AT a time when the country is wooing investors and trying to lure foreign companies in its privatisation process, the issue of high cost of doing a business in Pakistan has come to the fore.

Along with foreign, domestic investors too, are raising the issue as their products face greater competition in a WTO-led world, particularly in textiles - our principle exports.

And this issue has been brought into sharper focus by the World Bank’s annual s survey on the `cost of doing business in 175 countries around the world’. The revision in it’s indicators from year to year causes considerable interest among member-countries and investor-nations.

The Cost of Doing Business Indicators 2007 have been taken seriously and summarised in the annual report of the State bank of Pakistan for 2005-06, released last week.

It is a fact that there had been a significant fall in the status of Pakistan in the 2006 Indicators - when it was ranked 74 out of 175 countries as compared to 66 in 2005. However, it is not the outcome of any degradation in the facilities for investors but the result of the addition of 30 more countries to the index. Some have a far better investment environment than Pakistan; anyway the country has come down by eight points.

But the cost of doing business in Pakistan is far better than in India whose status in the Indicators is 134, while that of China 93, Bangladesh 88 and Srilanka 89.

The State Bank’s annual report underscores the need or rather urgency to improve the areas identified by the World Bank to attract more foreign and domestic investment.

The four major weaknesses identified by the World Bank are: inordinately long time to close a business, long time to register a property, time to start a new business, and delay in getting the credit.

Though by international standards, Pakistan is lagging behind many countries but is better than regional states, including India which is trying to improve its facilities fast.

Weakness in enforcement of contracts is the area in which urgent steps are essential. Inordinate delay can be fatal for business. In this regard Pakistan’s position is a lamentable 163 out of 175 countries. It reflects a serious flaw in the judicial system and practices. The State Bank says the investors want to get their right honoured fairly and at a negligible cost.

The World Bank says the time required for closure of a business in Pakistan is 2.8 years compared with 3.6 years in the region with a cost of 6.3 per cent of the estate value.

Registering a property takes 50 days with the cost of 4.4 of the estate value compared to 116.6 days in the region and 5.3 per cent of the cost of property. In Bangladesh, it takes 88 days to register a property.

Taxation on the companies, says the World Bank, is heavy. A medium-sized company has to make 47 payments and pay 43.3 per cent of the real profits in taxes.

In the area of employment there is a shortage of skilled labour in Pakistan. But it is easier to fire than hire an employee. In the area of labour legislation Pakistan comes at a low 126 out of 175 states.

A mix of complex labour laws and corruption gets a raw deal for workers who get a better deal in most foreign companies as they try to avoid breaking laws.

Making the situation worse by wasting a great deal of time is the red tape. Too many rubber stamps on too many papers are needed which delays the final permission to open a company while breeding extensive corruption in the process.

Our society is raging with too many forgers and false witnesses, hence the officials have to be cautious, particularly, in respect of land transactions which usually takes long.

In regard to income tax, domestic investors complain of double taxation- one of the profits of the company and then the same profit in the hand of shareholders. But the government does not want to give up tax revenues when these are easily spotted and readily collected. The government acts on the maxim that a bird in hand is better than two in bushes. So if it is not ready to let go or reduce revenues coming from existing companies in favour of a larger income which may come from newer companies.

The cost of doing business in Pakistan is enhanced by gross infrastructural inadequacies, particularly water and power shortage. Now, long traffic jams are making the movement of goods more difficult. While wages of workers are low, their productivity too is less and output not high as of skilled workers. So, serious efforts have to be made to impart training to them, particularly in textile, leather and steel industries.

A great deal has to be done to sustain economic growth between six to eight per cent as Dr Salman Shah, Advisor to Prime Minister on Finance desires. We have to increase industrial output and make these more value-added. In business time is money and businessmen cannot afford to waste time and put up with unavoidable delays. The investors want less number of holidays and fewer unscheduled ones which disrupt production and block the movement of goods.

In the West, if a company fails and cannot be made profitable through normal means, it is disposed off and a new business is started and the money lost is regained. But here, the investors hold on to the failing companies for long and use it as a begging bowl to seek favours and concessions from the government. The government hence does not agree to quick disposal of failing companies, including the foreign.

There is a great deal to be done to reduce the cost of doing a business and reducing the hindrances in its way. If done earnestly, Pakistan will not only regain its lost position in the index but will also come up to 50 from 74 by presenting s far more attractive economy to investors, both foreign and local.