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Doing Business Report 2020: Soaring Changes with Soaring Doubts

Sisir Devkota

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As Narendra Modi brands his government of making new leaps; similarly, the World Bank’s annually published report, “Doing Business” has largely become a tool to evaluate economies. Both Mr. Modi and the institution have things in common. Upon his election in 2014, the Prime Minister made it clear that India was going to climb the rankings under the same report. This year’s report insists that many countries, including India, have made good leaps. Amidst such table success, there are many questions over the serviceability of the report itself. For a start: consider why the subtitle of Doing Business 2020 is “Comparing Business Regulation in 190 Economies”.

Nevertheless, many leaders like Mr. Modi are lurking towards performing the charts. Perhaps, a psychological competition engulfs bigger nations like India. Kosovo and Cyprus are ahead of Mr. Modi’s people in terms of the ease of doing business. Adding fuel to the insecurities, the report also highlights a fact-based decrease in the cost of starting new businesses in developing countries. Unquestionably, nation states are in a race. Whether investors investigate such results is an altogether different case.

One example is how the report has defined entrepreneurial ease to tackle obstacles. The 2020 report claims that more than fifty-five economies have eliminated the need to pay minimum capital amount to start a new business. Such rate of change will raise eyebrows; history suggests that often, openings like that are a result of financial desperation. Clearly, there is a lack of something in the stated fifty-five economies; investors will hope that it is not market demand. Retrospectively, besides how institutions like the World Bank or the charming speeches of leaders like Modi would imply otherwise; investors will be careful of such data. After all, there is a huge difference between an easy business environment without any scope and a conducive environment with healthy competition. Because the report also suggests that many nations instead reduced the cost of capital launch; economists will be doubtful in even trying to handle such information. It will be left to seen whether the report will also affect the nature of successful markets and goods.

Similarly, 40% of low and middle-income nations now prohibit the use of fixed-term contracts for permanent jobs. The staggering changes this year is a news that is too good to be true. Assumedly, as the report claims, if there are more nations relaxing business operations with such contract policies, investors will be smelling early blood. If anything, a logical analysis only implies that there is wishful thinking in the academics of the report to transfer wealth into hungry mouths. Pragmatically, the huge numbers do not present opportunities. Instead, it is calling for a discomforting nature of risk in many countries.

For some amount of comforting information, the 2020 Doing Business report, maintains ease of government contractas an indicator of looking at the bigger picture. As much as the knowledge of how long it would take to acquire government contracts in Chile would be useful for aspiring Chinese companies; it misses the main point. How would investors weigh their decisions in nations with contradictory results along different indicators? The lack of comprehending such result for economic decisions, is a liability than a tool. New Zealand has been a consistent performer for years, and, for 2020, it is also ranked as the best place on earth for doing business. Somalia, on the other hand totters at the end. It has been tottering for many years now. A strange movement of middle rankers become sensational news. Like Mr. Modi, many leaders are not looking to upset high ranking nations, instead, in the most explicit form of political accomplishment, lies the aimless ambition. Narendra Modi will be most excited, he knows that another addition of electrical grids in rural India will soar the rankings again, next year.

Global Affairs Analyst based in Kathmandu, Nepal. Founder, Trainer & Researcher at "The Protocol" which facilitates analytical research on current affairs and workshops on Diplomacy and Leadership. Masters of Social Science in Democracy & Global Transformations from the University of Helsinki, Finland. Author for a book chapter titled as "Armed Conflicts in South Asia 2013".

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Economy

Pandemic Recovery: White House – Check-In or Check-Out Times

Naseem Javed

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Credit: Diego Rivera

Some 200 nations of the world are in serious economic pains of varying degrees; the images and narratives on social media makes the world appear small and spinning out of control, shrinking mental abilities to Tik-Tok tempo to fit small size screens. In reality, when global dialogues engage some 5000 languages, 2000 cultures, bouncing in 10,000 cities, 11,000 Chamber of Commerce, 100,000 trade associations and some five billion connected alpha dreamers extremely dynamic vibrancy appears. The world is immensely large, as only less than 5% its populace has ever travelled globally while 50% never went outside their own country. On social media, everyone is a certified global expert.

Nevertheless, some 200 nations are trying to change the world toward a better workable plateau, peaceful diversity, tolerance and some sort of balanced trade. The world is hungry seeking out untapped hidden talents of its local citizens, suppressed by the bad local policies. There are continents, oceans, jungles, animals and things, simply, so much, so large, so vast, a mind cannot fathom. Blessed are those who have open minds and souls. The rest self-imprisoned in their own minds, lost in the darkness of their own fears. The borderless world of commerce always needs colorfully smart; open to diversity to bounce in global space with national and global collaborations.  

Such doctrines lost during the last decades as economic disconnectivity blossomed under hologramic economies. Pandemic recovery, today, forces mobilization of the midsize business economy as a bold adventure on quality exportability based on upskilled citizenry. Occupationalism demands small and midsize manufacturing to uplift local grassroots prosperity. In the history of humankind, no other experiment of human endurance has ever been as successful as America; a century old, image supremacy of entrepreneurialism wasted when some 100,000 factories and Middle-Class America disappeared from the heartland. The manufacturing based economy laughed at over ‘information economy’ and hologramic adventuring. Deep study and new global age thinking is a perquisite.

Three types of new challenges

Nations without funding: It is almost a fact most governments from top to bottom are simply broke, and almost a fact most governments have already wasted their funds beyond their means. However, if we focus just on priorities, above programs are primarily not new funding dependent rather they are deployment hungry and execution starved. Any government anywhere in the world in the name of superior efficiencies can easily adopt digitization policy as a survival strategy and make all the processes highly affordable by bringing them on digital formats. The rain of free technologies is flooding the global markets. It is more about upskilling departmental leaderships to adapt to such opportunities, without fear.

Nations without infrastructure: Small percentages of nations have the infrastructure, rest assembling like Lego as they go. The internet connectivity or knowledge plug is almost everywhere. The lack of imagination and upskilling of the gatekeepers is a critical issue.

Nations without digitization: there are a majority of nations where mental attitudes are significant problems, fear of being replaced as redundant or fear of exposing lack of competence preclude any adventure on digitization. No nation will survive on economic progress without national digitization mandates.

Three types of new models: Start with the Marshall Plan thinking, the revolutionary models and national mobilization to catch up the last decade. Start with open debates and honestly frank analysis, no finger pointing. Start with a plastic award night, congratulate failures, and carry on as usual until the next pandemic.

When history becomes nothing, but agreed upon lies, culture as agreed upon fables, truth becomes taboo, dumb down narrative dominates, restless citizenry emerges.

Summary: Within next 50 days, the US Election will make global shock waves, no matter who wins…it will be the battles on acceptance and concession speech, the mail-order selection criteria my linger weeks or months in chaos… the Vaccines races may collide with bad results and delay the process to 2022. The economic recovery shaped W may bring reopening normalcy possibly in 2022. Tough and difficult times demanding critical thinking and mental endurance on all fronts. Study how national mobilization of mid size economy works in digital age.

Plan wisely and select right paths; but open bold and honest discussions, as masked and sealed lips are where most of the problems originally germinated. Move or get moved. 

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How India can get its growth back on track after the coronavirus pandemic

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The Covid-19 pandemic has led to exceptionally challenging times. World Bank projections suggest that the global economy will contract by 5.2% in the current year. India, too, is likely to be significantly impacted.

Covid-19 afflicted India when the economy was already decelerating. After growing at an average of 7% a year in the previous decade, growth decelerated to 6% in 2018-19, and fell further to 4.2% in 2019-20. Pre-Covid-19 slowdown was due to a number of factors: longstanding structural rigidities in key input markets, stressed balance sheets compounded by greater risk aversion among banks and corporates, and, more recently, growing vulnerabilities in thThe pandemic has rendered the outlook even more sombre. So is India’s growth story over?The pandemic has rendered the outlook even more sombre. So is India’s growth story over?

Two years ago, we analysed the long-term trends in India’s growth rates. Studying 50 years of data, we found that despite variations in the trend rate, growth accelerated steadily, with no prolonged reversals. Economic growth also became stable — both due to growth rates stabilising within each sector, and due to the economy’s transition toward the steadier services sector. Importantly, faster and more stable growth was evident across states without being concentrated, for the most part, in a few sectors or activities. Furthermore, periods of faster growth saw productivity gains and not just an increase in factor inputs. All these point to the long term resilience of India’s economy.

Several factors were instrumental in India’s growth story. First, India benefited from a growing working-age population. Second, its savings and investment rates continued to increase until the late 2000s. Third, the financial sector grew significantly, with a rising ratio of bank credit to GDP. Fourth, India was likely aided by its strong institutional base. Fifth, India’s trade-to-GDP ratio grew rapidly from the early 1990s, until world trade stalled due to the global financial crisis.

Finally, the macroeconomic policies, notably monetary and fiscal, were formulated under credible frameworks in the last decades, yielding impressive macroeconomic stability.

General State of Weakness

However, some of these factors have weakened in recent years. After the 2008-09 global financial crisis, specific weaknesses emerged in private investment, export performance and the banking sector. These have persisted for nearly a decade since. Investment rates and exports declined as a percentage of GDP. Worryingly, the vulnerability of the financial sector increased, resulting in anaemic credit growth.

Covid-19 has magnified these weaknesses. Disruption in economic activity has dented consumption, investment and exports. RBI’s financial stability report has cautioned that the financial sector is likely to bear a significant burden from the slowdown. What, then, is the short- and medium-term prognosis for India’s economy? How may the policy response be tailored?

As a response to Covid-19, extensive measures have been taken in the regulatory, fiscal and monetary policy areas. But there are limits to these relief and support measures, both in terms of their effectiveness and affordability. Recovery now will depend in equal measure upon unlocking the supply side, and on the containment of the virus itself.

Private investment in India is likely constrained by several factors, including financial sector inefficiencies, deleveraging, crowding out and regulatory policy framework. Removing these, and sector-specific constraints, and ensuring policy certainty will be important. While India has received healthy volumes of FDI, encouraging these further can spur both domestic investment and greater integration in global value chains (GVCs).

Exports were an important driver of growth prior to the global financial crisis. But its contribution has diminished since. The ratio of exports to GDP has been declining, with India’s share in global exports remaining stagnant, or even decreasing. India can improve its competitiveness in the world economy by boosting investment in infrastructure and bringing it at par with other global manufacturing hubs; further reforming land, labour and financial markets; upgrading the education system to equip its workforce with skills. Besides, a competitive exchange rate, deeper trade integration, and greater embedding into GVCs will assume significance.

In the financial sphere, Indian banks have seen subdued credit growth, and asset quality remains stressed. In the past few years, a number of measures have been announced — including the consolidation of banks, an asset quality review, timely resolution for specific institutions, strengthened oversight or forbearance (post-Covid-19) and equity infusions. These measures have improved the oversight of India’s financial sector and boosted financial inclusion. However, more needs to be done to improve the safety, depth and efficiency of financial intermediation.

Additional priorities include maintaining financial sector stability, undertaking specific reforms in the non-banking financial sector, deepening capital markets, enhancing the role of fintech and ensuring a more selective and strategic footprint for the public sector in the financial sphere.

Growth Rides on Reforms

There is nothing, however, that seems permanently broken in India’s growth model to warrant pessimism. Many of the deep-rooted structural factors that helped fuel the economy’s sustained growth during the past decades seem intact: demography, a large and diversified economy, still low-income levels that signify the potential to grow, a dynamic entrepreneurial class, political and geopolitical stability, a strong institutional base and credible policy frameworks.

With continued policy attention on reforms — which spur private investment, increase the economy’s competitiveness, promote greater integration into the global economy, and ensure an efficient financial sector — India can revert to the growth path of the past.

 Source: World Bank, The Economic Times

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COVID-19, major shifts and the relevance of Kondratief 6th Wave

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Covid-19 has changed the global strategic equations, it has impacted each part of human life so has it let us to ponder upon the Kondratieff cycles, as with Covid-19 there has started a new debate about sixth wave, which is about the importance of health sector, especially the biotechnology which is crucial for progress of society in future.

Henceforth, the countries that are working on these sectors know that the most important engine for our economic and social development will be health in the 21st century. For example we have USA that focused on these and now has created around 2/3rd of its jobs in health sectors along with that has invested about $3,500 billion on health sector back in 2017. Also a 2008 report said about 4,700 companies all across worked in  field of biotechnology whereby 42% were in North America, and 35% in Europe, which depicts these states long-term understanding of the emerging scenario as seen from the emergence of Coronavirus. But then the on the other side if we look into the health structure of underdeveloped states, we can easily conclude that these states will suffer the most if a global health issue emerges, and in the contemporary world it has emerged in the form of COVID-19.

COVID-19 has brought changes in the political and economic arrangement. It has not limited itself to the China from where it has been started but has impacted the whole world. The virus that is itself unseen has shaken the structure, with severe consequences for all states. No matter if it’s the USA that is the super power or any small states, the pandemic has divulged the capability and integrity of all in their response to the Covid-19. With some having the capabilities to deal with it, but most lacking in these sectors which resulted in huge loss not only of human life but also of resources. Time has come when the world is criticizing globalization at one hand because globalization is the reason for the spread of COVID-19. This has marked the end of one era with the emergence of a new one.

Mention below are some of the major shifts which Covid-19 has resulted in economic sectors in both the developed and the underdeveloped states, along with the major political shift that has led many to debate about the new structure of world after the crisis would be over.

The Covid-19 that was first reported in China, in November has changed the world completely and resulted in a lot of economic and political changes all across. For example the global economy due to Covid-19 crisis have a setback of $590 trillion. Apart from this many people lost their jobs, the household incomes have reduce, moreover World Bank report say nearly 49 million people will move into extreme poverty because of pandemic. Then World largest real estates are having economic problems, the Tourism industry has declined. An estimate showed the loss of about $1.2 to $3.3 trillion in this area of tourism all over world. Also report of International Air Transport Association predicted a loss of $63-$113billion. Moreover the oil sector also faced problem as it was for the first time that its price has gone negative. Henceforth, it can be predicted that once the pandemic is over the world will have a lot to calculate.

The impact of this crisis is seen in both core and periphery states. In core states like the US and china COVID-19 has brought huge economic impact but along with this also a question of who will act as the world saviour. As Chinese economy is expected to decline by 13% in February also the Belt and toad initiative is at halt, but still apart from the economic problem this pandemic has helped a core state like china to use the situation and move towards the status of Global power. Thus this struggle of Global saviour resulted in US and China at odds with each other. Indeed, COVID-19 has brought political repercussions along with economic consequences. When it comes to Europe the industrial production decline by 17%. Likewise USA is also effected by COVID-19 as by this pandemic about 39 million American have lost their jobs, also US economy seen to decline by 20% so US health sector has been in the eye of analyst for its failure to curtail the coronavirus. Then covid-19 has more devastating impact on peripheral states as there health care facility is not well developed. For example the GDP of Bangladesh fell by 1.1%, then many African states that look for tourism as a source of economy faced a loss of about $50 billion. Also 29 million in Latin America fell into poverty. Though they have been exploited in past but the need of the hour is that the world must help them.

Global dynamics are showing transformation amid coronavirus. The pandemic has shown how China is using its trump cards to transform the contemporary situation in its favour while bolstering its image as the “global saviour”. China’s emergence from the sick man of Asian to the positing of global saviour has opened the prospect of a tilt in the global status of Hegemon from US towards China. The question is that will the Chinese strategy amid COVID-19 will hinder the prestige of US who instead of acting as the global leader has shown a deterioration in its role in global governance.

The future of China’s pre-eminence in the global spectrum has been widened by the pandemic. All of this has been further bolstered by the broad rejection of Trump to engage in Europe and elsewhere. COVID-19 not only emerged as an impetus to shift the global dynamic but has helped China to strengthen its position. In response to the confident play by China, US hasn’t come up with any convincing tactics to prevent the increasing role of China in achieving its interest. Recently, a move by Trump administration to withhold US funds of around $400million will surely leave a gap, moreover will be an opportunity for china to bolster its position in WHO. Taking backseat in its global role amid pandemic, then the withdrawal from global treaties, and withholding of funds from WHO shows a pattern which will further create a vacuum for China to take advantage of the prevailing situation. 

The current international order set by US will be subject to testation as the changing shifts in the geopolitics have to be catalyzed by the COVID-19. For it is now the right time for us all to ponder the relevance of Kondratieff 6th wave in current scenario of Covid-19. As now the focus has diverted towards the health care system and biotechnology since the world has in current situation saw a blame game between states with few called corona virus as naturally occurring but some regarded it as ‘Chinese virus’. This has led to the realization that that warfare scenario has entered into discussion over biotechnology. So after the Covid-19 pandemic, the policy makers of both periphery and core state will work on new technological area which has the Medical technologies, Nanotechnologies, Biotechnologies etc. for the improvement in health sector will be crucial for the progress in future.

Conclusively, the current COVID-19 as a bioweapon has resulted in a clear impetus and will definitely bring a shift in the states attitude towards medical research and the multiple fields of technology in future, this is so because COVID-19 has created a ground for relevance of Kondratieff 6th wave.

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