ISLAMABAD, Sept 21: Pakistan ranks 95th among 127 countries in terms of economic freedom, mainly due to an ineffective implementation of legal system, security of Property Rights and access to sound money.
Pakistan even stands behind many under-developed and developing countries such as Madagascar, Senegal, Uganda and some African countries, says Economic Freedom of the World--2006 annul report.
The report, a copy of which was made available to Dawn, indicated that among the South Asian countries India had the highest ranking of 53 followed by Sri Lanka and Bangladesh standing at 83 and 95, respectively. The Nepal has the worst ranking of 118 in the region.
Pakistan, according to the report, has the worst ranking in legal structure and security of Property Rights (119); as against India’s rank of 44, suggesting clearly the need for independent judiciary, availability of a trusted legal framework for private businesses to challenge the legality of government actions, protection of Intellectual Property Rights and non-military interference in the rule of law and political process.
Similarly, Pakistan has the most horrible rank of 117 in access to sound money, thus proposing that to earn a high rating in this area, it must follow policies and adopt institutions that lead to low and stable rates of inflation and avoid regulations that limit the use of alternative currencies, should the citizens want to use them.
Despite opening up the international trade unilaterally, Pakistan still has a long way to go as indicated by its rank of 106 under the freedom to trade internationally. This showed that Pakistan’s trade faced a wide variety of restraints like high tariffs, quotas, hidden administrative restraints, exchange rates and capital controls.
The report suggested that for achieving a higher rating in this area, a country must have low tariffs, a trade sector larger than expected, efficient administration of customs, a freely convertible currency and few controls on the movement of capital.
Pakistan has a better rank in credit market regulation (61), labour market regulations (10), among the South Asian countries. However, the report recommended for an effective private banking system to allocate credit to private parties and to refrain from controlling interest rates to receive higher rating for this component of the regulatory area.
Moreover, Pakistan should allow market forces to determine wages and establish the conditions for dismissal of workers, avoid excessive unemployment benefits — that undermine work incentives — and refrain from the use of conscription.
However, in terms of business regulations, Pakistan ranks 88. This showed high restraints and bureaucratic procedures that retard entry into business, which lead to high cost of doing business.
The report recommends that countries like Pakistan must allow markets to determine prices and refrain from regulatory activities that retard entry into business and increase the cost of manufacturing products. They also must refrain from playing favourites, that is, from using their power to extract financial payments and reward some businesses at the expense of others.
According to the report, Hong Kong and Singapore occupy the top two positions. The other nations in the top 10 countries are: New Zealand, Switzerland, United States, Ireland, United Kingdom, Canada, and Luxembourg.
