IIs Pakistan a good place to do business? It should be because it improved its ranking in the World Bank’s Ease of Doing Business (EODB) index. But will the improved ranking translate into better regulatory conditions for business people? Will it also reduce the cost of doing business for entrepreneurs? Are the on-the-ground implementations of the regulations envisaged by the World Bank, such as providing electricity connection within a specified time, effective and consistent? Can increasing regulatory fees and the cost of local inputs, including the electricity tariff, reduce the cost of production for a domestic producer? Have we been able to control factors like inflation and the value of the currency against the global currency that increase the cost of all imported inputs used by local and export industries?
The EODB index ranks 190 countries based on the ease of doing business in an economy. Classification aims to provide an objective understanding of the regulatory environment for businesses worldwide. It covers 11 areas of business regulation. Ten of these areas, including starting a business, managing building permits, obtaining electricity, registering property, obtaining credit and paying taxes, etc., are included in the ease of doing business ranking. It also measures some characteristics of labor market regulation.
Pakistan have moved up 39 places over the past two years to secure 108th place on the list. According to the State Bank of Pakistan, the prime minister had appointed a high-level steering committee to oversee reform progress in each of the 10 indicators measured under the EODB report.
The news that the World Bank decided last month to suspend its Doing Deal Report therefore caused disappointment among policy makers in Pakistan who had hoped to improve the ranking further in the next report, possibly to 75th position.
After irregularities in the data used to Make business reports for 2018 and 2020 were communicated internally in June 2020, the Bank’s management decided to cancel the next Doing Deal Report and launched the audit of previous reports. The Bank released a 16-page investigative report saying data irregularities were discovered in reports from four countries.
In January of this year, the Bank conducted investigations to examine internal circumstances that may have contributed to the data irregularities that were identified. He said in a statement that he was working on a new approach to assess the business and investment climate in countries.
The current political uncertainty does not bode well for business. This can contribute to breaking the confidence of local and foreign investors.
Nevertheless, the Pakistani government will do well to continue to focus on removing obstacles to the smooth running of businesses. Among other things, the Board of Investment (BoI) needs to focus more on regulatory reform. Last month, the BoI, together with the World Bank, launched its seventh reform action plan focusing on improving regulations on business entry, electricity reliability, tax regulations, commercial regulations, creditors’ rights and property rights.
According to the Securities and Exchange Commission of Pakistan (SECP) last year, company registration through the SECP recorded a growth of 63%. 99% of new registrations were completed online and 45% of applicants received registration certificates the day they requested them.
One of the most notable reforms is the establishment of commercial courts in Punjab. The milestone initiative aims to reduce the median dispute resolution time from 1,000 to 180 days. Digitizing land records eliminates the need for field inspection.
Investment-friendly policies are the only way to create sustainable jobs. Khyber Pakhtunkhwa has taken the lead in this regard with the establishment of the Khyber Pakhtunkhwa Economic Zones Development and Management Company (KPEZDMC) and the Khyber Pakhtunkhwa Board of Investment and Trade (KPBoIT) which help new businesses attract investment. The governments of Punjab, Sindh and Balochistan must also follow suit to make it easier for business people to make a profit for themselves while contributing to the national economy.
The Foreign Investors Chamber of Commerce and Industry (OICCI) feels that foreign investors appreciate the improved business climate in Pakistan. Presenting the results of the 2021 Perception and Investment Survey on March 8, OICCI Secretary General Ghias Khan said the case for growth and business opportunities in Pakistan was backed by more 65% of survey respondents.
According to the survey, 8 out of 10 respondents plan to invest greater or similar amounts over the next five years compared to the investments they made the previous year. Governance issues, such as delays in policy implementation, however, remain a serious concern. The same goes for the increase in the tax burden and the cost of doing business.
The 2021 Perception and Investment Survey showed an increase in confidence among OICCI members in the country’s growth potential. The TI has also highlighted some areas where government intervention is urgently needed.
An improvement has been observed in the economy of Pakistan compared to other countries in the region. On some indicators, Pakistan was rated higher than India, Thailand, Vietnam, Bangladesh, Sri Lanka and the Philippines. However, it lagged behind Indonesia, Malaysia, United Arab Emirates and China. The survey also focused on sectoral issues that the OICCI intends to raise with the actors concerned.
So, is Pakistan finally in a position to attract the investors who have strayed away over the past decade due to the law and order situation and lack of a business-friendly environment? The current political uncertainty clearly does not bode well for business. This can contribute to breaking the confidence of local and foreign investors. It is hoped that this uncertainty will give way to political and economic stability.
The writer is a staff member. He can be reached at [email protected]