Ease of doing business

Pakistan ranked eleven places higher in World Bank's ease of doing business index and moved from 147 to 136th position, attributed to three measures: (i) enhancing online one-stop registration system, (ii) replacing several forms for incorporation with a single application form, and (iii) establishing information exchange between the registry and the tax authority. These measures accounted for the reduction in the time required to set up a new business from 20 days to 17 days and a reduction in cost from 7.9 percent of per capita income to 6.8 percent. Only two cities were used to assess the ease of doing business - Karachi and Lahore - and therefore one would hope that a countrywide assessment is carried out by the authorities to ensure that the measures taken are being widely used. Be that as it may, this improvement must not be used for complacency because the index is based on perceptions and that too in only two cities of the country.
However, the three measures that account for an improvement in Pakistan's ranking in ease of doing business can be sourced to the previous administration and, unfortunately, do not reflect either an increase in the country's growth rate, or an increase in exports or, even more worrisome, a decline in imports. The International Monetary Fund (IMF) has projected a growth rate of 4 percent for fiscal year 2019, a decline from the previous year's rate of 5.8 percent while upping the rate of inflation from 3.9 percent in the last fiscal year to 7.5 percent. The Asian Development Bank (ADB) had earlier forecast 5.1 percent GDP growth rate for 2019 but has since revised its estimate downward to 4.8 percent and is likely to further downgrade this rate given that the ADB defers to the greater expertise in the Fund's capacity to make projections. To claim the blame for the lower growth rate rests with external factors can be challenged given that the forecast for Bangladesh (7.9 percent) and India (7.3 percent) were not downgraded though the rise in inflationary pressures would no doubt be attributed to the rise in the international price of oil. However, if the country accesses the three-year up to 3 billion dollar facility from Saudi Arabia and succeeds in getting an equivalent amount of facility from the United Arab Emirates then the government may not be able to cite external factors as negatively impacting on our domestic inflation.
Exports have increased by only 4 percent subsequent to the rupee depreciation of around 18 percent while imports have increased by 6 percent thereby further widening the trade deficit. Foreign Direct Investment is on the decline and the State Bank of Pakistan's website reveals that as of 20 September 2018, banks held excess cash reserves (over and above the Cash Reserve Ratio) of a 48,926 million rupees - money that was simply not lent to the productive sectors due to a variety of reasons not least being uncertainty. The Khan administration has not yet announced any structural reform out of the box policies and the only positive news has been the 6 billion dollar package from the Saudi government. To date all measures taken by the current dispensation have unfortunately indicated the continuation of policies of the previous administrations: slashing development as opposed to current expenditure which will impact negatively on growth, overestimating revenue particularly with reference to Asad Umar's belief that 93 billion additional rupees would be collected due to improved technology use and publicly supporting a regressive tax like withholding tax which is levied in the sales tax (regressive) as opposed to income tax mode.
To conclude, while the higher ranking in ease of doing business is perhaps the first positive economic news that the country has received in quite a while, yet as aforementioned it is not yet time for complacency and one would hope that the government understands that it needs to spread certainty in the marketplace and that would be achieved only if the structural reform plans are announced as soon as possible.