Pakistan should be in a position to lure back investors who moved way during the last decade or so
Is Pakistan a good place for doing business? It should be because it has 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 businessmen? Will this also reduce the cost of doing business for entrepreneurs? Are on-ground implementations of regulations considered by the World Bank, such as the provision of electricity connection within a specified time, effective and consistent? Can increase in regulatory duties and cost of local inputs, including power tariff, decrease the cost of production for a domestic producer? Have we been able to control the factors like inflation and the value of currency against the global currency that increase the cost of all imported inputs used by both local and exporting industries?
The EODB Index ranks 190 countries on the ease of doing business environment in an economy. The ranking aims at providing an objective understanding of the regulatory environment for businesses around the world. It covers 11 areas of business regulation. Ten of these areas, including starting a business, dealing with construction permits, getting electricity, registering property, getting credit and paying taxes, etc, are included in the ease of doing business ranking. It also measures certain features of labour market regulation.
Pakistan has advanced 39 places during the last two years to secure 108th place on the list. According to the State Bank of Pakistan, the prime minister had constituted a high-level steering committee to oversee the progress of reforms in each of the 10 indicators measured under the EODB report.
The news that the World Bank has decided last month to discontinue its Doing Business 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 data used for Doing Business Reports for 2018 and 2020 were reported internally in June 2020, the Bank management decided to cancel the next Doing Business Report and initiated audit of the previous reports. The Bank has issued a 16-page investigative report saying data irregularities were found in reports for four countries.
In January this year, the Bank carried out investigations to review the internal circumstances that might have contributed to the data irregularities that have been identified. It said in a statement that it was working on a new approach to assessing the business and investment climate in the countries.
The current political uncertainty does not augur well for businesses. It can work to shatter the confidence of the local as well as foreign investors.
Nevertheless, the government of Pakistan will do well to keep its focus on removing hurdles in the way of smooth functioning of businesses. Among other things, the Board of Investment (BoI) needs to focus more on reform of regulation. Last month the BoI, in collaboration with the World Bank, launched its seventh reform action plan focusing on improvements in firm entry regulations, reliability of electricity, tax regulations, trade regulations, creditors’ rights and property rights.
According to the Securities and Exchange Commission of Pakistan (SECP) last year, the companies’ registration through the SECP showed a 63 percent growth. 99 percent of the new registrations were done online and 45 percent of the applicants were issued registration certificates the day they applied for it.
One of the most noticeable reforms is the setting up of commercial courts in the Punjab. The milestone initiative is aimed at bringing down the median dispute resolution duration from 1,000 to 180 days. Digitisation of land records is eliminating the need for on-ground inspection.
Investment-friendly policies are the only way to create sustainable employment. Khyber Pakhtunkhwa has taken the lead in this regard with the establishment of Khyber Pakhtunkhwa Economic Zones Development and Management Company (KPEZDMC) and the Khyber Pakhtunkhwa Board of Investment and Trade (KPBoIT) that are facilitating new businesses to attract investment. Governments in the Punjab, Sindh, and Balochistan also need to follow suit to make it easier for businessmen to make profits for themselves while also contributing to the national economy.
There is a feeling at the Overseas Investors Chamber of Commerce and Industry (OICCI) that foreign investors are appreciative of the improvement in the business climate in Pakistan. Presenting the results of Perception and Investment Survey 2021 on March 8, the OICCI secretary general, Ghias Khan, said that the case for business growth and opportunities in Pakistan was supported by over 65 percent of survey respondents.
According to the survey, 8 out of 10 respondents plan to invest more or similar amounts over the next five years compared to investments they made in the previous year. Governance issues, such as delay in policy implementation, however, remain a serious concern. So do the rising tax burden and cost of doing business.
The Perception and Investment Survey 2021 showed an increase in confidence among OICCI members on the growth potential of the country. IT also highlighted some areas where government intervention is urgently required.
Improvement was seen in Pakistan’s economy compared to other regional countries. On some indicators, Pakistan was rated better than India, Thailand, Vietnam, Bangladesh, Sri Lanka and the Philippines. However, it remained behind Indonesia, Malaysia, the UAE and China. The survey also dealt with sectoral issues which the OICCI plans to raise with the concerned stakeholders.
So, is Pakistan finally in a position to lure back investors that moved away over the last decade or so due to the law-and-order situation and absence of an enabling business-friendly environment? The current political uncertainty clearly does not augur well for the businesses. It can work to shatter the confidence of the local as well as foreign investors. One hopes that this uncertainty gives way to political and economic stability.
The writer is a staff member. He can be reached at email@example.com