Earlier this month, I attended a fascinating conference organized by the Legatum Center for Development and Entrepreneurship at MIT. Three things about South Asia stood out for me.
One, cheap connectivity. Thanks to the mobile phone, increased connectivity in South Asian countries is unleashing economic potential like never before. Countries there have some of the lowest costs anywhere in the world. Bangladesh, for instance, is third lowest in the world in total cost of ownership of a mobile line for voice and messaging. And for data, its TCO is the lowest: about $8 a month. Compare that to Brazil’s $250 a month to get a sense of who might access and benefit from technology.
To me, this cost is not just a reflection of the devices, celltowers, and labor expenses. It’s a reflection of liberal government and corporate policies, which keep taxes reasonable, provide mutual political and economic profits, and allow healthy competition. Latin America’s cost structure is certainly not high enough to justify the world’s highest data charges.
Two, better information availability. We had a great discussion in my graduate class on globalization yesterday about digital divide vs. Friedman-esque flat world optimism. Nearly 700 million people in India, a country that Friedman has gushed about, lack ICT connectivity. This information divide, which sustains much political power and corruption in South Asia, may be reducing in some areas. A great example was provided by Comat, a company that’s working currently in five Indian states. It has set up a network of two thousand ICT-enabled rural business centers that simply provide information, such as citizen records, government rules, etc. Farmers don’t have to bribe local officials to get a copy of their deed. These add up. Comat’s program evaluation, done by Harvard, estimated its corruption-reduction impact to date in the range of $400 million. And all the company provides really is information which the public has the right to access but could not earlier without paying cronies along the chain.
Three, high cost of business. All these changes are brought about by innovative business ideas inclusive of the bottom billion and by supportive government policies that allow these businesses to operate. Comat, for example, needed to get authorization from very high levels to access information that previously was the fiercely protected turf of local officials.
But across South Asia, the cost of doing business remains very high in all major areas, whether you want to start a business, get permits, employ workers, register property, get credit, protect investors, pay tax, trade across borders, pay investors, or close your business. Out of 183 countries ranked by the World Bank, India ranked 133 (and 182 in enforcing contracts). Bhutan and Nepal were slightly better, in the 120s. Bangladesh was 119, Sri Lanka 105, and Pakistan 85 (note that the doing business index does not look at political and physical risk to the business). Unless you are highly connected, the only way that entrepreneurs can reduce these barriers is by paying bribes. Imagine the potential if governmental red tape on doing business is lowered!