Abstract

This paper studies the foreign-owned firms’ (hereinafter, FOFs) perspectives about selected indicators of business environment in four South Asian countries - Bangladesh, India, Pakistan and Sri Lanka. For the last few decades, these countries have eagerly sought to increase the inflow of foreign capital. Using the World Bank’s Enterprise Survey 2017 data, this study identifies political instability, poor infrastructure, and pervasive corruption as the three biggest obstacles that FOFs face in their business operations in these countries. The other obstacles include inadequately educated workforce, customs and trade regulations, crime, theft and disorder, tax administration, business licensing and permits, and access to finance. This study also finds that since 2007 the business environment for FOFs has improved remarkably in Bangladesh, improved slightly in India, improved modestly in Sri Lanka, but worsened noticeably in Pakistan. This study adds to our knowledge of factors that affect the dynamics of foreign capital inflow, which should be helpful in devising strategies to attract more foreign capital to developing countries.

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