72930 MAY 2012 ABOUT THE AUTHORS A New, Improved Office of Company Registrar in Nepal ASHISH RAUNIAR is a Consultant on regulatory reform with a focus on business regulation and hydropower. Prior to joining IFC, he worked Emerging from political conflict that has affected all walks of life for over two with UNDP (United Nations Development Programme) on livelihoods promotion decades, Nepal is now poised for economic growth through reforms. Since 2010, the related to setting up micro hydropower stations. Before that, Ashish’s diverse experience included television broadcasting, Nepal Investment Climate Reform Program (NICRP) has worked with the government IT-enabled services, agriculture, and community-level work promoting of Nepal to improve the economic outlook of the country by undertaking a number sustainable livelihood through productive end-use of hydropower electricity. of investment climate reforms. Nepal is currently ranked at 125 out of 142 countries NUMA MAGALHAES is Senior Information Officer, International in The Global Competitiveness Index 2012 report; the Doing Business Report 2012 Trade and Investment. He has worked for the World Bank on public and private sector projects for over 20 years, providing ranks Nepal at 107 out of 183 economies. These indices show that Nepal has a long technical assistance and advice on a variety of World Bank and IFC projects and way to go to attract and support private investments in today’s highly competitive participating in projects in Colombia, Nepal, Mozambique, Rwanda, Liberia, Sierra Leone, Kazakhstan, Kenya, Yemen, St. Lucia, and global village. In recognition of this and in an effort to improve service delivery for the Philippines. Numa has managed the development of several World Bank internal the private sector and enhance economic growth for jobs creation, the government and external systems in such areas as external communications, political risk insurance, investment promotion, is now working closely with IFC. The NICRP’s overall effort to improve Nepal’s knowledge management, document management, and electronic messaging. investment climate started by helping the government improve its “Starting a TANEEM AHAD Business� indicator, which is currently at 100. This SmartLesson describes IFC’s is a Project Manager and Associate Operations Officer for the Nepal Investment Climate Program, based in Kathmandu. He approach to the often uphill task of upgrading the Office of Company Registrar also manages the Regulatory Reform project, which covers business regulation, business taxation, and private participation in (OCR) in Nepal. infrastructure, with a focus on hydropower. Prior to Nepal, Taneem was based in Dhaka, where he managed specific BICF (Bangladesh Investment Climate Fund) projects on regulatory reform, land administration, and Background competition policy. DOBROMIR CHRISTOW In May 2011, the NICRP Regulatory Reform manual (paper-based) processes, requiring is with the Business Regulation team of the World Bank Group, based in Washington, (RR) team completed a comprehensive study manual intervention at each step. Although D.C., providing support and supervision to business regulation reforms around the to map the process of company registration. the OCR claimed that the registration process world. He has operational experience from The report identified clear opportunities and was efficient in its current state, it was evident all six WBG regions. His previous work includes the law firm of White & Case LLP, scope to streamline the business registration that an electronic workflow would raise the International Law Institute, and the Ministry of Economy of Bulgaria, where process by reducing the number of steps from process efficiency, reduce time and cost for the Dobromir worked on regulatory reforms, infrastructure, and public-private 15 to fewer than 10, which would enhance the business community, and, most importantly, partnerships; supervised 42 insolvent companies; and was on the team that helped ease of doing business, make it easy for improve accountability and transparency. The draft investment laws and regulations and led the negotiations of the Bilateral informal firms to formalize, and potentially Global Product team and the NICRP-RR team Investment Treaties of Bulgaria. improve the country’s overall performance for put their heads together to come up with a the indicator.1 (See Figure 1.) feasible plan and a viable set of reform APPROVING MANAGER Paramita Dasgupta, Regional Business Line recommendations to remove the bottlenecks Leader, Investment Climate, IFC South Asia. For the recommendations for reforms to be and align the process with international good realized quickly, it was critical that the process practices. not entail any legal amendments that could result in delays.2 After careful evaluation, the Challenges: NICRP-RR team and IFC’s Global Product team determined that process reengineering was the • Resistance to change. Resistance to any best route to achieve the desired objective of change is a prominent characteristic of streamlining business registration at the OCR. South Asia. And, the reform that would simplify the registration process called for The study indicated that the business-registration radical change. For example, the process was a combination of electronic and recommendations proposed an automated system to facilitate an 1 An offline simulation of reducing the steps for registering a com- pany from the current 15 to 6 showed a subsequent improvement electronic workflow combined with in the DB “Starting a Business� indicator by 19 positions. significant process reengineering through 2 Nepal has a constituent assembly in the parliament whose primary concern the past three years has been to draft a new change management and overhauling of constitution. Under the current circumstances, even the slightest the current manual practices. legal amendment can take a year or more. SMARTLESSONS — MAY 2012 1 Figure 1: Registration Process Steps • Skepticism. As expected, the reform was received with sufficient to ensure continuity of OCR administration and skepticism, criticism, and, during some discussions, operation. This inadequate support often, if not always, outright rejection—because of perceived misgivings resulted in low morale and a lack of motivation to take any about a weakening of security that the proposed initiative to improve the situation. In fact, many officials systems might cause. The only glimmer of hope was saw working at OCR as an interim step or a convenient that the company registrar and his IT team agreed to transition to move to better government departments. look into the possibility of adopting those changes. Strategy for Success: • Lack of support for the OCR. Although the OCR has registered over 90,000 companies, averaging 10,000 The NICRP-RR team took a multipronged approach toward companies registered each year during the ten-year addressing the issues these challenges raised: period when political instability and conflict was at its peak, it lacked an appropriate image and was not • F acilities-related issues—In an effort to boost the adequately recognized as a key organization for the morale of the OCR officials and help them recognize business community. As a result, its facilities were far that they were part of an important organization, the below the standards required. Furthermore, people at NICRP-RR team, as a first step, proposed replacing the the OCR felt that the government was not much old facilities with a modern building to house the new interested in improving the situation. For example, the registration system. The proposal immediately met budget the government provided for fuel to run the with skepticism. But, a joint effort between IFC, the OCR generator in case of power cuts was barely World Bank, and the Company Registrar helped convince the government to allocate $447,000—within a month!3 This surprising big win served to greatly boost the morale of the OCR officials. Suddenly, what seemed impossible was becoming realizable! • Human and cultural issues— It is not uncommon in South Asia for officials to be reluctant to change and reform so that the status quo could continue, resulting in lack of motivation to move forward. The team had to be sensitive to these issues. • Bureaucratic issues—Garnering support for the reforms process from the higher-ups in the government came about through a series of formal and informal interactions. Besides resulting in the allocation for building a new facility, the effort also helped convince the bureaucrats of the importance of having an Construction begins on the new OCR building. (Photo by Ashish Rauniar). 3 The World Bank country team extended its help by introducing the RR team and key decision makers within the Ministry of Finance. 2 SMARTLESSONS — MAY 2012 effective, adequately staffed OCR with a motivated Information Technology Center in Kathmandu and team working there. This support from the government backed up at the OCR. Once the system becomes has helped motivate the OCR staff to participate in operational, the OCR is expected to realize potentially ensuring the success of the reforms process initiated by huge image gains and be seen as an organization the project. capable of providing high-level service to the business community—an image made possible only through • apacity building and peer-to-peer learning—Another C reforms, process streamlining, and infrastructure important issue coming out of the informal interactions modernization. was the desire of the OCR team to visit modern, successful registration systems and see them in operation. The OCR team felt awkward bringing this issue up in formal meetings but found it natural to do so during informal interactions. Consequently, OCR team members had two peer-to-peer learning opportunities during the Corporate Registers Forum (CRF) at Singapore and at New Delhi. This also helped the OCR people connect with over 40 CRF member jurisdictions from around the world. Both exposures helped tremendously in showing OCR why reforms are necessary. • mage building of OCR—As a first step in boosting I OCR’s image across government departments and in the business community, the team proposed that the new OCR system be interoperable with the newly announced National e-Governance Portal, to bring greater visibility to OCR’s modern online system. A further step enhanced OCR’s website by adding Internet-enabled transactional features such as forms Registrar makes a presentation during the 2012 Corporate downloading, online application submission, company Registers Forum in New Delhi. (Photo by Ashish Rauniar) name search and reservation, online updating of company records, submission of comments, and so on. An important milestone was achieved when the OCR The proposed new system is designed to implement the and the Inland Revenue Department (IRD) were recommended reforms jointly with the IT team at OCR, convinced—through the collaborative efforts of the which now owns it. As a bonus, the IT team added new USAID (United States Agency for International features to the system, such as providing online authorized Development) NEAT (Nepal Economic, Agriculture, and access to a host of useful information for potential Trade Activity) project and the NICRP-RR team—to entrepreneurs, investors, and government officials. agree to share information. This was another big gain for the business community, because this agreement The system features technology that facilitates the addition spared them the burden and costs of resubmitting the of remotely located Registry Offices to the new system same set of company-related documents to IRD for through the Internet. As a result, companies can register obtaining a PAN (Permanent Account Number). directly from remote locations using the new system, significantly easing the burden on new entrepreneurs from • V endor selection—An important element in ensuring different parts of the country who no longer will have to success of the project was finding the right vendor, one come to Kathmandu to register their companies. This is with experience and expertise as well as an appreciation expected to boost company registrations in suburban and for the relationship between OCR and IFC. A well- rural areas, resulting in positive impacts of job creation and crafted request for proposal and effective procurement economic growth. selection were fundamental to the project’s success. The Cost Compliance Savings (CCS) from Kathmandu Evolution: operations is estimated to be approximately $1 million, which is significant given the small number of companies • All of these developments helped OCR agree to and registered in the past 10 years because of the political sign-off on a comprehensive Business Process conflict.4 The CCS is expected to go up as the ease and Reengineering Plan in January 2012. To achieve that efficiency of the new system will encourage more companies result, the IT team at OCR, the local contractor, the to register at the OCR. Increased registration will also be Global Product team, and the NICRP-RR team came helped by the new positive image of OCR as a provider of an together to design an electronic workflow to suit the efficient, transparent, business-friendly registration system. present and future needs of the OCR. (See Figure 2.) The system incorporates features that ensure nearly 100 percent business continuity, redundancy, and data 4 The OCR has registered over 90,000 companies, averaging 10% growth trend with about 10,000 companies registered each year during the past ten-year period when recovery in the event of a system fault or natural political instability and conflict was at its peak. The project aims to achieve 20% an- disaster. The system will be housed at the National nual growth in registrations, a 10% increase of over the average past 10-year growth trend. SMARTLESSONS — MAY 2012 3 the project, and OCR was apprehensive that the NICRP-RR Figure 2: New OCR Workflow Schematic team would be averse to supporting this request, given the high cost of the effort. The IFC team analyzed the cost and benefit of the request and, given the long-term positive impact of starting a business, finally accepted it, leading to stronger cooperation and support from OCR. Lesson 3: It is imperative to garner support for reform at all levels and at the same time motivate certain sections or officials of the organizations that hold the keys to the success of the project, and then encourage those sections or officials to advocate for the benefits of the system. Higher-level officials may not necessarily be the champions of the project. Often, it could be the lower-level staff who—if convinced that the reforms will help improve the quality of the work and their working environment, raise their efficiencies, and give them more power within the organization to achieve their organization’s goals and image—help get quicker buy-in from the top-level management and thereby ensure success of the project. For example, the RR team encouraged the IT team at the OCR to participate in designing and owning the new automated electronic workflow that incorporated the recommended reduction of steps in the registration process. So, it was easy for the IT team to see the immediate and long-term benefits and then convince the Company Registrar and the OCR management that the reform was feasible. Lesson 4: Supplement formal meetings with informal interactions. Formal meetings are necessary, of course, but informal interactions will provide important insights into the process as well as a better understanding of the organizational and personal needs and expectations from Lessons Learned the project. Informal two-way communication also can uncover and clear up misunderstandings and can help Lesson 1: What is said is not necessarily what is meant. create effective strategic cooperation. For example, the IFC team invited OCR officials for informal dinners to Many Government officials—in Nepal, at least—sometimes celebrate important milestones such as project kickoff and interact in ways that suggest there are issues underneath signing of agreements. The open exchanges—of opinions, that are influencing the discussion. Informal interactions expectations, and needs—that occurred in these unofficial go a long way toward helping us understand those settings made it much easier to tackle tough issues later undercurrents and identify key issues that will motivate on, and to expedite decisions that helped move the project government officials to embrace difficult but positive forward. change. To form efficient and successful strategies, it is important to be alert to these issues and to delve into and Lesson 5: Often, utterances or actions expressing explore them. skepticism or resistance to change may be an attempt by officials to test the project’s credibility and depth— Lesson 2: Resistance to change is to be expected, but and the extent to which the team is willing to cooperate you can address it effectively by understanding and with them. being responsive to client needs. With the OCR, the NICRP-RR team found that—after a Don’t be surprised or discouraged when you run into certain level of trust and confidence had been built resistance to your recommendations. The way forward is through constant interactions—the very people who had to keep working toward win-win solutions. During project seemed to be obstacles turned out to be reliable partners! inception, the OCR project team wanted to have all 93,000 In the initial phase, for example, some officials were old company records digitized and incorporated into the skeptical about the success of the project, based on their new system—an action OCR could not afford. The past experience with another donor-supported project digitization of records was not within the original scope of that had failed. The IFC team did a thorough analysis of 4 SMARTLESSONS — MAY 2012 the earlier project, learned why it failed, and assured the skeptical group that those issues were well-addressed in the current project. This action convinced the critics, who then readily extended their support and cooperation. Lesson 6: A positive attitude is contagious and can produce more results in a short time. It helps to have committed players—including government officials and vendors as well as a positive, open-minded IFC team—who are willing to think creatively and consider fresh ideas, and are excited about the project’s potential. Also, drawing from experiences with business entry reforms in Bangladesh enabled the IFC team to promote peer-to- peer learning within the region through knowledge sharing. Conclusion Working with the OCR helped the NICRP-RR team gain in-depth experience and lessons in how to deal with an organization that is extremely averse to change. The obstacles, which at times seemed insurmountable, were overcome. With the deployment of the new system, scheduled to be completed in October 2012, OCR is now on its way to becoming an important organization, and it deserves credit for ensuring nearly 100 percent business continuity through its world-class business- registration system. Morale and motivation at the OCR are high, in spite of frequent staff changes at the top, middle, and lower levels.5 And, most encouraging, the IT officer during the last meeting announced that he had started working on a guideline for the business community, outlining the e-services that OCR can provide—and the guideline will then be issued as a directive. How’s that for a proactive OCR! DISCLAIMER SmartLessons is an awards program to share lessons learned in development-oriented advisory services and investment operations. The findings, interpretations, and conclusions expressed in this paper are those of the author(s) and do not necessarily reflect the views of IFC or its partner organizations, the Executive Directors of The World Bank or the governments they represent. IFC does not assume any responsibility for the completeness or accuracy of the information contained in this document. Please see the terms and conditions at www.ifc.org/ smartlessons or contact the 5 Since the start of the project, two company registrars have come program at smartlessons@ifc.org. and gone, and transfers at the middle level also are frequent, add- ing to the challenges. SMARTLESSONS — MAY 2012 5