Ease of doing business needs to be improved

Many bureaucratic and procedural hurdles stand in the way of investing in SEZs

ISLAMABAD: Exports, remittances and foreign direct investment are the three main pillars which contribute to economic growth. However, currently Pakistan is facing a crisis on all the fronts due to a multitude of reasons.

Its dismal performance on these fronts led to the drop in foreign exchange reserves to critically low levels. At this difficult time, Saudi Arabia, the United Arab Emirates (UAE) and China came forward to bail Pakistan out of this situation.

Pakistan and China launched the China-Pakistan Economic Corridor (CPEC) under which the latter poured billions of dollars into the development of infrastructure and energy projects. These two sectors are necessary for growth as energy shortages have struck 3% off economic growth in the past. Road infrastructure is required for market access.

During tenures of previous governments, several foreign companies left the country due to bureaucratic hurdles, especially in the energy sector, such as Malaysia-based Petronas and British Petroleum. So, the government needs to simplify procedures to ensure the ease of doing business in Pakistan. It also needs to adopt measures to attract foreign investors to boost the economy.

Pakistan jumped 11 places on the Word Bank’s Ease of Doing Business Index and got 136th position for the first time in 15 years due to reforms introduced by the previous federal and provincial governments. However, experts believe that the ease of doing business (EODB) index is a narrow and misleading gauge of a few economic rules.

Ironically, the EODB index is not based on an objective, statistical collation of hard facts gathered from across the country, rather it is derived from the subjective views of a handful of respondents in Karachi and Lahore.

It also does not take into account a number of critical factors such as investment during difficult periods, exports, tax collection, employment-to-population ratio, etc. Therefore, instead of running after a better ranking in the EODB index, the Board of Investment should focus on facilitating existing investors, ensure long-term and consistent regulatory policies in all sectors and attract new investors for sustainable socioeconomic development in the country.

CPEC is entering the next phase of industrialisation. Under this phase, nine Special Economic Zones (SEZs) have been planned. However, there are bureaucratic and procedural hurdles in the way of making investment in these special zones. Investors are required to get 30 No Objection Certificates (NoCs) before making investment in these zones. Procedures are not automated to simplify the process for the investors.

One-stop service

Almost all countries around the world have followed the concept of one-stop service (OSS) to facilitate investors in investing in the special zones. Best examples are Georgia and Thailand who have simplified procedures to facilitate investors by introducing the OSS concept.

According to a World Bank report released in October 2018, Georgia featured among the world’s top 10 economies in the World Bank Group’s annual Doing Business report, which measures the ease of doing business. The country moved up to sixth place in global rankings and is currently the highest ranked economy in the European and Central Asian region. Georgia introduced different reforms relating to the ease of doing business. It made it easier to start a business by cutting or simplifying post-registration procedures relating to tax registration, social security registration and licensing.

It also made tax payments easier by introducing new or significantly revised tax laws, simplifying tax compliance processes and reducing the number of tax filings or payments.

It enforced contracts by focusing on court automation through the introduction of electronic payments and processes, automated assignment of cases to judges and by publishing judgements.

Georgia also enhanced the scope of its existing one-stop shop for business incorporation, allowing entrepreneurs to start a company through a single procedure. Previously, the entrepreneurs had to make a separate visit to the Revenue Service for value added tax registration after company registration.

In a bid to attract investment in the SEZs, the government would have to take measures for the ease of doing business by introducing OSS, rather than visiting 30 offices to get permissions. Pakistan has been a conventional exporter of textile products. The government needs to attract investors in different sectors to diversify exports.

A continued anti-corruption campaign projects Pakistan as the most corrupt nation. We need to change this strategy. We need to project Pakistan as an ideal destination for investment. We have to follow Georgia’s example to introduce reforms in different sectors to make business easy for the investors.

The writer is a staff correspondent

Published in The Express Tribune, March 4^th, 2019.

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