The press is having a field day with Pakistan’s fall in World Bank’s Doing Business rankings. They have read it all wrong, for when it comes global comparative rankings, it is not the rankings that really matter; ratings do.
The ratings in this case is the distance to frontier (DTF) measure that shows the distance of each economy to the “frontier,” which represents the best performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s distance to frontier is reflected on a scale from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier. The ease of doing business ranking ranges from 1 to 190.
Pakistan may have fallen three ranks in DB rankings, its DTF score has improved in 7 out of 10 indicators tracked by the World Bank. Its DTF fell in only one of the indicators and remained unchanged in two. That’s surely not the best performance, considering that neighbouring India has improved in 9 out of the 10 indicators, but it still shouldn’t be construed as if doing business has worsened.
Some quarters that argue that in a world where others are improving ranks matter the most, since any potential foreign investor looks at the rankings before investing. This column contends that any level-headed investor would be looking at the scores and the data that feeds into the scores rather than the rankings, because there is so much to an investment decision than just the ranking.
Besides ranking are often a misleading indicator. Consider this: Pakistan’s ranking in ‘starting a business’ is 142 as of DB 2018. Does that mean that the government bodies looking to improve doing business in Pakistan should focus on this sub-index or focus more on ‘dealing with construction permits’ that is ranked 141? NO! The government should give more attention to ‘dealing with construction permits’ because its DTF score is much worse than the score for ‘starting a business’.
This brings the conversation to who’s taking the charge. The Board of Investment has recently advertised a position to improve investment climate; that person will have a lot on his or her plate for there are no short cuts to improving the business climate. The real push must come from the PM office, who is advised to ensure that provinces do their job as well.
At present, the provincial leg of doing business reforms in Punjab is given to the provincial P&D department that – according sources who request anonymity say - lacks expertise and domain knowledge; ‘they are better off with making PC1 for projects’. In the case of Sindh that matters the most since Karachi has 65 percent weight in the rankings (as against Lahore 35%), the performance of Sindh’s Board of Investment has been precious little so far.
In terms of being gung-ho about the reforms, Pakistan should take a leaf from India. In comparison to Pakistan’s, India’s improvement in DTF scores was by leaps and bounds – signifying major reforms – enabling the country to jump 30 places to rank 100th in the ease of doing business rankings.
The roots of this improvement go back to the time of its general elections, when the now ruling party BJP promised to bring India into the top 50 doing business rankings. Even the manifesto of the left-of-center Congress Party promised to raise India’s performance in the index to 75.
In fact, when Indian premier Modi first interacted with government Secretaries the first thing he did was to express his frustration over India’s rank in Doing Business indicators, and tasked them with reforms in their respective areas.
To date, doing business reforms is something that the Indian government tracks closely and considers it important enough to hold press conferences about.
Changing the ranking isn’t just about the changing the ranking. It’s about changing the mindset of the ‘babus’; from command and control type to that of a facilitator or a service provider.
That cannot be achieved by merely tweaking around of procedures, rules and laws just to get a tick mark when World Bank’s surveyors begin their field work. The way forward must be single-minded pursuit of wholesale reforms with an attitude of service. That attitude has to come from the top, and bred over the years in civil service academies.
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