Doing business: Lahore vs Karachi

Published: December 26, 2017
The writer is a public policy expert and an honorary Fellow of Consortium for Development Policy Research. He tweets @hasaankhawar

The writer is a public policy expert and an honorary Fellow of Consortium for Development Policy Research. He tweets @hasaankhawar

Recently I met an entrepreneur in Lahore involved in repackaging agricultural products, who told me that it took him one year to fulfill the requirements to get an NOC from the environment department for one of his new projects, including six months to wait for a public hearing. Even after fulfilling these requirements however, he has been waiting for the last three months for issuance of the NOC. In the meanwhile, his investors have pulled back and he isn’t sure how he is going to finance his project, if and when he actually gets the NOC. Businessmen in other provinces also tell countless such stories.

In the recently-released World Bank’s Doing Business 2018 survey, Pakistan’s rank has fallen from an already low 144 to 147, within 190 countries, faring much worse than the South Asian average. Doing Business indicators measure time and costs associated with complying with a set of regulations that impact private enterprises in starting, operating and expanding their business. The ones falling under provincial governments include issuance of construction permits, labour regulations, registering property and enforcing contracts. Pakistan scores extremely low on the last two counts. Interestingly, the survey covers both Karachi and Lahore, giving a comparison of Sindh versus Punjab.

On registering property Lahore does far better than Karachi but still remains far below international benchmarks. The indicator covers the hypothetical case of an entrepreneur who wants to purchase a building that is already registered and free of title dispute. The indicator includes time taken and costs of processes involved as well as quality of land administration covering reliability of infrastructure, transparency of information, land dispute resolution, etc. In Karachi, it takes eight processes, 208 days and 4.2% of the property value to get it transferred. But in Lahore, it takes merely 56 days to register the property, surpassing the South Asian average of 111 days by almost 50%. The quality of land administration index however, stands at six for Karachi and 10 for Lahore (on a scale of 0 to 30), showing significantly poor quality.

On contract enforcement, Karachi does marginally better than Lahore. The indicator captures time required to enforce a contract through courts, cost of litigation and quality of judicial process. The average time to enforce a contract in both cities remains almost three years, costing as much as 18-25% of the claim. Other regulations such as issuance of construction permits and labour regulations also remain cumbersome in both provinces.

Contrary to popular belief, excellent business processes are not specific to developed countries. For instance, the whole process of property registration takes six days in Nepal and less than two in Saudi Arabia. Similarly, it takes less than eight months to enforce a contract in Nepal and South Sudan.

Our reform efforts somehow have failed to make a dent in our performance and ranking. For instance, despite land record digitisation in Punjab, the system fails to communicate with NADRA and other databases, requiring multiple manual processes. Similarly, while Karachi has made fee schedule and list of documents necessary to complete any property registration available online, the applicants continue to face numerous hiccups during the actual transaction. Consequently Pakistan’s distance to frontier — gap with best performing economy — marginally improved over the last year but its ranking fell, depicting that while we are improving slightly, others have made more significant progress.

Not only do we need targeted reforms to improve our Doing Business ranking, we must also realise that these indicators are just the tip of the iceberg. Enhancing the overall competitiveness would need much wider reforms by the provinces. If we are serious about attracting FDI, making use of the CPEC opportunity, attracting industries to relocate and becoming an investment hub of South Asia, we need to walk the talk of reforms.

Published in The Express Tribune, December 26th, 2017.

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