What we had been hearing and seeing for the last few weeks is not good for Kerala, business and the economy.
The spread of such messages, it is common knowledge, does not stop with the media alone; they reach the ears of the investors and Fund Houses who invest in these companies and also the buyers of their products faster. Such messages spread worldwide. Whatever has happened and what is happening are very unfortunate.
It is high time that we stop this blame game once and for all and start working on these issues in earnest.
Few suggestions to make ‘Ease of Doing Business’ easy.
1. Give Care and Recognition to the “Made In Kerala” Businesses
We always ignore the Home-Grown Businesses while looking for new investors. There are quite a large number of businesses of various scales and sizes in Kerala which are well established and doing well over the past several years and contributing to the economy of the State. They need support and recognition; it is important to understand their problems and how they are running. They are the ones who can send the strongest message to the outside world regarding the investment climate in the State.
2.Handhold the new investors
Most of the time new investors are welcomed to the State with a lot of fanfare. Lots of commitments are made to them in the excitement of bringing them. We should be upfront and unequivocal in the beginning itself about what is possible and not possible. It is important to stand by our commitments. Depending on the size of the investment there should be a senior officer (from the government) designated for each of these investors from day one until the project is set up and starts running. Such support and guidance will give confidence to the investors. It is very important for the investors to complete their projects on time as otherwise it may send a negative message to the investor world.
3. A matrix is necessary to differentiate scale and size
We cannot paint everyone with the same brush. Each entity is different in size, investment, composition of employees, regulations, ownership, customer base and business. We have put them in four different boxes - A, B, C and D - as below.
Those entities coming in A are the ones with high investment, revenues, and high employment growth, but are not regulated or listed. These companies have a high stake for both the investor and the State with regard to revenue and employment potential.
Those entities coming in B are the ones who have high investment, revenue and high employment growth and are either regulated or listed. They have all the attributes of A but with a very high degree of governance requirements.
Those coming in C are highly regulated or listed but not with much investment or employment opportunities. Examples being the branches in Kerala of the insurance and telecom companies headquartered in other States.
The companies falling under B and C are either regulated or listed and hence the level of compliance of such companies will be much higher as compared to those under A.
And those in D are neither regulated nor listed or offering high employment opportunities as an enterprise but have a great impact to provide self-employment and all the Nano, Micro, Small and Medium enterprises come in this box. They have a great bearing on the local businesses and these businesses have great potential to grow and contribute to the State’s economy.
Now how do you treat the enterprises put into the four boxes?
We should have a very clear set of norms for each of them. It is good for the State Officials, including Officials of Industries Department and KSIDC, to study how many of other regulations matter to these entities and educate other related Departments and to have standardized norms and guidelines formulated so as to ensure compliance and smooth functioning of the businesses.
For instance, in the case of businesses coming under A, B and C, self-declaration by the key managerial personnel of the organisation should be sufficient from the compliance perspective. There should be levels of officers and SOP for the officers who can inspect the unit, considering its size and category, in case of complaints. Segregation of entities, as explained, will help in understanding the stake of the business and in prioritising them and in taking appropriate decisions, as and when required. It will also help in preventing unnecessary and repeated inspections.
The bigger the owners’ stake in the business, they do not want to risk noncompliance. Also, the more the business is in a regulatory framework there are stringent governance requirements spelt out by the respective regulators. Today most of the financial services, real estate, telecoms etc, are regulated. Also, when one is an exporter to foreign countries there are audits on the company as insisted by the respective buyers of their products.(like child labour, pollution etc.) The time and efforts of the government and the companies should not be wasted on things already taken care of by default.
Those entities coming in D are mostly the self-employed which also need a grading as to their level of compliance over a period. Those well compiled enterprises in this box should be rewarded and encouraged.
Today we are embarking on a time that will soon rate businesses based on their contribution to the environment and society. Businesses are today becoming more aware of serving the interests of all stakeholders (customers,suppliers, employees, shareholders and local communities), as opposed to only shareholders. Kerala should change with the changing time, lest business scenario will undergo a change for the worse. The attitude and approach towards business should change. If we work together and in earnest true to the spirit of the slogan “Make in Kerala” I have the firm conviction that Kerala, our State, can better its Ease of Doing Business Index, from the current 28th position.
(The author is the Chairman of the Muthoot Pappachan Group & Chairman of the CII Kerala Policy and Advocacy Task Force. Views are personal)