ISLAMABAD, March 1: Pakistan has a high-cost operating environment for business, which depresses investment, employment and production, says the World Bank.

In it latest “Pakistan Country Update”, the WB said that the high cost of doing business was most depressing for small and medium industries, as the special privileges claimed by large business often insulate them from the general environment.

The past poor governance and inefficiencies of public providers (mainly Wapda, KESC, PIA, Pakistan Railways, Pakistan Steel), resulted in their cost of services being very high. in addition, they have been a major drain on the budget.

During FY 99-03, close to Rs200 billion of taxpayers hard earned money has been routed to these institutions to keep them afloat. Major reforms are now under way in these public corporations although there is still a long way to go and lasting improvement in governance will come only by privatization of these essential private sector activities.

The privatization of all the major nationalized commercial banks, the WB said, is either completed (MCB, UBL) or close to complete (HBL and the re-sale of ABL). Privatization of other major state-owned enterprises is on the cards (PTCL, PSO, OGDC).

The “business inspector” (for scores of outdated or needlessly cumbersome regulations on the rule books) at both the federal and even more at the provincial level extract extra payments and or cause distraction and delay in the conduct of business.

The bank believed that Pakistan needs to have an aggressive deregulation process, to remove the “hassle factor” of doing business that comes from the mock enforcement of un-needed rules and regulations. They plague the efforts of particularly small businessmen trying to earn a livelihood by employing others and producing what Pakistan consumers and businesses want. The improvements in governance of public entities, the improved creditworthiness, reduced tariff, the competitiveness and now stability of the exchange rate, the fall in the interest rates and the expectations of the continuation of the improvement in the business climate has begun to show up increased foreign investment, particularly in the textile and the oil and gas sectors. “Increased domestic investment has to follow if the growth in income and employment is to flourish,” the Bank said.