OVERVIEW
23
2 3
2 3
4
4
5
5
4
5
5
4
n.a. 2 1 5
5
3
3
3
3
4
4
2
2
5
5
1
1
4
n.a. 3
2 1
4
3 4
1 4
1 4
3
1 1
1
4
5
5
3
3
1
1
n.a. n.a.
5
5
3
2
2
5
3
3
4
4
2 1
5
5
2
Expanding firm
1 4
2
Sri Lanka Benchmark firm
1 3
2
Expanding firm
1 3
2
Benchmark firm
1 3
1
Pakistan
Expanding firm
1
Nepal Benchmark firm
1
Expanding firm
2
Maldives Benchmark firm
Expanding firm
2
Expanding firm
Benchmark firm
2
India Benchmark firm
Expanding firm
2
Bhutan Expanding firm
Benchmark firm
Electricity Political instability Corruption Tax administration Labor regulations Inadequately educated labor Access to land Transport Government policy uncertainty Courts Crime, theft, and disorder Business licensing Macro instability
Bangladesh
Expanding firm
Constraint
Afghanistan
Benchmark firm
South Asian region
Benchmark firm
TABLE 1.2 Top five constraints reported by South Asian benchmark (nonexpanding) and expanding firm in the urban formal sector, by country
4
5
5
3
4 5
4
Competition
Source: Authors, based on Carlin and Schaffer 2011b (based on World Bank enterprise surveys). Note: Analysis is based on pooled sample of enterprise surveys conducted between 2000 and 2010. n.a. = Not applicable (question was not asked). Access to finance and tax rates constraints are excluded.
Although the level of severity is different, job-creating fi rms rank constraints in much the same way that benchmark firms do, ranking electricity, corruption, and political stability as the top three constraints (see table 1.2).13 The severity of the electricity constraint facing urban formal firms—as well as urban informal fi rms and rural nonfarm enterprises—prompts a discussion of the problems facing the sector and the policies and other initiatives being undertaken to address them (box 1.2). The need to make substantial investment in electricity is an example of the point made earlier that a rapid reallocation
of workers to more productive sectors will require accumulation of physical capital.
Constraints facing rural firms Improving the business environment can spur development of the rural nonfarm economy, which accounts for an increasing share of rural employment in many South Asian countries and, therefore, the creation of better jobs within it. (See chapter 3 for a discussion of the rural nonfarm economy.) Doing so requires an understanding of the constraints fi rms in this sector face. The severity of constraints reported by rural firms in Bangladesh, Pakistan, and