Maria Ali
Pakistan, since 2016, has undertaken around more than 300 measures to improve the country’s investment climate. In the last two years, Pakistan has risen 39 places in the ease of doing business (EODB) index, reaching 108th place among 190 economies but the ranking has not translated into the country’s exports and growth. Launching a business in Pakistan has a number of challenges. Communication delays, centralized decision-making, a lack of commitment, a slacker workforce, and free-rider issues are all examples. All of these factors contribute to the country’s high business costs. Pakistan has been recognized as one of the finest reformer in South Asia and the world’s sixth best. The Securities and Exchange Commission now allows companies to register in one day, while the Federal Board of Revenue now offers online tax payments and efficient customs software. The Securities and Exchange Commission of Pakistan (SECP) has seen a 63 percent increase in company registrations, with 99 percent of these registrations being completed online and 45 percent of applicants receiving registration certificates the same day. Following the discovery of data manipulations in the quest of improved rankings, the EODB index was suspended in September 2021. In a statement, the World Bank stated that it will be working on a new framework for analyzing the countries’ business and investment climates.
Doing business encompasses a number of critical aspects of the regulatory environment as it pertains to local businesses. It includes quantitative indicators on how to create a firm, obtain construction licenses, obtain electricity, register property, obtain loans, protect minority investors, pay taxes, trade across borders, enforce contracts, and resolve insolvency. Doing business also assesses the aspects of hiring employees. Despite the fact that conducting business does not give rankings of economies based on hiring employee’s metrics or include the topic in the overall ease of doing business score or ranking, it does include the topic in the aggregate ease of doing business score or ranking. In terms of international standards, the ease and expense of conducting business in any country are the determining factors. Countries where it is simple to conduct medium, large, or small business without difficulty have experienced a significant increase in FDIs, and more foreign corporations are keen to create operations or form joint ventures with local countries. Pakistan has continually worked to strengthen the country’s business environment.
According to a webinar conducted by PIDE, our country’s business climate has not improved with the passage of time. Our exports were 3.8 billion dollars in 1986, whereas Vietnam’s exports were only 0.8 million dollars. However, Pakistan’s exports are only worth 24 billion dollars, while Vietnam’s are over 264 billion dollars. Pakistan’s exports have only increased by 6 times, while Vietnam’s exports have increased by 330 times. Some of the variables that have a negative impact on Pakistani enterprises include; lack of policy consistency, repressive taxation, high utility costs, cumbersome procedures, weak contract enforcement and dispute resolution capacity, lack of professionalism in our business community, lack of Innovation and entrepreneurship. Furthermore, the government only supports the elite groups that run the governments. Perks and advantages are only given to a selected few, lowering the market’s competitiveness even further. New entrants cannot afford to enter the market since it necessitates bureaucratic, government, and large bribes for officials.
The good news is that the administration has made an improvement in the ease of doing business as a top priority. Pakistan has been named among the top 20 worldwide reformers by the World Bank this year as a result of the coordinated efforts spearheaded by the Board of Investment. Pakistan has improved in six areas including starting a business, dealing with building licenses, acquiring energy, registering property, paying taxes, and trading across borders. Pakistan has made it easier to launch a business by broadening the procedures available via an online one-stop shop. Aside from changes in property registration, acquiring a building permit has become simpler.
We need professional leadership and a good strategy that picks up on relevant global best practices if we want to create a viable and vibrant environment for business to thrive because difficult reforms are possible with visible political commitment. Effective use of technology will be the single most powerful variable in improving business processes. Pakistan must reconsider the role of international financial institutions (IFIs) eager to join the policymaking table despite a lack of grasp of political economics and the reform process. Any meaningful reform will be failed unless the lead agency establishes a mutually respectful relationship with the implementing entities.s
It is vital for the government to recognize that in a policy vacuum, no single reform will produce the intended results. To demonstrate the government’s commitment to improving the investment climate, the government must make a significant structural shift, which includes supporting physical and regulatory infrastructure, lowering the cost of doing business, implementing world-class growth policies, tracking business transactions quickly, and resolving commercial disputes.
The author Maria Ali is a student of M. Phil Public Policy at Pakistan Institute of Development Economics (PIDE), Islamabad.
Published under special arrangement between Matrix Mag and Pakistan Institute of Development Economics (PIDE), Islamabad.
