array of opportunities. An Imphal-based entrepreneur was quick to launch package tours to Mandalay. Another local business is planning to run charter air services to Mandalay. The gains are shared. Myanmar will get tourists and, the Imphal hospitals are getting medical tourists. India’s outbound tourists (5.4 million) are increasing by 25% a year but Myanmar is yet to get a share of it.
So where does BIMSTEC fit into the scheme of things? In many ways than one. That it's not merely a trade block, helps the purpose. The optimal utilisation of Trilateral Highway and the success of the Dawei deep-sea port in Myanmar, as a low-cost alternative, to reach Thailand and CLMV (Cambodia, Laos, Myanmar, Vietnam) countries, avoiding the Strait of Malacca; depend on the seamless movement of vehicles. This is easier said than done. Thai truckers resisted such proposals in the past. And a similar agreement among BBIN nations couldn’t be implemented yet due to resistance from Bhutan on environmental grounds. Can BIMSTEC help end the deadlock?

Panel discussion at WTC-Mumbai on BIMSTEC. Right to Left- Prof Prabir De, RIS, Delhi; Suresh Kumar, Jt DG, Directorate General of Shipping; Saugata Bhattacharya, Sr VP, Business and Economic Research, Axis Bank; Sohai Jaria, member-executive committee, Indo Myanmar Chamber of Commerce and Industry and; me. 

Drug and arms smuggling, gold trafficking and huge informal trade are major stumbling blocks to optimise the scope of formal economic activities between BIMSTEC nations. Common anti-cold tablets are finding a way from India to Myanmar via informal route and, returning as methamphetamine or ‘meth’ for the further journey to Bangladesh. We need a mechanism to stop this.
Most or Many of the rivers coming down from Nepal and Bhutan are finally ending up in Bangladesh through India. There is no common mechanism for flood control, resource sharing and utilisation like water transport.
In the days of climate change and erratic rainfall, these rivers often cause heavy damage in lower riparian areas. Flash flood coming down from Meghalaya caused major loss of life and crop in Bangladesh in 2017. More investment in granular observatories in the snow catchment areas of Bhutan, Nepal and North East and quick flow of information can minimise damage. Third Pole reported how quick alert from China on an unprecedented rise in water flow in the Brahmaputra helped minimise the flood impact in Assam, this year.
BIMSTEC doesn’t have the magic wand to solve all problems. But it can surely sensitise issues. Here are some suggestions:
1)    India is a vast country where States have a lot of constitutional authority. Involve key States like West Bengal, Bihar, UP and North Eastern States in BIMSTEC programmes.
Bodh Gaya attracts lakhs of tourists from Buddhist nations. Bihar Must be responsible for their safety security, food and hygiene.
West Bengal must not keep a blind eye to local hurdles to ensure smooth transit of cargo.
In North-East, culture and language change in every 20 km. And, policies often become prisoners of Naga-Kuki, Kuki-Meitei, Mizo-non-Mizo conflicts. We need more sensitisation.

2)    We deserve more intense air connectivity. While major BIMSTEC cities are connected. There are serious deficiencies in non-major centres. Manipur and Mizoram are, for example, desperate for connectivity with Myanmar. Similar demand may arise from other member countries and destinations.
India government has plans for increasing air connectivity to the neighbourhood. But it is yet to take off. Mapping of traffic potential, infra gaps and devising a suitable framework may help attract private investments.
3)    With reference to India, spread out BIMSTEC activities beyond Delhi and involve media and local chambers. Involvement of chambers brings media coverage. If BIMSTEC has funds, consider offering some media fellowships to create future equity.

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Somnath Chatterjee (1929-2018): One of the tallest Leftist Parliamentarians, who was not liked either by the party or the media for trying to industrialise Bengal

Pratim Ranjan Bose

CPI(M)-led Left Front came to power in 1977 riding on the most irresponsible labour movement (with Jyoti Basu at the forefront), that took the shape of an anti-industry movement and sent capital packing from Bengal. The irresponsible agitations continued through 1980's and the state, which was headquarters of most of India's blue chips, became a graveyard of industries. The hardliner finance minister Ashok Mitra contributed in the process. 

As Chief Minister Jyoti Basu wanted to make amends, Mitra fell apart and eventually resigned. But by that time no industrialist believed in CPI(M) and the state was in the grip of some crony capitalists and traders. On top of all, the fanatics in the party prevented West Bengal from welcoming PV Narasimha Rao-led liberalisation in 1991 that actually addressed some policy issues (like freight equalisation) in Bengal's favour. West Bengal came out with an industrial policy to take advantage of the liberalisation in 1995. 

Veteran Leftist Parliamentarian Somnath Chatterjee was Jyoti Basu's man-Friday during this period. As a top corporate lawyer, he used his influence to make top industrialists visit the state, if not investing in it. If one may remember CII held two gala industry meets in Kolkata during the period. Mukund Ispat proposed to take over sick private sector steelmaker IISCO. French hotelier Accor wanted to acquire Great Eastern Hotel. The Frankenstein created through labour movement and party fanatics foiled both the efforts.  

But some changes started brewing. The dingy WBIDC office was remodelled to suit corporate tastes, under Chatterjee's leadership. As big capital was not keen, he initially depended on investments by the local crony capitalists. Most of them did invest in sponge-iron if I remember correctly. Tatas also invested in Tata Metaliks during the period. Initially, the quantum of actual investments was very small, in the range of Rs 50-60 crore a year, but they created foundations for a new beginning. To the dismay of fanatics, the CM of the State was found hobnobbing with capitalists. In next five years, actual investments reached around Rs 250 crore a year. Purnendu Chatterjee’s Haldia Petrochemicals and Mitsubishi Chemical’s PTA Plant (then largest Japanese FDI in India) were the two biggest achievements of the period. 

Jyoti Basu relinquished position to Buddhadeb Bhattacharjee in 2000. Chatterjee became speaker in Lok Sabha 2004. But, the trend set by him continued to gain momentum. By 2005, the average actual investments in Bengal rose to Rs 2000-2500 crore a year with big industrial houses describing West Bengal as a preferred destination. 

We all know that the trend didn’t last long. The red fanatics and the Frankenstein of anti-industry movement did strike back through Mamata Banerjee’s Trinamool Congress by 2008. The exit of Tatas from Singur created ripples and big capital fled miles away. Barring a few big projects - IISCO modernisation by SAIL, Durgapur Airport City project or the defunct urea plant of Matix – which were initiated before or around 2008; the rest scrapped their investment plan in Bengal. They didn’t come back. They are unlikely to come back anytime soon. 

We now get barely Rs 300-700 crores actual investment a year in the industry through smaller and less capital intensive ventures. (I am not taking into Reliance Jio’s optic fibre laying into consideration. They created such a backbone in the entire country.) The good news, if any, is there have also been some acquisitions in petrochemical downstream in the very recent past. 

But in this mêlée, a few things changed in Bengal. In the mid-1990’s, when Chatterjee was trying his best to turn the rusted wheel of industrialisation in Bengal, he convinced Basu to sign many memoranda of understandings (MoU), or preliminary agreements, worth thousands of crores. These were very fictitious figures of prospective investments, most of which never saw the light of the day. Entering MoU is a common practice in India, probably out of political compulsions to create a visibility and feel-good, which is important to attract investment. Across the country, only a fraction of MoUs are converted into actual investment. The conversion rate has always been lower for Bengal for understandable reasons. 

But those big bang announcements of MoUs, vis-a-vis the grim realities of mid-1990’s, fetched Chatterjee a nickname. He was mocked by newspaper editorials as ‘MoU-Dada’.  Chatterjee was so unhappy about it that he used to end press conferences in a huff if anyone asked about the actual investment in Bengal. For a big man with a towering personality, his visible discomfort to such questions, was a source of amusement to city reporters, like me. 

And, that's the biggest change that struck today’s media. When the current Chief Minister Mamata Banerjee or his finance minister Amit Mitra, make announcements of prospective investments running into tens of billions of dollars after industry meets, no one laughs at them. In fact, no one asks them questions, which they consider “unacceptable” – a big change indeed.   

Chatterjee passed away today at the ripe age of 89. He was 10 time MP and Speaker of the Lower House in Parliament from 2004 to 2009. He was expelled by Party for fulfilling his constitutional duty (during a no-confidence call given by the party) in 2008. He was an accomplished man but a lonely man during the last few years.  

I didn’t meet him for years. Don’t know how he rated us in media, our change of heart to today’s politics and its tall claims of industrialisation of Bengal.

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Restoring pre-1947 connectivity options is no guarantee for development of India's Northeast

 Pratim Ranjan Bose

(Reproducing my presentation on “Value Chain, Networking and Marketing” at a seminar on regional development, jointly organised by the Ministry of Finance, RIS and FICCI in Guwahati on May 14)

Thank you for inviting me to this important seminar on Regional Development.

I am a business journalist with infrastructure and connectivity being my focus area. It is those subjects which primarily bring me to the North Eastern States time and again. So my presentation will have a mix of both these aspects.

Various speakers since morning pointed out that restoration of pre-1947 connectivity options through Bangladesh, Myanmar and China are definite measures for development of North-eastern India.  I, however, feel the regional development of the northeast can be optimised by first ensuring efficient intra-regional connectivity with a clear focus on creating local value chain.

We all know, at 13-14 percent of GDP, logistics cost in India is higher than the global average of 8-9 percent. There is no official statistics on the logistics cost in Northeast, but one can safely assume that its higher than the national average. Highways in large parts of the hilly states like Mizoram, Meghalaya, Tripura, Nagaland, Arunachal Pradesh are unsuitable for plying of multi-axel large capacity trucks. This surely increases transportation cost to these states, which is a detriment to the creation of local value chain.

Transportation cost is just one factor. There is more to logistics. Here in Guwahati, two young investment bankers have set up a processed food start-up called Arohan Foods. They have so far enlisted 2000 pig farmers in two districts of Assam and parts of Meghalaya. Notably, Northeast records highest per capita consumption of pork in India and, pig farming is a part of the social practice here. Arohan wanted to ride on that to market branded processed food. While their brand, “Choice Pork Natural” is already available with many retailers outside North East; the company is growing slower than expected for lack of both physical and social logistics.

To optimise value addition; such ventures require uniform farming practices at the back end and availability of physical infra like the cold chain to market the processed food in more attractive and high value yielding markets outside North East. North East lacks both these infrastructures. Naturally, Arohan is forced to ensure availability of animal feed, identifying model animal shelter to investing in cold chain logistics.

Their job could have been easier if the State shouldered the responsibility of creating enabling environment. Arohan could have spread its activities way beyond a couple of districts to the entire north-eastern region, converting it into a high value processed meat export destination.

In the past, at the direction of the Centre, the State-owned companies had set up heavy industries in North East to create employment opportunities. This was a command economy planning and most of the times they were inefficient planning.

Assam, for example, has petroleum refining capacity way beyond either its crude production potential or demand for petroleum products. So imported crude is pumped into Assam all the way from Odisha coast and products are pumped back to the mainland India. Even a child can tell, it would have been easier to refine crude in Odisha and send products to North East.

We all know the geography of North East may not suitable for large industries. Considering India’s long coastline there is no reason for auto-companies to set up base here. There is also no reason to believe that the huge Indo-ASEAN trade will be routed through North East sacrificing cheap sea freight opportunities.

On the contrary, it is well known that North East didn’t do justice to its huge agri-horticultural potential. It is a pity that barring the sole exception of lower Assam; rest of the North East including the vast plains of upper Assam are still single-crop, due to lack of irrigation facilities. If this is the situation of primary agri-commodities, the scene is even worse in the horticultural segment. North East surely produces one of the world’s best quality gingers, turmeric, pineapple and so on. But, they cannot extract the best value due to lack of uniform and certified practices; which are key to play in the high-value food sector.

The point I am trying to make is, North East is playing in the lowest equilibrium in the agri-horticulture sector, where it has maximum promises. Connectivity is no magic pill to remove this gap. On the contrary, my fear is, opening up connectivity with the outside world without putting the house in order; can make North East into a third-country transit trade destination like Myanmar. It will be swamped by imports, which will not only limit its own growth potential but also create a headache for the rest of India.

It is hard to believe that the region which failed to grab the market opportunities at its doorstep will be prosperous once Trilateral Highway establishes connectivity to ASEAN! It is a pity that States like West Bengal, Bihar or Andhra Pradesh meet the demand for rice or potato in Tripura; not the next door neighbour Assam.

If outward connectivity gets smoother, rice may come from China or Thailand. I have no clue how it is helping local value creation and employment generation. On the contrary, I have fears that the inefficient farm practices in Assam or Tripura will stand no chance before such competition and, we might end up creating a new set of problems.

The story is similar to the marketing potential of North East’s rich cultural heritage of handloom and handicrafts. North East failed to create a high earning potential from such activities. The benefit is reaped by traders or retailers outside North East. Tourism potential is untapped beyond Kaziranga and Shillong due to the absence of social and physical infrastructure.

Meanwhile, a time bomb is ticking in the organised tea sector in Assam – offering the livelihood to at least 10 percent of the regional population. The spread of small tea growers created a structural imbalance in the plantation sector as organised tea sector is witnessing rising costs and narrowing earning potential vis-a-vis increasing weather risks.

The need of the hour is, allowing the organised sector to utilise the land for producing more remunerative agri-horticultural products and source tea, through contract farming, from the small growers. This could have been a win-win for all. But its barred by law.

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