FeaturedNationalVolume 14 Issue # 08

Pakistan’s improved ranking in ease of doing business index

According to the World Bank’s Doing Business indicators in 2018, Pakistan improved 11 ranks in the index. By contrast, India’s rank moved 23 spaces up. The three key areas in which Pakistan improved in 2018 are “starting a business”, “registering property”, and “resolving insolvency”. In “starting a business”, Pakistan enhanced “the online one-stop registration system, replacing several forms for incorporation with a single application and establishing information exchange between the registry and the tax authority. This change applies to both Karachi and Lahore.” Karachi is given the weight of 65 percent; Lahore the rest.

 

In “registering property”, Lahore made registering property easier by streamlining and automating administrative procedures, and by increasing the transparency of its land administration system, whereas Karachi made registering property easier by increasing the transparency of the land registry. In the case of “resolving insolvency”, Pakistan introduced “the reorganization procedure and improving the continuation of the debtor’s business during insolvency proceedings. This change applies to both Karachi and Lahore.”

 

Another area in which Pakistan improved was “trading across borders”, mostly due to lower cost of trade in terms of border and documentary compliance. These are a result of new container terminal and improvements in Weboc, the customs platform for electronic document submission, implemented in the years before. The kind of information ministry it has, anything is possible. At a press conference, PM Advisor Razzak Dawood acknowledged that Pakistan’s ranking improved because of the reforms rolled out by the previous government. Dawood added said that PTI-led government is working to bring Pakistan’s ranking at below 100. He didn’t specifically set a target. But he did say something rather strange.

 

Doing Business rankings are based on 10 key indicators. Of this the reforms need to move up under “enforcing contracts” indicator lies mainly (up 70% items tracked by WB) in the domain of high courts, and the rest with provincial governments. Of the remaining nine indicators, save for “registering property” and “dealing with construction permits” that lie in the provincial domain, the rest lie in the domain of the federal government. Clearly, the provinces do not have a monopoly on poor performance.

 

Under the “getting electricity” indicator, the World Bank does not even measure Pakistan on the “reliability of supply and transparency of tariff index” because Pakistan’s average duration of power interruption is beyond measures of calculation and, of course, beyond Nepra’s maximum allowed limits. The result is poor ranking in “getting electricity” as is the case with many other indicators. Going forward, the federal and provincial government need to focus more on the ease of doing business scores.

 

These scores previously called Distance to Frontier (DTF) scores, captures the gap of each economy from the best regulatory performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s DTF score is reflected on a scale from 0 to 100, where 0 represents the lowest and 100 represents the best performance. While Pakistan is still ranked 130 on “starting a business”, in terms of DTF scores, it is still up there with a score of about 82. Instead, it needs to focus more on indicators where it scores less than 60. That’s where the gains lie; and much of those are Islamabad’s responsibility.

 

It is interesting to note here that at a recent press conference, PM Advisor Razzak Dawood said that Pakistan’s ranking improved because of the reforms rolled out by the previous government. Dawood added said that PTI-led government is working to bring Pakistan’s ranking at below 100. He didn’t specifically set a target. But he pointed out that Pakistan’s ranking in Doing Business index came down after the 18th amendment. By this he was  implying that the 18th amendment caused the fall in doing business rankings. This strengthens the demand made by some quarters to revisit the 18th amendment with a view to removing the anomalies that stand in the way of accelerated economic growth.

 

In any case, the federal and provincial governments need to focus more on the ease of doing business scores so that the country performs better in next year’s index. In this regard it will be a good idea if the Federal Board of Investment collaborates with provincial BOIs and task the World Bank to research provincial level Ease of Doing Business for the year FY19. Following the 18th amendment, many vital sectors of the economy were devolved to the provinces and it is at this level we need to work more to make it easier for businessmen and investors to run their enterprises without unnecessary impediments.

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