Doing business in Pakistan

Intrigued by the following headline some weeks ago “World Bank: Pakistan among top 10 economies”, I read a news report which was basically about our latest ranking in the Doing Business 2017 report. The headline which had enticed me to read the said story was of course misleading. The World Bank may have recognised Pakistan to be among 10 economies that have made improvements in terms of their business regulations. This certainly does not mean that we are now ranked amongst the top 10 economies of the world, even in terms of ease of doing business.

While Pakistan is the only South Asian economy to have improved its overall ease of doing business ranking, we are still ranked 144^th (instead of 148^th) out of 190 countries. The ten economies highlighted by the World Bank this year for making the biggest improvements in their business regulations include a diverse lot, such as Brunei, Kenya, Indonesia, Georgia and the UAE. While Pakistan has been praised for improving infrastructure and streamlining procedures such as introducing a new electronic platform for customs clearance, it is still considered a low middle income, and ranked quite low overall.

There is, thus, much less ground for enthusiasm than the above-mentioned news headline has suggested. Yet, there are several significant issues about the Doing Business Report itself, which do need more attention.

The Doing Business Reports are a flagship World Bank publication. The current report is the fourteenth in a series of annual reports measuring governmental regulations that enhance or constrain business activity. Doing Business looks at quantitative indicators on business regulations and the protection of property rights, which can be compared over time, across 190 economies. It measures regulations affecting different aspects of running a business.

This annual ranking of business friendliness isn’t based on surveys of businesses. Instead, it rates government policies without considering their real effect. Nonetheless, the ranking is taken quite seriously by international investors as well as politicians within the countries aspiring for greater growth. Consider the case of Prime Minister Narendra Modi, who has set the goal of getting India into the top 30 countries in this ranking by 2018. President Vladimir Putin’s goal is more ambitious, as he wants Russia (which is currently ranked 51) to be in the top 20 countries in terms of ease of doing business. The entrepreneurial ambitions of the Sharifs would no doubt aspire to equally ambitious plans for Pakistan.

Yet, scoring a better ranking does not necessarily change the fate of an economy. Many prominent economists and business analysts have criticised the ease of doing business ranking. When political strongmen try to pry open their economies to big business, fair play does not automatically ensue. Instead opportunities for corruption become rife. For example, some companies can resolve bureaucratic hurdles much faster than required by the law, whereas others face inexplicable delays, despite the same laws.

Doing Business Reports should not reward governments for creating broad business enabling rules which are arbitrarily enforced. Two years ago, an independent panel urged the World Bank to stop compiling an aggregate country ranking and to stick to assessing the relevance of policy frameworks in area and country-specific contexts.

There are also other issues with such a ranking, given its implicit assumption that ease of business is necessarily a good thing. Exploitative supply chains of big business may accrue greater profits and even increase foreign direct investment in developing countries, but they also do little to protect poor workers. Therefore, Pakistan’s modest improvement on such a ranking may be good news for the country’s political and economic elite, and for foreign business interests trying to make a fast buck off our country, but it will not spell any significant changes for the ordinary people, especially the already marginalised and vulnerable segments of the population.

Published in The Express Tribune, June 16^th, 2017.

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