Pakistan improved 11 ranks in Word Bank’s Doing Business indicators in 2018. Congratulations! India’s rank moved 23 spaces up. Beat that! Just how good or bad has been the country’s performance, and whether the bulk of responsibility to fix doing business lies with the provinces or the Islamabad. That might have been the subject of discussion in business circles, if it weren’t for the TLP-led protests on the streets paralyzing human and economic lives across the country. Thankfully, the World Bank doesn’t measure such protests directly for its doing business index.
The three key areas in which Pakistan improved in 2018 are ‘starting a business’, ‘registering property’, and ‘resolving insolvency’. In ‘starting a business’, Pakistan enhanced “the online one-stop registration system, replacing several forms for incorporation with a single application and establishing information exchange between the registry and the tax authority. This change applies to both Karachi and Lahore.” Karachi is given the weight of 65 percent; Lahore the rest.
In ‘registering property’, Lahore made registering property easier by streamlining and automating administrative procedures, and by increasing the transparency of its land administration system, whereas Karachi made registering property easier by increasing the transparency of the land registry. In the case of ‘resolving insolvency’, Pakistan introduced “the reorganization procedure and improving the continuation of the debtor’s business during insolvency proceedings. This change applies to both Karachi and Lahore.”
Another area Pakistan improved was ‘trading across borders’, mostly due to lower cost of trade in terms of border and documentary compliance. These are a result of new container terminal and improvements in Weboc, the customs platform for electronic document submission, implemented in the years before.
The good thing is that the PTI government has not claimed any credit. The kind of information ministry it has, anything is possible. At a press conference, PM Advisor Razzak Dawood acknowledged that Pakistan’s ranking improved because of the reforms rolled out by the previous government. Dawood added said that PTI led government is working to bring Pakistan’s ranking at below 100. He didn’t specifically set a target. But he did say something rather strange.
Perhaps as a casual jab to 18th Amendment that has been making rounds since the PTI has come to power; the advisor is reported to have said that Pakistan’s ranking in Doing Business index came down after the 18th amendment. If he was implying causation, that 18th amendment caused the fall in doing business rankings, he needs to educate the economics community or otherwise rescind his remarks.
Doing Business rankings are based on 10 key indicators. Of this the reforms need to move up under ‘enforcing contracts’ indicator lies mainly (up 70% items tracked by WB) in the domain of high courts, and the rest with provincial governments. Of the remaining 9 indicators, save for ‘registering property’
and ‘dealing with construction permits’ that lie in the provincial domain, the rest lie in the domain of the federal government. Clearly, the provinces do not have monopoly on poor performance.
For instance, under ‘getting electricity’ indicator, the World Bank does not even measure Pakistan on the ‘reliability of supply and transparency of tariff index’ because Pakistan’s average duration of power interruption is beyond measures of calculation, and of course beyond Nepra’s maximum allowed limits. The result is poor ranking in ‘getting electricity’ as is the case with many other indicators.
Going forward, the federal and provincial government needs to focus not on the ranking but on the ease of doing business scores. These scores previously called Distance to Frontier (DTF) scores,
“captures the gap of each economy from the best regulatory performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s DTF score is reflected on a scale from 0 to 100, where 0 represents the lowest and 100 represents the best performance.
In that light for instance, while Pakistan is still ranked 130 on ‘starting a business’, in terms of DTF scores, it is still up there with a score of about 82. Instead, it needs to focus more on indicators where it scores less than 60. That’s where the gains lie; and much of those are Islamabad’s responsibility.
Lastly, considering that PTI’s slogan is Naya Pakistan and not Naya Karachi or Naya Lahore, the Federal Board of Investment should collaborate with provincial BOIs and task the World Bank to research provincial level Ease of Doing Business for the years FY19 and FY22, if not FY19 to FY22. That would help track performance of provincial governments. If the BOI doesn’t have enough money in its kitty then a think tank or the PBC, the Razzak Dawood’s pet project, should do this exercise. It would be far more useful than pro-forma based bilateral trade research.
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