Governance and Business Environment in Developing Countries

DOI: 10.24312/ucpmr030101

Abstract

Policymakers and governments in developing countries always try to facilitate business firms by creating a friendly business environment. However, the existence of a gap between policy intentions and actual outcomes implies a lack of understanding of some crucial determinants of good business governance. In this context, the main objective of this paper is to estimate the impact of government performance measures on the business environment in the case of three South Asian countries, Pakistan, India and Bangladesh. Using World Enterprise Survey data, the paper uses econometric approach to measure the influence of e-governance on tax administration issues that private firms face. Arguably, tax administration is the most important aspect linking the government to private business firms and is a crucial determinant of the business trust on government policies. Findings indicate a significant positive impact of E governance index on tax administration. It shows that higher levels of e-governance increase the probability of poor tax administrative outcome from firms’ perspectives. This is because the firms do not have much understanding about the world-wide web and this is what can be termed as the second digital divide.