Better investment climate : A challenge of Government of Manipur
Dr Mohendro Nandeibam
When the whole world talks about good governance with rising confidence and promise of glorious future, it is strange; but not surprising that most of us are not fully aware of the fact that the job of development of Manipur too big for it to do alone. The “Development Partnership” is the best option which in turn demands a strong partnership between government and private investors; — domestic and foreign. Can we now think of making Manipur as best investment destination? This is all about costs, risks and barriers.
The contention is reinforced by the small budget of the state limiting the scope for “Induced Investment” for a “Big Push” with larger multiplier effect. Almost all problems, perhaps, have economic origin. What exceptional development can one imagine when Manipur had to have Plan Outlay of Rs. 1.55 crores only during 1st Five Year Plan (1951-56) followed by Rs. 6.25 crores during 2nd Five Year Plan (1956-61). The backlog of underdevelopment suffered by Manipur has its origin during the period, 1951-1972. Right now the situation is getting troubled by the mounting spectre of Growthless Jobs and Jobless Growth caught in the clutch of stagflation and liquidity trap. Better Investment Climate decidedly marks the first firm foundation of development intervention. It is the mother of all productive engagements.
Investment Climate is a set of location specific factors shaping opportunities and incentives for firms to invest productively, create jobs and expand lines of business. It is a prepared situation free from unjustified risks, unjustified costs and unjustified barriers to competition. It is a situation where free entry and free exit are conveniently allowed to enrich competitiveness. FEAR OF FAILURE, the dreadful culprit is going to be replaced by a new passion and spirit of larger competition. Now, the entrepreneurs, captains of “creative destruction” go ahead with rising confidence.
It is largely the outcome of Rule of Law, Predictability, Professional Discipline, hassle-free financial sector, efficient physical infrastructures, particularly transport and communication and water supply, and positive social attitude. Government is not going to be luxury; but a vital necessity. It has to act as custodian of the state.
Investment climate helps the development process in all important ways including administration of justice. All major decisions of all sectors and sub-sectors are, to a very great extent, influenced by the character of investment climate. The farmers do better farm planning and carry out agricultural operation with confidence. Micro- entrepreneurs run their business with rising expectation and start new lines of business. The local manufacturing companies start expansion. The multinationals have courage of identifying next global centres. In short, firms acquire a new competitive spirit to develop, adapt and adopt. Both input and output markets become fairly competitive and firms become innovative to ensure present satisfaction and future safety. Much acclaimed sustainable development and better investment climate are closely linked.
A good investment atmosphere contributes to the exchequer by expanding tax-base and changing the tax-rate. Government may expect larger fiscal advantage and better financial position. As such, better investment climate benefits the society as a whole. It is for everyone. It is a golden goose that lays golden eggs.
We can learn a lesson from the development experience of developed countries. “Improvement in policy predictability increases the likelihood of new investment by more than 30 percent” (WDR – 2005, P-2). During 1980’s and 1990’s better investment climate was largely responsible for doubling private investment as share of Gross Domestic Product in China , Uganda , Poland , Romania , Russia and Slovakia. The employment generated by the private sector could increase from 2.3 million in 1981 to 74.7 million in 2001 in China. The Per Capita GDP rose ten-fold from $440 in 1980 to $ 4,475 in 2002.
“Investment, especially private investment, is ‘key driver’ that drives demand, creates capacity, increases labour productivity, introduces new technology, allows creative destruction and generates jobs. Application of behavioural economics can play key role in success of public policies and programmes” (Economic Survey, 2018-19).
The present scenario in Manipur is visibly disturbing. Manipur abounds with unreliable infrastructures. Internally, the state is marked by the poor transport and communication and externally, the state is inadequately linked with the rest of the country. Transportation is too much road-based. Predictability is fairly low. Meaningful Rule of Law has yet to start. Improper payment is order of the day. The National Highways are in the hands of highwaymen who can stop and demand “anything” at any time. Bandhs and Blockades are convenient status symbol. Extortion and Demand Letters are nothing new. The corruption of inefficiency goes with professional backwardness. Corruption, “the crime of calculation”, remains a deep-rooted institutional culture. There is need for tackling the sources of policy failure.
On the other hand the congenial atmosphere characterised by durable peace and stability is a process, – not a single episode in the general drama of troubles and tensions. Man does a number of economic calculations and technical exercises before investment which is essentially meant for a brighter future of profit, progress and prestige. Creation of favourable investment climate begins with the understanding of perspectives, preferences and priorities of firms. Investors are mostly entrepreneurs.
Another uneasy edition of feudal disability makes the situation more alarming. The new culture of “quick rich” without adequate investment of money, knowledge and hard work born largely out of flood-gate of liberal “trade activities’ with Myanmar, highly subsidized economy full of foreign goods from China, Thailand and Korea, threatens to negate the lasting asset of trade dynamism and consequently attempts to exhaust human values and professional discipline. The running phenomenon of ‘drug trafficking’ and the creation of Smuggling Hub at Moreh Zone questions the justification of Indo-Myanmar Border Trade. Can Manipur afford to ignore this dangerous warning? Is it not a right time for the Government of Manipur to reassess and review the Act? Because our future largely depends upon better investment climate. Hostile investment climate invites long shadow of pre-mature future.
What the Government of Manipur needs now is a tough Economic Decision duly supported by strong political will and massive social support. Improved credibility of government is extremely important because it has power leveraging impacts of other policy instruments.
The 1st Pillar of Development Strategy should definitely be better investment climate and the 2nd Pillar should necessarily be sensitization, empowerment and enrichment of people to take fuller advantage of the emerging opportunities.
The writer was Professor of Economics, Manipur University and associated with Ministry of DoNER and NEDFI