FeaturedNationalVOLUME 15 ISSUE # 07

Doing business made easier

After a long time we have the good news of Pakistan improving its position in an important world index. Pakistan has gained an impressive 28 places on the World Bank’s Ease of Doing Business Index and secured a place among the top 10 countries with the most improved business climate.
This is a development that will greatly improve Pakistan’s image abroad and attract foreign investment. As we all know, international investors consult the report and the Global Competitiveness Index of the World Economic Forum before taking decisions on investment plans.
The improvement in Pakistan’s ranking has resulted from the fact that Pakistan carried out six reforms that helped improve its ranking from 136 to 108. It turned out to be the sixth global reformer and first in South Asia that improved ease in doing business in the last one year. Among other regional countries, Bhutan was at 89, Nepal 94, Sri Lanka 99, Maldives 147, Afghanistan 173 and Bangladesh 168.
According to experts, the fewer the regulations, the better is the ranking on the doing business index. The secret is to cut the red tape that hinders business activities in the name of regulations and procedures.
The World Bank has set 10 benchmarks to monitor a country’s business-related regulations. These range from starting a business to getting a electricity connection, securing construction permits, paying taxes, resolving disputes and protecting minority shareholders’ rights. These are the areas that are closely examined by the global investors before they take their investment decisions. The WB report measures how close each economy is to the best global practices in business regulations.
It is significant that on the measure of absolute progress towards best practices, Pakistan has improved the score to 61 from 55, suggesting the country did some good work and built on the reforms introduced in the previous year as well .While India remained top among South Asian nations, up 14 spots to 63, Pakistan also made a mark by climbing 28 positions and securing a place among the top 10 global business climate reformers and improving 28 positions in a year.
The groundwork for bringing an improvement in the country’s ranking had been laid by officials associated with the Board of Investment, the finance ministry and other departments. The World Bank country director also played a very proactive role in making Pakistani authorities realise the importance of the global rankings and provided support in the implementation of reforms.
Accordingly, Pakistan developed an ambitious reform strategy, setting up a national secretariat as well as a prime minister’s reform steering committee to ensure progress in the matter. Pakistan’s performance report was based on surveys carried out in Lahore and Karachi, and the results are based on work done from November 2018 to May 2019. Pakistan’s position could have been even better had the authorities in the State Bank of Pakistan not blocked or delayed the issuance of the rules and regulations related to two very critical areas.
Enforcing contracts and getting credit still remain weak areas for Pakistan despite the Parliament enacting relevant laws about three years ago. To improve rating on these pillars, Pakistan needs to set up dispute resolution bodies at district levels and maintain a registry of movable assets for securing loans. Pakistan’s ranking on enforcing contracts remained unchanged at 156 and dropped on getting credit by seven spots to 119. Similarly, on protecting minority rights, its ranking slipped by 2 points to 28 and dropped on resolving insolvency by 5 spots to 58.
Pakistan made the biggest gain on the indicator of starting a business where its ranking improved by 58 spots to 72. The earlier ranking was 130. On the index of construction permits, the position improved from 116 to 112 – a gain of 54 points within a year. Karachi made obtaining a construction permit easier and faster by streamlining the approval process and also made construction safer by ensuring that building quality inspections take place regularly. Lahore also made obtaining a construction permit easier and faster by streamlining the approval process and by improving the operational efficiency of its one-stop shop for construction permits.
On the index of getting electricity, Pakistan improved its position by 44 points to 123 due to improvement in power supplies to households and businesses by Lahore and Karachi power distribution companies. The old ranking was 167. Pakistan made getting electricity easier by enforcing service delivery time frames and by launching an online portal for new applications. Pakistan also increased the transparency of electricity tariff changes.
On the index of paying taxes, the ranking improved by 12 points to 161. But it was still the poorest ranking that Pakistan obtained on any indicator. Pakistan has made paying taxes easier by introducing online payment modules for value-added tax and corporate income tax. There has also been a reduction in the corporate income tax rate.
The country gained 31 positions on the rank of trading across border where its standing improved from 142 to 111. Pakistan also made trading across borders easier by enhancing the integration of various agencies in the Web-Based One Customs (WEBOC) electronic system and coordinating joint physical inspections at the port.
Similarly, on the indicator of registering a property, the ranking was improved by 10 points to 151. Pakistan made property registration faster by making it easier to execute and register a deed at the Office of the Sub-Registrar. Despite having made gains, Pakistan still has a long way to go to improve its overall business climate.