September 24, 2006	Sunday	Sha'aban 30, 1427

ISLAMABAD, Sept 23: Pakistan lagged behind India in South Asia in carrying out of reforms to simplify business registration, cross-border trade, easing of access to credit, payment of taxes and strengthening of investor protection during the fiscal year 2005-06.

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 2005-06, ranking the region last in the pace of reforms, according to the World Bank and the International Finance Corporation’s new report — Doing Business 2007.

According to the report, a copy of which made available to Dawn, India, the top reformer in South Asia, implemented reforms to simplify business registration, cross-border trade, and payment of taxes, as well as easing access to credit and strengthening investor protection.

Although the reforms improved India’s ranking over last year’s, it still ranks relatively low at 134 and lies 41 places after China —- which is reforming at a faster pace than India.

The top 10 reformers, in order, are: Georgia, Romania, Mexico, China, Peru, France, Croatia, Guatemala, Ghana, and Tanzania.

The top ranked countries in the region are: the Maldives (53), Pakistan (74), Bangladesh (88), Sri Lanka (89), Nepal (100), and India (134). Bhutan (138) and Afghanistan (162) are ranked lowest in the region.

Pakistan was the leading reformer in the fiscal year 2004-05 in South Asia, with a ranking of 66 among 175 economies of the world. However, its ranking deteriorates and lays eight places after Peru, which is one of the leading reformers. The only justification for this might be that some more economies were also included in the report, which might have some impact on the ranking of the country.

The report says India cut the time to start a business from 71 to 25 days and reduced the corporate income tax rate from 36.59 per cent 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 to modernise customs reduced time to import from 39 to 19 days and time to export from 33 to 24 days. Corporate tax rates fell from 39 per cent in 2004 to 37 per cent in 2005 and 35 per cent in 2006. Bangladesh also reformed, introducing a new land registration act to improve security and reduce corruption in land transactions.The report finds that the South Asian region ranks behind all others on the pace of reforms, with only a quarter of countries making at least one reform that improved the doing business indicators. And two — Sri Lanka and the Maldives -— made doing business more difficult. Sri Lanka reintroduced stamp duty and levied a new tax on profits. The Maldives now requires a mandatory two-month notice period before workers can be dismissed, a move that may especially discourage small business and the hiring of poor, low-skilled, and young workers.

The report finds that the greatest remaining obstacles in the region are slow courts and rigid labour laws. For example, in Bangladesh, enforcing a simple commercial contract through the courts takes 50 procedures and 1,442 days. In Sri Lanka, an employer must pay 178 weeks in severance to dismiss a redundant worker. The less flexible the labour regulations, the more business hires informally, paying lower wages and avoiding benefits.

Doing Business 2007 also ranks 175 economies on the ease of doing business -— covering 20 more economies than last year’s report. These rankings highlight significant obstacles to business in South Asia, compared to countries around the world.

The top 30 economies in the world are, in order: Singapore, New Zealand, the United States, Canada, Hong Kong (China), the United Kingdom, Denmark, Australia, Norway, Ireland, Japan, Iceland, Sweden, Finland, Switzerland, Lithuania, Estonia, Thailand, Puerto Rico, Belgium, Germany, the Netherlands, Korea, Latvia, Malaysia, Israel, St. Lucia, Chile, South Africa, and Austria.