In its annual ‘Doing Business 2017’ report, the World Bank has concluded that Pakistan is among the 10 ‘most-improved’ economies in areas tracked by the report. The report tracks regulatory changes in 190 countries for businesses throughout their life cycle — from the ease of business startup regulations and getting credit to property rights. The 10 most-improved countries were Kenya, Belarus, Indonesia, Serbia, Georgia, Pakistan, United Arab Emirates and Bahrain.
Pakistan’s improved performance, as is evident from World Bank’s ‘Doing Business 2017’ report, signifies that the country is now more business-friendly for small- and medium-sized enterprises. The country has jumped four ranks from its position last year from 148 to 144 out of 190 countries under the revised methodology introduced this year.
Conducive environment for starting and operating a firm is crucial for accelerating economic growth. One of the top priorities of the sates is, therefore, to create business-friendly environment that is inevitable for achieving higher economic growth rates, enhancing employment ratio, lowering income inequality levels and reducing poverty.
Pakistan is the sole economy in South Asia to reform property transfers. Under the Land Records Management and Information System, a programme has been developed and deployed to strengthen the capacity of land administration institutions in Lahore. During a five-year period, the project deployed an automated land records system and improved the quality of services provided by the land agency.
Another reform measure was improving of access to credit information guaranteeing by law borrowers’ rights to inspect their own data. The credit bureau also expanded the borrower-coverage. This reform applies to both Lahore and Karachi.
Pakistan made trading across borders easier by enhancing its electronic web-based customs platform. This reform applies to both Lahore and Karachi.
However, there is still ample room for improvement and concrete measures are needed to perform better on a number of socioeconomic dimensions. On the gender index, Pakistan performance is dismal, to say the least. The economy does not offer equal opportunities to male and female workforce for earning. Even the business environment is hostile toward females. There exists a wide gap between literacy rate among males and females in the country. Among others, access to education is also an uphill task for the females. Even parents are prejudiced toward teaching their daughters as they prefer to invest in sons’ education.
Increased violence at national level, particularly since 2011, is the primary source of damaging the business environment. Violence happened in many forms such as urban crime, terrorism, trafficking, civil war, etc. Karachi, the largest city and the hub of the country’s economic activity, has seen massive increase in brutal and senseless barbarism in the past decade that has caused considerable damage to business environment. Gangsters and terrorists were at large given weak institutional capacity so much so that a portion of business community, discouraged by the poor law and order situation in the metropolis, started transferring business capital to other countries for better returns on investment. Such a reaction was inevitable since the security situation tends to modify the decisions of the investors — both domestic and foreign. An uncertain environment is always damaging for long-term investment activities.
Undoubtedly, terrorism has inflicted colossal damage to peace and security in the country. In fact, Pakistan is the only country that has suffered the most in terms of loss of human lives, finances and destruction of physical infrastructure, etc., in the fight against terrorism. Deadly terrorist attacks on public gatherings, educational institutions, airports and army installations were so rampant that they unquestionably contributed to damaging business environment. Both domestic and foreign investors shy away from investing under such tumult and uncertainty.
The convoluted tax system also has a great bearing on the business environment. If too many hours are being spent on paying taxes, filing tax returns, maintaining records and obeying other administrative orders, then business activity gets hampered. It is empirically found that investors are reluctant to invest in a country where either tax burden is relatively high or tax system is unfair and obscure. Despite the fact that the Federal Board of Revenue (FBR) has adopted a series of measures, such as online registration, e-filing, e-payment and e-notices to facilitate firms for filing and paying taxes, one wonders why the country ranks low on the list of 190 countries in terms of time to comply tax procedures — even higher than the world average. For example, taxpayers in the country require considerably more hours for paying taxes. On the other hand, average hours required for paying taxes in the Asian Pacific countries are much lower. It means either tax laws are too complicated to comply with easily or the tax officials are not duly facilitating the taxpayers in making tax payments and filing their returns. The tax authorities have to do more to improve tax environment in the country and facilitative measures are needed to improve tax culture in the country.
Other factors that have direct impact on business environment include uninterrupted power supply, adequate infrastructure, smooth supply of inputs, better marketing system, etc. Acute power shortage has been detrimental to the business activity.
Above all, widespread illiteracy is another big hindrance in the way of promoting shared values and garnering societal cohesion. Low gross and primary enrolment ratios, sizeable gender gap at primary level, less than regional overall adult and female literacy rates and a huge number of out-of-school children are the challenges the state is confronted with in the education sector. Illiterate people are easily exploited by violent actors by offering petty gains or arousing their sentiments especially those related to religion. Improved literacy rate is also indispensable to enhancing tolerance level in the society. It has been seen in the past that the country got deprived of the invaluable services of leading doctors, engineers, educationists, politicians, scholars and researchers in the wake of growing religious bigotry and intolerance.
In a nutshell, the state has to maintain law and order and provide enabling environment for business enterprises to operate over a longer period of time. It needs concrete measures such as improving education to integrate the society that has been disintegrated into several sects on religious grounds and is posing serious challenges to ensure peace and to deliver security as public good. Additionally, developing a tax culture wherein the taxpayers are facilitated to the maximum in following tax procedures is the direst need of the hour. Simplification of tax laws is also required. Of course, there are many other policy issues that must be addressed in order to create conducive environment for businesses so as to further improve country’s position on ease of doing business index.