By Pradeep S Mehta
Other countries — the Philippines, South Korea, Kazakhstan, Greece — have it. We too need an independent adjudicator
Let’s take two recent instances: A factory owned by Nokia in Chennai has shut down due to wrangles with the I-T department.
At a conference in New Delhi in September, Vodafone’s head said it had sought the Government’s approval to bring in funds from its parent company to buy spectrum in December 2013, but the clearance was still awaited; and the dealing officer is soon going to retire. “Yes, it is difficult to do business in India, that’s the general perception of foreign companies, and not just in telecom,” he pointed out.
Yet, we want companies to ‘Make in India’.
These are just two of the many examples of post-investment blues. Some of them relate to micro or operational issues; many are related to macro or policy issues. Some are also related to judicial interventions, including public interest litigation.
However, they are not directly related to the World Bank’s Ease of Doing Business in India rankings where our rank in 2014 slipped from 140 to 142; this ranking is mainly around the issue of entry and establishment of business.
Many issues land up in courts in India or abroad under our international investment treaty obligations, especially when a company wishes to exit. Can we find an easier way for such issues to be resolved so that business can devote its attention to production?
The Government is focused on improving the business sentiment. It has also established an eight-member committee under Invest India (a joint venture of the Centre, FICCI and State governments) to help business navigate the maze of clearances.
While that is much needed, the Central and State governments should establish non-judicial grievance redressal mechanisms to deal with running a business smoothly. That will boost investor confidence hugely and ensure that the ‘Make in India’ programme runs faster.
Early this month, the Japanese state minister in their PMO, Yasutoshi Nishimura, speaking at the India Global Forum in New Delhi, said that unless we improved our business environment, which included red tape, the promised $35 billion investment would not flow in.
Given this unfavourable image of not being a business friendly nation with its varied regulations, challenging procedures and widespread corruption, an ombudsman, both at the Centre and in the States, would go a long way in overcoming some of these glitches.
There is an ombudsman in the Department of Industrial Policy and Promotion (DIPP) in the form of the additional secretary with a joint secretary as grievance officer, but one is ignorant about their existence or track record. There are no reports on DIPP’s website and informal enquiries with foreign investors reveal ignorance of or perhaps their lack of faith in this arrangement.
The issue of grievance redressal has been addressed by various other nations which have a dedicated body to handle investor complaints, but the body is situated outside of the ministry and is headed by a credible person.
The practice abroad
South Korea has had an office of a foreign investment ombudsman (OFIO) since October 1999. The ombudsman works autonomously with his/her own team of ‘home doctors’, who are specialists in various fields.
One case resolved by the OFIO involved a complaint from a foreign company which was liable to receive a registration tax cut for its capital accretion for reinvestment purposes. The company was, however, charged 120 million Korean won (approximately $0.1 million) as registration tax imposed by the local government. The OFIO was successful in getting the amount refunded to the company through consultations and assistance in filing a civil complaint.
Greece also has a dedicated ombudsman to handle investor grievances. It helped resolve an issue involving one of the leading broadband internet providers. The company decided to create another data centre and acquired land for the purpose. The government, however, included that plot in a group of residential zones, thus halting work on the project which could proceed only after a ‘special application act’ was passed.
Other countries following this strategy are the Philippines and Kazakhstan. The investment ombudsman team (IOT) in the Philippines is already planning to increase its mandate to include policy mediation and dialogue between government and the private sector.
The IOT was established in June 2014 and has received 14 complaints within three months, many of which were against local government units refusing to issue business permits, accreditation, official receipts among others.
Independence and authority
One of the primary attributes of such an ombudsman is the requisite authority and independence provided to them to tackle grievances. More often than not these grievances are be raised against government departments. Therefore, a body created outside government is likely to be less biased and more successful.
This will also create a favourable perception of transparency and impartiality and go a long way in boosting investor confidence in the process. Such an institution would be an alternative dispute resolution mechanism as well. It would need to ensure that the resolutions create a win-win situation for both, investor and government, which would instil confidence in the process.
Overall, Narendra Modi’s government has been successful to an extent in altering perceptions about the business climate in India. It started from a very low base, when policy paralysis ruled the environment. But it is yet to succeed in changing the mindset of the bureaucracy.
The dream of a business-friendly India will become a reality only when businesses and investors have an impartial avenue to get their grouses settled swiftly. Ombudsmen at all levels will be pivotal in achieving this.
The writer is the secretary-general of CUTS International. Tunisha Kapoor of CUTS provided research assistance