September 2008. Orissa is a resource-rich but income-poor state in Eastern India. While this is common enough in many countries around the world, things are changing in Orissa these days. Over the past five years, income has been rising and poverty among Orissa’s 37 million people is falling. The state is transforming rapidly and, while there is still much to be done, the Government of Orissa has made a number of impressive strides. The economic growth rate is up from 4 percent in the 1990s to about 8.5 percent over the past five years, compared to an all-India average of 7.8 percent. The manufacturing sector is growing at 11 percent a year, and a large number of investment projects are underway. In short, Orissa seems to be on the right path.

But how did this transformation from a ‘lagging state’ to a rapidly developing, forward-looking state take place? There are many reasons for this. While Orissa’s natural resource base is one of its biggest assets, the Government realized that more was necessary to bring about the much-needed change for the people.

“We understood that we needed to spur economic growth to reduce poverty. One way to do this was to encourage broad-based private sector development which would lead to employment generation and substantial spill-over effects in the economy. That’s one of the reasons why we requested continued capacity building for the State’s Industrial Promotion and Investment Corporation (IPICOL )” said Mr. Ashok Kumar Meena, IPICOL’s Managing Director.

IPICOL was set up by the Orissa government to facilitate the opening of businesses in the state.A new Industrial Policy was adopted by the State Government in 2001, and legislation to put the policy into practice was passed in 2004. The new policy had a strong focus on improving the investment climate through targeted regulatory reform. It promoted the implementation of a Single Window System to facilitate and streamline the setting up of new businesses in the state. Several donors supported this initiative, including the World Bank.

Combining training and technical assistance, the World Bank Institute helped to build the capacity of key institutions in Orissa. District Industries Centres (DICs) which cover small and medium investments at the district level were included in addition to the IPICOL. Inclusion of the DICs was important to make an impact on the small and medium sector which is crucial for broad-based growth and poverty reduction.

“There are many examples of countries around the world which have made regulatory reform a key priority and a crucial part of their strategy to improve the quality of economic performance and ensure better government effectiveness. Some of the best examples of successful single windows are from Malaysia and Ireland. So we brought experts from these countries to Orissa to share their experiences and provide hands-on advice to the Government.” says Qimiao Fan, Lead Economist and Program Leader, WBI.

As a result, IPICOL became much more service and business oriented: “IPICOL provides the first hands-on interface for companies wishing to set up industries in Orissa,” said Vishambhar Saran, Chairman, VISA Steel Limited, a large investor in Orissa.

From the very beginning, the State Government was fully committed to the reform process and brought together the different government agencies involved in investment clearances. These efforts led to the formal creation of “Team Orissa” under the leadership of the Chief Minister. The principal goal of the team is to provide synergies and encourage the convergence of all government efforts to facilitate the establishment of industries and promote investment.

WBI helped to develop Team Orissa’s capacity through direct advice and technical assistance. In 2008, it offered a seven week e-learning course on effective investment promotion for district level officers and IPICOL staff. The combination of e-learning with video conferences gave participants considerable flexibility as they were required to devote just a few days each week to the course. At first, some skepticism had to be overcome as the concept of distance learning was new to most government officers.

“Initially, we were not very hopeful of the outcomes from this course, but the way it was conducted, it really made participants aware about the necessity of a focused approach towards investment promotion and facilitation. The participants have immensely benefitted and my team at IPICOL is already using the concepts”, explained Ashok Kumar Meena, IPICOL’s Managing Director.

“The course was great, I am now more confident to guide entrepreneurs who wish to set up medium and small enterprises. The e-learning methodology was new and refreshing and my approach is now more systematic and logical. It is a very convenient method of learning. I could sit in my room and take time to think, evaluate and complete my assignments. The video conference method of interaction was also very interesting,” said Satish Chandra, an Industrial Promotion Officer from the District Industrial Centre in Bhubaneswar.

The regulatory reform package introduced by the Orissa Government, combined with the capacity development initiatives, led to a significant decline in the cost of doing business in Orissa. It now takes only 52 days to start a business in Orissa compared to the 79 days it took to do so before the reform process started in 2004. The cost of doing business in Orissa is now comparable with the rest of the country. Going forward, Orissa will have to focus on improving its infrastructure and services, such as power, water supply and telecommunication, as other investment friendly states like Gujarat and Maharashtra have done. If the reform process continues, Orissa has much to be hopeful about in the future.

A story by Une J. Lee, Pooja Churamani, Alexandra Humme - World Bank Institute (WBI)

For more information:
Investment Climate Capacity Enhancement Program