ALMAS HYDER

Although there is a great hue and cry about the Pakistan’s poor ranking on World Bank Ease of Doing Business Index in 2016, little is known at the national level about how this Index works and the actual reasons behind Pakistan’s abysmal ranking of 138 in 2016.

The Doing Business Index, started in 2003, basically measures how easy or difficult it is for a local entrepreneur to open and run a business when complying with relevant regulations. The WB Doing Business Report 2016 ranks 189 economies on this index, based on 10 areas of business regulation—Starting a Business, Dealing with Construction Permits, Getting Electricity, Registering Property, Getting Credit, Protecting Minority Investors, Paving Taxes, Trading Across Borders, Enforcing Contracts and Resolving Insolvency. The main factors considered for ranking in each of the aforementioned areas are the number of procedures, time and cost.

The 2016’s poor performance of Pakistan is not an anomaly as the country’s ranking has been deteriorating consistently since the last 5 years, ever since reaching a peak of 105 in 2012. This does not necessarily mean that business conditions in Pakistan are worsening but it might mean that the other countries are improving at a pace that is much faster than ours. The countries around the world are facilitating their business communities by making simple regulations and online portals to reduce time and avoid the duplication of information.

Pakistan’s ranking in the area of “Starting a Business” is 122nd. It takes around 19 days to incorporate a company and register and obtain the relevant tax and social security numbers. This is in deep contrast to half a day in New Zealand where the users have to give one-time information on a portal on the website of Companies Office New Zealand to obtain the relevant tax and social security numbers.

If and where the automation has taken place in the government departments of the country, it has not been integrated to really benefit the new companies. For example, a business establishment in Pakistan will have to give almost the same or similar information separately on the portals of SECP for company incorporation, FBR for tax registrations and EOBI for social security. This results in duplication of information, wastage of precious time and decline in doing business ranking. If properly managed, all registrations can be done in parallel.

Furthermore, for the registrations with the provincial departments like Labor and PESSI, same information has to be given separately to these departments.

Lahore Chamber of Commerce and Industry has recommended both the federal and provincial governments to make one electronic portal for business incorporation and departmental registrations where new businesses would just need to enter information once and get all the registrations completed. In light with the LCCI’s recommendation, Punjab Information Technology Board (PITB) is coordinating actively with the provincial departments like Labor, PESSI and Excise and Taxation for development of one-portal for provincial business registrations.

Pakistan’s ranking in the area of Paying Taxes stands at an appalling 171st owing to 47 times tax payments in a year (highest in the region) taking a total of 594 hours. The main reason for the inflated figure of 47 tax payments in Pakistan is the high frequency of social security payments which have to be paid every month, both at the federal (EOBI) level and provincial (PESSI) level. LCCI has recommended the provincial government to curtail the frequency of social security payments to quarterly.

The country’s ranking in the area of Dealing with Construction Permits is 61st. With a comprehensive automation program of LDA and LRMIS underway, this ranking is expected to improve in the coming years.

The indicator of Registering Property does not present a rosy picture either as the country ranks 137 on this indicator. The extension of Land Record Management Information System (LRMIS) to the urban areas and the introduction of E-Stamps is expected to bring a lot of improvement in the inefficient working of sub-registrar offices and hence the ranking of this factor.

Getting an industrial electricity connection is no less than a predicament in Pakistan and it is of no surprise that the country ranks 157 on the indicator of Getting Electricity. It takes around 178 days in Pakistan to get a 140 KVA, 3 phase electricity connection as compared to 18 days in South Korea which holds the top position in this area. These delays can be avoided if there is an Electronic Portal. This E-Portal should be integrated with SECP, LRMIS and NADRA database for the verification of owners and company’s information.

In Pakistan, it takes a lot of time (993 days) and cost (23% of the value of the claim) to resolve the commercial disputes, resulting in a low ranking of l51st in the area of “Enforcing contracts”. A viable option to make contract enforcement more efficient is the Pretrial Conference where both parties are presented in front of the judge to discuss the issues of the case, list of evidence, witnesses, tentative timetable to dispose of the case and the settlement of the case is looked into, to save time. Resolving insolvency is another area where our current ranking of 94 needs substantial improvement.

The constant deterioration in doing business ranking is considerably hampering the image of Pakistan as a business destination at the global level. The political leadership needs to take the ownership of improving Pakistan’s ranking. If the government puts its act together and changes the rules & regulations along with implementing the more efficient use of information technology in government departments, the doing business ranking can improve significantly. Information Technology can be used for automating the manual operations of government departments and development of online portals for swift one-time input of information without duplication (which can be used by multiple government departments).

The writer is senior vice president of LCCI.