ISLAMABAD, Dec 26: The Asian Development Bank (ADB) has urged Pakistan to improve law and order situation and reduce the number of regulations and regulatory departments for ensuring better investment climate in the country.

“Law and order problems weaken property rights and hit investors’ decision to invest. These problems are clearly linked to law enforcement and criminal justice system, but results suggest that the issue is complicated by regional politics,” the Bank believed.

According to a new ADB Working Paper, prepared by Pakistan Resident Mission, the increase in crime and violence in Karachi is largely a consequence of political conflict.

The paper urged the government to further improve investment climate and promote better business practices. “There is an urgent need to reduce the number of regulations and regulatory government departments confronting business in Pakistan,” it said and added: “This will lower the burden of compliance for small and medium enterprises (SMEs) and remove the incentives for firms to remain small and grow laterally instead.”

The government was advised to rescind unnecessary laws and regulations and that the multiple state agencies with overlapping jurisdiction needed to be reduced. In critical regulatory areas, the law needed to be revised to reflect current market realities, such as the existence of contract labour and the requirements of flexible labour market operating within a globalized trade environment.

The Bank also said that international evidence on infrastructure privatization suggested that Pakistan’s current structure of power supply would produce only limited efficiency gains in the absence of strong regulator to look after public interest and active competition at generation and distribution levels.

The success of infrastructure privatization in Pakistan depended on the government’s ability to enforce its commitment to unbundling and competition. In order to maximize gains from infrastructure privatization, the government should invest sufficiently in capacity building of the National Electric Power Regulatory Authority (Nepra). In particular, it should equip Nepra with human and technology infrastructure required to regulate power sector.

Talking about accountability and judicial incentives, the Bank said: “Institutional design must alter judges’ incentives to make them more accountable and efficient. Developing country evidence suggests that monitoring judicial performance and revealing this information publicly are strongly correlated with increase judicial effort. Generating accurate statistics appears to reduce judicial delays because judges are concerned about their reputation.”

The Bank was also of the view that there was an urgent need to reduce the compliance costs of GST export refund and customs duty drawback procedures. Delays in payment to small and medium size exporters seriously undermine the competitiveness of Pakistan’s export sector. Both procedures needed to be rules-based and transparent, it said.