Is Pakistan becoming business-friendly?

Despite recent controversies surrounding the World Bank’s Doing Business survey, I remain a big fan of the tool, which every year ranks ease of doing business in countries across the globe. It provides a pulse of what is going on in a country in terms of regulatory burden for businesses and creates pressure for any responsive government to take corrective action.

And that is exactly what happened in Pakistan. The country’s falling ranking in recent years compelled the government to focus on reforming the business environment. Many steps taken during the last two years have now started to bear fruit and Pakistan has finally jumped 11 places to 136^th position amongst 190 countries, in the 2019 Doing Business survey.

The survey captures overall ease of doing business (EoDB) score in a country, based on 10 indicators, measuring time and costs for complying with selected regulations that impact starting, operating and expanding of private businesses. The score represents the gap between a country’s performance and the best performing country on respective dimensions.

Not only did Pakistan increase its overall score but also improved on six out of 10 indicators, while maintaining its score on the other four. On resolving insolvency, Pakistan is now the top ranking country within South Asia, thanks to regulatory changes introduced by the federal government. On the other hand, Punjab made significant improvements in registering property by streamlining and automating administrative procedures, while both Punjab and Sindh took steps to increase the transparency of land administration system. And these examples just depict only few of the reforms that took place in the recent past.

While we are certainly headed in the right direction, the country is far from being a business-friendly country or an attractive investment destination. Pakistan is still ranked 5^th in South Asia highlighting our weak position vis-à-vis our regional peers. Moreover, Pakistan still didn’t make it to the top 10 countries this year, which improved their EoDB score the most. Incidentally, the list did include India and Afghanistan from South Asia. Afghanistan was in fact the top improver in the world with its EoDB score registering four times as much increase as that of Pakistan.

While Pakistan didn’t let its score slip on any of the 10 indicators, there are two areas where the country’s ranking dropped within South Asia showing that our neighbours are making progress on those counts. On getting credit, Pakistan slipped from 4^th to 5^th position within the region, whereas on dealing with construction permits, Pakistan slid from 5^th to 7^th position.

Another important aspect of these rankings is the fact that these are based on two cities — Karachi and Lahore — besides covering selected federal regulations and business processes. Accordingly all our reform efforts are focused on Sindh and Punjab and I did not witness any such reform in Khyber-Pakhtunkhwa or Balochistan. Moreover, since we are committed to move up the Doing Business ranking, we are fixing only what is being measured.

The Doing Business ranking and EoDB scores should instead be taken as symptom of a wider problem of Pakistan’s poor investment climate. Not only should such reforms be implemented across the country but they should also have broader scope covering factors that affect competitiveness, such as, strengthening institutions, ensuring policy predictability, improving labour force quality, capital market reforms, etc, Pakistan should also undertake a similar survey at the sub-national level to rank various cities in Pakistan on ease of doing business. The last such survey was conducted by the World Bank in 2010.

Nevertheless we must remember that only 10 years ago, Pakistan was ranked 85^th and then gradually fell to 147^th position last year. The government therefore deserves applause for reversing the decline in Pakistan’s ranking and putting the country on the path to become a business friendly country. 

Published in The Express Tribune, November 6^th, 2018.

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