Cumbersome and often conflicting government rules, excessive regulations, multiplicity of taxes, rampant corruption and bureaucratic red-tape are only a few factors that make it difficult for an entrepreneur to start and operate a business in Pakistan.

Little wonder that Pakistan has consistently performed poorly since the World Bank began to rank nations on its Doing Business index in 2003. In fact, the country’s position on the list of nations being ranked by the bank has been deteriorating as it dropped to 138th place out of 189 countries ranked in 2016 from 105th in 2012 and 85th in 2009.

The drop in rank on the Doing Business list doesn’t necessarily mean that it has become more difficult to start or run a business in the country in these year. Pakistan has improved its distance to frontier (DTF) score from 51.62 to 51.69, but slid in the list.

It reflects a lack of interest — or incompetence- of the country’s economic policymakers who have not done enough to ‘pull down the barriers’ to starting and operating businesses

But it definitely reflects on a lack of interest — or incompetence- of the country’s economic policymakers who have not done enough to ‘pull down the barriers’ to starting and operating businesses.

It also indicates that others are working harder and faster to mitigate the hardships facing the investors and entrepreneurs in doing business to create jobs and alleviate poverty, and, by doing so, are pushing Pakistan and other such economies further down the list.

“Ease of doing business is related mainly to rules, regulations and procedures, and time taken to complete the procedures and comply the rules and regulations,” Almas Hyder, senior vice president of the Lahore Chamber of Commerce and Industry, told Dawn last week.

“While the business community in Pakistan is a victim of legacy regulations, and manual and inefficient working of the government, the countries around the world are facilitating their business communities by making simple regulations and online portals to reduce time and avoid duplication of information,” he said.

The Doing Business index ranks countries on the basis of the DTF (distance to frontier) score which is a composite measure of a country’s progress along a series of indicators including starting a business, dealing with construction permit, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.

Another businessman who is also former LCCI president Ijaz A Mumtaz pointed out that the World Bank rankings showed “performers with good rules that allow efficient and transparent functioning of businesses and markets without compromising over public interest.”

It takes around 19 days to incorporate a company, and register and obtain relevant tax and social security numbers compared to New Zealand where the users have to give one-time information on a portal on the website of Companies Office to obtain the relevant tax and social security numbers, a report prepared by the LCCI on doing business says.

A business establishment in Pakistan has to give almost same or similar information separately on the portals of Security and Exchange Commission of Pakistan for company incorporation, Federal Board of Revenue (FBR) for tax registrations and Employees Old-Age Benefits Institution (EOBI) for social security.

“This results in duplication of information, wastage of precious time and decline in doing business ranking. If properly managed, all registrations can be done in parallel.

Furthermore, for the registrations with the provincial departments like Labour and PESSI, same information has to be given separately to these departments,” Almas said. He said the Punjab government had constituted a committee to help create ease of doing business on the report prepared by the LCCI. But he said the federal government departments appeared averse to any suggestion to help investors and entrepreneurs.

Pakistan’s ranking in the area of Paying Taxes stands at an appalling 171st owing to 47 times tax payments in a year (highest in the region) taking a total of 594 hours. In Hong Kong, there are three tax payments in a year taking up a total of 74 hours while in Singapore, there are six payments taking a total 83.5 hours. In India, there are 33 tax payments, which consume a total of 243 hours in the whole year. The main reason for the inflated figure of 47 tax payments in Pakistan is the high frequency of social security payments which have to be paid every month, both at the Federal (EOBI) level and Provincial (PESSI) level, the LCCI report adds.

Ijaz said the cumbersome rules and regulations encompass small to large businesses.”But small to medium businesses are affected the most because they usually do not have access to decision-makers or capital to meet the extensive requirements for starting and running a business. It is because of cumbersome procedures and regulations that enormously raise the cost of starting and operating a business in the country that the size of informal economy is growing fast,” he concluded.

Getting a 140kv electricity connection in Pakistan, for example, costs Rs1.8mn against Rs1.1mn in Korea and Rs0.12mn in India.

A country’s ranking on the World Bank’s Doing Business list reflects the quality of business climate in a particular country relative to the other economies ranked.

India is placed higher than Pakistan on the Doing Business ranking at 130. It was also lauded as the most improved economy in South Asia.

It used to take 127 days to start a business in India in 2004. This number had dropped to just 29 days in 2015.

One of the reasons for India’s improved position is the launch of an ambitious programme of regulatory reform in 2014 aimed at creating a more business-friendly environment.

“If no one is making new investments in the industry and everyone is parking their money in speculative, high return and low tax areas like real estate, and if capital is flying out of country, it means something is wrong and needs to be fixed,” concluded Almas.

Published in Dawn, Business & Finance weekly, August 1st, 2016