Sept. 27 (Bloomberg) -- There's no reason why India and Pakistan should restrict their rivalry to Kashmir and cricket.

The feuding south Asian neighbors now have the ammunition to start a brand-new fight about whose bureaucracy is more business- friendly. Helping them in this endeavor is an objective assessment of red tape released this month by the World Bank.

The Washington-based lender and its private investment arm, the International Finance Corp., have for the first time ranked 155 economies globally according to the ease with which investors can do business in those countries.

The findings are available at http://www.doingbusiness.org.

Pakistani Prime Minister Shaukat Aziz should make use of this non-partisan research to highlight to investors -- with some relish -- the following facts:

-- Only 10 official signatures or stamps are required to export cargo out of Pakistan, compared with 22 in India.

-- Buying a plot of land in India with a warehouse on it means shelling out 9 percent of the value of the property in stamp duties, legal fees and other charges; In Pakistan, investors can get their titles registered for a third the cost.

-- It takes 10 years to close down an unprofitable business in India. That's triple the time bankruptcy procedures take in Aziz's country.

Bureaucratic Excesses

Pakistan ranks 60th globally, according to the World Bank's index for ease of doing business. At 116, India is behind Iraq and Indonesia. Even China fares worse than Pakistan at 91.

There's no denying the fact that the size of the market matters, as does availability of scientific and managerial talent. India trumps Pakistan by those measures, which weren't covered in the study.

That doesn't mean India is immune to bureaucratic excesses just because 700,000 software engineers in the billion-people nation are riding the global demand for outsourced services.

``Red tape,'' the World Bank says, ``is estimated to cost more than 10 percent of the value of exports in developing countries.'' Inefficient customs procedures force businesses to hold large inventories, adding 4 percent to 6 percent to production costs, the study estimates.

Both India and Pakistan inherited the same traditions of civil service and rule of law from their erstwhile British colonial overseers.

So why should the smaller nation (population: 159 million) be able to resolve a contract dispute in 7 percent less time than its larger neighbor?

Claimants

Why is it that claimants on a bankrupt Indian company -- creditors, tax authorities and employees -- get back 13 cents on the dollar compared with 44 cents in Pakistan?

An editorial in the Times of India rejected the World Bank report's finding that the bureaucracy in Pakistan -- or China -- may be more business-friendly than in India.

``Non-democratic states are by definition adhocracies run not on principles of social equity and respect for law but on the whims of the ruling elite,'' the Indian newspaper said.

``The very fact that democratic India has codified norms for doing business is a guarantee for fair trade practice which can't arbitrarily be short-circuited by all-powerful vested interests,'' the editorial said.

At best, it's a spurious argument. At worst, it's an excuse for doing nothing.

Top 10

If there were a conflict between democracy and rule of law on the one side and ease of doing business on the other, New Zealand, the U.S., Canada, Norway, Australia, Denmark and the U.K. wouldn't figure among the 10 most business-friendly economies.

Seven out of 20 countries that are ranked as most tolerant of political and civil freedoms by Washington-based independent researcher Freedom House also are among the top 20 on the ``doing business'' list.

India doesn't need to be ruled by a military dictator like Pakistan's President Pervez Musharraf for its bureaucracy to become more accommodating for business.

It doesn't take a leader in army fatigues to slash the number of procedures required to register a new business. The same goes for reducing customs paperwork.

Rather than hiding behind tired excuses, India would do well to acknowledge the challenge posed by Pakistan's progress.

Pakistan, meanwhile, should focus on areas where it's clearly behind India. One such concern is taxation.

The government in Islamabad claims 57 percent of a midsized company's gross profit in taxes, compared with 43 percent in India.

Adding a business dimension to their rivalry may not do anything to solve the 58-year-old territorial dispute between India and Pakistan over the Himalayan territory of Kashmir.

It will have other benefits. If the two countries earnestly compete against each other to get rid of bureaucratic red tape, both their economies will gain new investments and add jobs.

And that will be good news for Indian cricketers. The way they're playing, they may need new jobs pretty soon.

To contact the writer of this column: Andy Mukherjee in Singapore amukherjee@bloomberg.net.

Last Updated: September 26, 2005 21:54 EDT