PAKISTAN continues to adopt the ‘Doing Business’ reforms to cut time and costs associated with compliance of several government regulations that impact entrepreneurs in starting, operating and expanding their businesses. The reforms are being implemented with technical and financial support of the World Bank.
In all, the government is pursuing 44 reforms across a range of indicators and departments/agencies at federal and provincial levels, with a steering committee headed by the prime minister overseeing their implementation.
The immediate objective of the reforms is to push Pakistan’s position up on the World Bank’s Doing Business index that ranks 190 countries. This explains why the exercise is undertaken in Karachi and Lahore, the two cities where the bank surveys the investment situation for its report. Karachi’s contribution to Pakistan’s ranking on the index is 65 per cent and Lahore’s is 35pc.
Sceptics insist that other problems restraining business and economic development must also be addressed
The Doing Business report for 2018 shows that Pakistan was able to cut its distance-to-frontier (DTF) score by 0.71pc to improve it to 51.65 percentage points on a scale of 1 to 100. Its ranking on the index dropped three places to 147 from 144. DTF shows the distance of each economy from the ‘frontier’ that represents the best performance observed on each indicator across all economies on the Doing Business indicators.
The report ranks Pakistan at the sixth place in South Asia, with only Bangladesh trailing behind it.
“Doing Business (ranking) throws light on how easy or difficult it is for an entrepreneur to open and run a small to medium-sized business when complying with local laws and regulations (governing starting, operating and expanding a business),” Amjad Bashir, a senior economist at the World Bank, told a media briefing organised in Lahore earlier this month to highlight doing business reform initiatives being implemented by Punjab. “We are supporting reforms in Pakistan to benefit people doing business in the country.”
The index measures and tracks changes in laws, regulations and procedures facilitating or hampering starting, operating and expanding a business across its life cycle: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and labour market regulation.
The ones falling under provincial governments include the issuance of construction permits, registering property and enforcing contracts. Two other areas starting a business and paying taxes also partially fall under the provincial authority.
“You cannot grow economy without improving business environment for local small and medium enterprises. The world takes such global rankings seriously... how can you bring foreign investment without improving conditions for your domestic investors?” Punjab’s planning and development department secretary Iftikhar Ali Sahoo noted at a briefing, giving details reform initiatives being implemented by the province.
He said the 2018 Doing Business report recognised progress made by Pakistan around four reforms: ease of starting a business, ease in property registration, protecting minorities and facilitating cross-border trade.
The secretary said the reforms were piloted in Lahore as the government wanted to improve its ranking. “But improvement in the Doing Business index ranking isn’t the only objective. The incentive is to improve business and investment environment across the province… we plan to soon expand these reforms to the rest of the province under our wider strategy to create jobs and improve competitiveness of our industry and businesses.”
Pro-business reforms are usually considered crucial in countries like Pakistan with weak institutions and outdated laws and regulations hampering growth and expansion of private business. But the sceptics insist that other problems restraining business and economic development must also be implemented alongside these reforms.
“Indeed, the reforms to improve doing business are crucial for attracting investment and helping small and medium-size enterprises to create jobs and strengthen international competitiveness of your manufacturing industry,” businessman Shahzad Azam Khan said.
“But the government also needs to implement reforms in areas that are not part of the World Bank doing business survey if it is serious about fostering local and foreign investment. For example, what is the use of getting an electricity connection in one week or one month if you cannot afford it?
“You may have wonderful regulations and procedures in place to help the investors start businesses. But no business can survive for long with the kind of (present energy) cost it has to pay to stay afloat,” he said.
“And what about the issue of the cost of paying taxes a business has to bear? Is anyone even thinking of such impediments? Not really. Nobody has time to address the real issues that are pulling our manufacturing and exports down because we are too busy in implementing cosmetic changes for the sake of Doing Business ranking.”
Published in Dawn, The Business and Finance Weekly, February 26th, 2018