NationalVOLUME 15 ISSUE # 01

Reducing the cost of doing business

Pakistan’s business community is waking up to its responsibility towards the task of national economic reconstruction. Recently, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) urged the government to support businesspeople in discharging their tax liabilities, creating job opportunities and boosting exports. The FPCCI chief said that the government should look into the challenges being faced by the business community.


According to him, the FPCCI should be considered as partner of the government in utilisation of the export development fund as it is generated from export proceeds. He also demanded the government improve the ease of doing business framework and reduce the cost as the two elements are instrumental in attracting domestic and foreign investments.


It may be pointed out here that Pakistan’s global ranking in the ease of doing business index improved to 136 out of 190 countries in 2018 as against 147 in 2017. But it is still far behind its competitors in the region. India was ranked 77 in 2018, as compared to its ranking of 100 in 2017. Bangladesh, Sri Lanka and other countries in the region are also ahead of Pakistan.


Another problem facing the business community is inflation. There is a growing apprehension in the business circles that the International Monetary Fund (IMF) loan program may open the floodgate of inflationary pressure and, thus, escalate the cost of doing business. Revised utility charges are an important factor in the situation. Already, the current economic slowdown has resulted in the elimination of 0.6 million jobs from the market. The government is not unaware of the hurdles and difficulties in the way of doing business in Pakistan.


It may be added here that to facilitate the export sector, the government recently fulfilled its commitment of releasing the long stuck refunds claims to the exporters. The government has released Rs50 billion to exporters under various export enhancement schemes of textile and commerce divisions, including the prime minister’s export enhancement package, during the last fiscal year of 2018/19.


Taking notice of the concern expressed by the business leaders, the Economic Coordination Committee (ECC) of the Cabinet recently approved a summary moved by the Revenue Division for the implementation of the Authorised Economic Operator Programme to reduce operational costs for businesses and improve Pakistan’s prospects as a viable business and investment destination.


According to official sources, the World Customs Organisation’s (WCO) Authorised Economic Operator has started to work in Pakistan in phases. The program would prove of great help in developing business confidence, especially within industries in relation to imports of raw materials and machinery and exports from Pakistan. Organised and documented business enterprises will be given special and speedy clearance to accelerate their operations in the country. The new process will also take care of the usual complaints of delays and harassment by corrupt government officials.

The AEO programme, one of the pillars of the WCO’s framework of standards to secure and facilitate trade (SAFE), is widely acknowledged as a key driver for a solid customs-business partnership and secure, transparent and predictable trading environment. Many developed as well as developing countries, such as Australia, New Zealand, South Korea, China, India and Brazil, have already initiated AEO programmes, benefiting stakeholders all along the trade supply chain. Pakistan will also now be part of the international chain.


Accredited AEOs can enjoy several trade facilitation benefits, including expedited processing and release of shipments, mutual recognition of the AEO status by customs administration, financial guarantee waivers, and self-assessment. AEOs include exporters, importers, manufactures, customs agents, carriers, ports, airports, terminal operators integrated operators, warehouses and distributors.


The government of Pakistan is duty-bound by law to provide maximum trade facilitation measures related to exports, imports or transit formalities and procedures to authorised operators. Implementation of a comprehensive AEO programme will, therefore, also help Pakistan in meeting its commitment under WTO’s TFA.


Pakistan’s current rank, based on World Bank’s Ease of Doing Business score, makes it a less attractive destination for potential investors. The government has taken several initiatives to improve the trade and business environment; for example, the Customs-led National Single Window (NSW) programme, which is expected to be completed by 2022.


However, business circles are of the view that further facilitation initiatives are required to reduce the cost of doing business. A recent study by the National Confederation of Industries in Brazil indicates that the benefits accrued to certified AEO companies had enabled them to save $ 1.5 billion. Similarly, Pakistan can save billions of dollars by comprehensively implementing the AEO programme. There is a consensus of opinion among trade experts that the phased implementation of the AEO programme in Pakistan will substantially reduce operational costs for business, improving Pakistan’s prospects as viable investment destination. It will also give a big boost to Pakistan’s exports.