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How Tonga beat India hollow

If India at number 120 can boast of so many world-class businesses and be such a magnet for global investors, trillions of dollars must be flowing into Tonga, ranked number 47 by the World Bank, writes Manas Chakravarty.
None | By Manas Chakravarty
UPDATED ON OCT 06, 2007 11:30 PM IST

Things have never been better for Indian business. Stocks are soaring, balance sheets are bloating and profits are growing. The icing on the ever-expanding cake has been provided by the World Bank’s survey on the ease of doing business, wherein India has moved to 120th place in the global league table, from 134th last year. India is now the 120th easiest place to do business, out of a total of 178 countries. We’ve beaten Brazil and Indonesia, comprehensively licked Gabon, Djibouti and the Comoros, wherever they may be and knocked the stuffing out of Togo, Mali and the Central African Republic. Clearly, the government deserves a pat on the back and all that remains to be considered is how to deliver it to Mr Chidambaram.

Which countries are still ahead of us? Well, there’s Mongolia, ranked number 52, where all you have to do to start a business is take your camels, go into the Gobi desert and pitch your tent. You can then proceed to sell camel hair, camel milk, camel dung and so on without further ado.

At number 51 is Botswana, where a third of the population has been wiped out by AIDS, greatly reducing competition and enhancing the ease of doing business. Number 66 is Colombia, a country torn apart by drug wars, but noted for its ease of doing business. The business model there goes something like this: go to a nearby forest, plant some coca leaves, set up a cocaine factory and you’re on your way to becoming a drug lord.

At number 84 is Papua New Guinea, where you have to apply for a head-hunting license, go to a neighbouring tribe, hack off their heads, shrink and sell them to tourists. Gaza and the West Bank are ranked 117, three notches above India, no doubt because of the thriving AK47 business there. It’s difficult to compete with these countries.

Closer inspection reveals that the final ranking is based on ten parameters: starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. The US is ranked number 7 on the “getting credit” parameter, which is patently unfair.

Considering that all a subprime borrower needed for getting a housing loan was make a vague promise to the effect that he would, at some future point of time, see if he could bring himself to repay the principal, the US deserves the number one rank in this category. Singapore scores the highest in the category “trading across borders”, perhaps because you reach the border if you travel around five miles from the city centre.

But while Singapore may have bagged the top spot because it’s a city-state, nobody can make that allegation against New Zealand, which is ranked second overall. That’s because you can set up a business in that country simply by buying a couple of sheep, getting a sheep license, registering the sheep and getting a sheep loan very easily. New Zealand also ranks number 1 in the “protecting investors” category, because sheep are a very safe investment, rarely turning around and biting investors in the leg.

But is it really so difficult to do business in India? After all, all you need is to rent a cart, pile it with wares, push it to the local police station and pay your hafta, go to the local thug, pay your dues, park the cart at a street corner and hey presto, you’re in business.

Of course, a great institution like the World Bank knows best. If India at number 120 can boast of so many world-class businesses and be such a magnet for global investors, trillions of dollars must be flowing into the Pacific island nation of Tonga, ranked number 47 by the Bank. Tongan companies must stealthily be snapping up businesses across the world at a prodigious pace. Could Tonga be the great undiscovered new economic superpower?

Manas Chakravarty is Consulting Editor, Mint.

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