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UP Private Sector Development

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Title: UP Private Sector Development


1
UP Private Sector Development
Lessons From Bihar Investment Climate Reform
Program
Lucknow, January , 2009
2
Agenda
  • Indias Investment Climate
  • Bihar Investment Climate Reform Program
  • Implications for Uttar Pradesh

3
Investment Climate - Why does it matter?
  • Investment Climate comprises institutional and
    policy variables that have a crucial
    bearing on business performance, but over which
    individual firms have no control
    individually, such as
  • Functioning of product and factor markets
    (including markets for labor, land, capital, and
    knowledge)
  • Quality of public goods (such as law and order,
    business regulation)
  • Physical infrastructure .
  • One of the important factors on which firms
    make decisions on locating their businesses
    based on the quality of investment climate and
    one of the critical enablers is the
    business regulatory environment- entry and
    operations

4
Major Investment Climate Constraints in India
World Bank Investment Climate Assessment 2006
5
Inter State Differences Ability to attract
private investment and growth is closely
correlated with a states IC
  • Measures both cost and perception (e.g. hours of
    power outages and sales lost due to power
    outages, and rating of electricity as an
    obstacle)
  • Successfully tested for reliability (e.g. states
    with good index have higher private domestic
    investment as share of GDP and higher GDP and per
    capita GDP growth)


Karnataka
Kerala
Gujarat
Andhra Pradesh
Haryana
West Bengal
Maharashtra
Delhi
Tamil Nadu
Punjab
Jharkhand
Orissa
Madhya Pradesh
Bihar
_
Uttar Pradesh
Rajasthan
Investment Climate Index
6
In 2009, despite reforms, India ranked relatively
poorly among 182 countries in the Doing Business
Report
Regulatory barriers remain a key factor which
constrain ease and cost of doing business in India
7
Agenda
  • Indias Investment Climate
  • Bihar Investment Climate Reform Program
  • Implications for Uttar Pradesh

8
Private Sector Development Investment Climate
Reform Program in Bihar
  • Govt. of Bihars Investment Climate Reform
    Program was supported by The World Bank Group
    starting mid 2007
  • Launched through series of Public-Private
    Dialogues/Sessions led by state government and
    including active participation from private
    sector representatives, financial institutions
    and other stakeholders
  • Private Sector Development engagements covered
  • Business Regulatory Reforms
  • Single Window Systems lessons from various
    states
  • Specific Licensing Reforms
  • Investment Policy and Promotion Support
  • Sector Specific Development / Investment
    Attraction Strategies
  • Tax Administration Reforms
  • Complementary support provided via World Banks
    Development Policy Loans with Investment Climate
    Reform Components

9
Improving Business Regulatory Environment in
BiharCarried out Progressively Facilitated by
WB/IFC
A
Overview of business entry requirements and
single window systems in India, comparing Bihar
with eight other Indian states
B
Detailed review assessment of investment
operating requirements in Bihar as well as its
impact on implementation of single window
overall investment climate
C
Studying Licensing reforms required in Bihar to
improve investment climate. Identifying
simplifications in prevailing business
regulatory environment in Bihar through reform of
three selected licenses
10
Journey of an investor and typical time
estimatesfor a typical application in Bihar
Upon Completion of Construction
Pre-Construction Stage
During Construction Stage
1 SIPB Approval (optional) 7-8 days
3 Pollution (NOC) 45-60 days
4 Land BIADA (Lease Deed) 10 days
5 Permanent Registration 2-3 days
3 Factory (Lay out approval) 90 days
5 Pollution (Consent to Operate) 45-60 days
4 Factory (License) 30-40 days
1 Provisional Registration 1-2 days
3 Power (Load Sanction) 7 days
4 Power (Connection) 21 days in case of no
extension works
5 Commercial Taxes (CST VAT Registration) 7 days
2 Land Allotment- BIADA 65-75 days till issue of
physical possession order
4 Water Linkage (Agreement) 40-50 days
3 Water Linkage 15-20 days
5 ESI (Registration) 7-10 days
3 Fire (Lay out approval) 5-10 days
4 Labor (Contract registration) 7-10 days
5 Weights Measures (Clearance Certificate) 2-3
days
3 State Excise (NOC) 15-20 days
4 State Excise (License) 30 days
5 Employment Exchange (Registration) 7 days
Same serial number denotes parallel processing
Average timelines
160-185 days
45-60 days
40-50 days
A days reduction in overall timeline can
generate additional tax revenues of Rs. 10 Crore
!!
11
Following up on implementation of
recommendations. Overall
Eliminating process related redundancies
Renewals, returns, inspections registers
Strengthening SW systems
  • BIADA eliminate duplication of functions of PCC
    and SIPB
  • Pollution Establish SEIAA or SEAC to avoid
    central clearances
  • Business Registration - Potential for process
    amalgamation with SIPB
  • Abolition of Cold Storage license
  • Sugarcane Extend cane reservation orders
  • Extend renewal limits to reduce administrative
    load, management time effort
  • Introduce Combined Returns/Registers - follow
    best practices from TN, AP, Karnataka Gujarat
  • Common periodic inspections - more stringent
    inspections for non-hazardous industries
  • Provision of self certification for non-hazardous
    industries
  • Base SWS on TN or AP model where ample groundwork
    has been done prior to Empowered Committee
    meeting
  • Introduce comprehensive CAF - best practices from
    AP
  • Create Handbook for Investors IT-enable SWS
  • Create Monitoring Committee with representation
    from concerned departments to discuss status of
    applications

12
Followed up with easing specific regulatory
barriers Business Licensing
13
Incremental steps ..
Business licensing assessment for Bihar
identified significant scope for simplification
of the requirements for each license/regulatory
requirement
It was recommended that the state take
incremental steps at reform, copy the better
performing states but not look for best
solutions, e.g. move towards the best models for
single window in India but follow a step wise
approach suited to Bihar (i.e. deemed approval
only when the system matures)
We suggested that the state tackle the quick
wins first (reform measures which are easy to
implement and likely to be less controversial)
14
Large expected gains.
WIN-WIN FOR BOTH GOVERNMENT AND PRIVATE SECTOR!!
15
Going Beyond Regulatory Reform
... Being done in phased manner by Govt of Bihar
and supported by IFC and WB
All of the above should eventually lead to
significant increase in private sector
investment, new jobs and higher revenues for
government
16
For addressing this PSD Cycle, GoB with IFC-WB
Support has embarked on a structured program
  • Developed Strategic Framework Action Plan for
    Investment Promotion.
  • Strengthening implementation and investor
    facilitation capacity at Udyog Mitra
  • Developed Sectoral Strategies (Agribusiness,
    Tourism)
  • Following up with ambitious Investment Promotion,
    Generation and Facilitation program
  • Focusing on results - Tracking Investment
    Proposals

17
Agenda
  • Indias Investment Climate
  • Bihar Investment Climate Reform Program
  • Implications for Uttar Pradesh

18
Uttar Pradesh growth story is relatively weaker..
in spite of significant advantages
  • Factors land, labor, skills
  • Location advantages
  • Institutions Knowledge, Skills
  • Existing Industries and Linkages Leather
    , Textile, Engineering, Agro- industry, IT.

Need to realize potential through private sector
development
19
Uttar Pradesh Key Economic Drivers
Source IBEF
20
Well spread out infrastructure activity across
the state areas/parks/estates
21
We are having Public Private Dialogue (PPD) for
better business to start with Industrial Policy.
Embark on Regulatory Reforms
Public Private Dialogue
Develop Private Sector Enabling Programs
22
Thank You
23
The World Bank Group is well placed to support
GoUP through
  • Facilitating Public Private Dialogues capturing
    inputs for Industrial /Investment Policy
    Formulation
  • Help GoUP in developing a program for continuous
    but incremental regulatory reforms
  • Reforming state institutions and strengthening
    capacity
  • Build a program for Investment Promotion,
    Generation, Facilitation, Monitoring and Tracking
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