September 18, 2006	Monday	Sha'aban 24, 1427

THE government has failed to reduce the cost of doing business. It is unable to provide inexpensive and timely infrastructure facilities such as land, electricity, gas etc to the local and foreign investors.

According to some informal official estimates, foreign direct investment (FDI) could double within one year if various hurdles facing business are removed.

Officials quote the new report of World Bank/International Finance Commission (IFC) which says, “doing business became easier in India and Pakistan in 2005-06”, adding that five reforms in India and two in Pakistan reduced the time, cost, and hassle for businesses to comply with legal and administrative requirements.

No other South Asian economy improved its business regulations in 2005-2006, ranking the region last in the pace of reforms.

As a leading reformer in South Asia, India has taken over the top spot in last year’s report. India cut the time to start a business from 71 to 25 days and reduced the corporate income tax rate from 36.59 to 33.66 per cent. A Supreme Court decision made enforcing collateral simpler, easing access to credit.

New risk management procedures in customs lowered import time by two days and exports by nine days. And reforms to stock exchange rules toughened investor protections. Pakistan was the runner-up reformer in South Asia this year.

Officials recognise that the government urgently needs to simplify business registration, cross-border trade, and payment of taxes, as well as easing access to credit and strengthening investor protection, without Which, no meaningful investment could take place.

The World Bank/IFC research report on Pakistan was conducted by Dr Zafar Moeen Nasir, senior economist at the Pakistan Institute of Development Economist (PIDE). He believes the situation has slightly improved as far as the cost of doing business is concerned.

“The problem is that we have too many laws, our bureaucracy is non-cooperative and our tariffs, especially those relating to customs, are still high compared to other countries. Then we do not have proper infrastructure which is particularly in bad shape in transport sector. All these things have become a big hurdle in the way of the investors”, he said.

He also said that while power rates were still high, the frequent electricity breakdown was further causing problems to the industrialists. He quoted an example of an investor from Libya who recently came to Pakistan and despite making all efforts, could not get the required support to set up his business from the Board of Investment (BoI).

“Later, he came to us and we helped him to some extent”, Zafar Moeen said adding that BoI needed to be turned into a vibrant organisation in a bid to providing all possible facilities to the investors.

Like Dubai and China, Pakistan should provide instant infrastructure facilities to investors under one roof if real local and foreign investment was to be attracted, he said.

A former senior official of the Planning Commission and former head of PIDE, Dr A. R. Kamal said that World Bank/IFC report has shown some improvement as far doing business in Pakistan was concerned. According to the report, he said, Pakistan was on 74 position in terms of providing infrastructure facilities to the investors which meant that, “we are still far behind and need to do some thing concrete to remove various hurdles being faced by the investors”.

He said an investor faces lot of problems in getting electricity, gas and water connections for establishing a factory. Moreover, the cost of the land has become so expensive that it was becoming more and more difficult to set up new industries.

Dr Kamal said, the government must undertake second generation reforms to address serious issues affecting the cost of doing business.

Officials in the local offices of donor agencies also believed that cost of doing business was still very high and was causing frustration to investors. They have proposed that so-called ‘one window operation’ should be made possible with a view to offer timely and inexpensive infrastructure facilities to the local and foreign investors.

Nevertheless, state minister for privatisation and investment and in-charge of the BoI, Omar Ghumman did not believe that the government was not doing enough to provide timely infrastructure facilities to the investors.

“Pakistan is today a choice destination for investors”, Ghumman claimed. As far as expensive electricity rates were concerned, he said, the government was trying to bring them down for the investors.

He said, a Russian company has decided to invest heavily in producing 10,000 MW of electricity during the next four year. Then he said that GE would invest $150 million to generate 750 MW of electricity. Further an American company - Lorma - was in the process of establishing its power plant.

“So this is a wrong perception that BoI is doing nothing to help the investors”. He said there was a firm commitment on the part of President Gen Pervez Musharraf to facilitate foreign investors, about which, he again talked in Brussels the other day.