Ease of doing business reform

Prime Minister Shahid Khaqan Abbasi seems to have fully recognised the criticality of ‘ease of doing business’ in order to attract investments and enhance exports.

Recognising the slide in country’s ratings as the major obstacle to investment and exports, the prime minister has formed a steering committee to introduce and take some urgent steps with a view to improving Pakistan’s investment climate and its international creditworthiness.

The 10 criterion considered by the World Bank in its global ranking of doing business are:

1. Starting a business

2. Enforcing contracts

3. Resolving insolvency

4. Protecting minority investors

5. Property registration

6. Construction approvals and permits

7. Getting utilities (electricity, gas and water)

8. Getting credits

9. Paying taxes

10. Trading across borders

In Pakistan, however, behind each of the abovementioned factors hide a trail of poor governance, vested interests and inordinate delays at each step.

Of the above, the first five points are influenced by the judicial system of Pakistan.

There is considerable cost and time tag attached to resolve commercial disputes and issues related to insolvency, construction and permits.

The ‘One-Window’ concept of facilitating business entrepreneurs has failed to translate into a reality in Pakistan, particularly in federal and provincial boards of investment as these public sector entities pursue their own specific agendas, reducing the role of federal BoI in the policymaking process. Same is likely to be the fate of Special Economic Zones being set up under the CPEC could suffer the same fate unless steps are taken to make them autonomous under an act of parliament. PM Abbasi must therefore prevail upon his managers to come up with realistic and meaningful Terms of Reference (ToRs) for this challenging task.

To begin with, there is a need to analyse every doing business factor threadbare, identify the gaps, restructure the process and enforce a mechanism for its implementation through a cabinet decision or an act of parliament. Above all, it needs extensive research to come up with realistic and tangible results in line with international practices as competition is always more fierce on the global stage than in the country.

The Steering Committee on Doing Business Reforms of the Board of Investment (BoI) met the other day to identify major bottlenecks in doing business. The start of the process is disappointing as it is marred by the usual rhetoric. Not only is it devoid of a larger strategic blueprint, it also fails to articulate tangible targets of improving the ‘doing business’ ranking each year by a couple of notches.

The committee formed for the purpose has termed delayed refunds as a major bottleneck and recommended reducing time period for payment of sales tax refunds to business community. The body has also underscored the need for decreasing time to obtain value-added tax (VAT) refunds to 20 weeks from 79 weeks.

As part of the reform, the Federal Board of Revenue (FBR) shall integrate its website with the relevant provincial counterparts, Securities and Exchange Commission of Pakistan (SECP) and Employees Old-Age Benefit Institution (EOBI) under a one-window project for enhancing foreign investment. The Securities and Exchange Commission of Pakistan and Federal Board of Revenue shall take measures to facilitate e-payments through mobiles and debit cards.

In an encouraging development, the provinces have also been taken on board by BoI as being the principal stakeholders in ‘ease of doing business’ area. Presentations were given by the governments of Punjab and Sindh. The BoI is therefore required to also take into confidence the governments of KPK and Balochistan without any further loss of time.

FBR will be signing an MoU with the government of Punjab with regard to its integration with Punjab Business Portal and STN-NTN merger. There is a need to also loop the other three provinces in on similar and related developments.

K-Electric is a major contributor and stakeholder for entrepreneurs of Karachi. K-Electric undertakes to issue a notification in respect of the time taken in days (111 days, which is less than proposed 120 days) to get an electricity connection in areas where K-Electric is present. K-Electric claims that in 2016, the average time to get an industrial connection was 178 days. This period has now been reduced by a promising 30 percent.

Insofar as the trading across borders is concerned, the FBR will implement an e-payment solutions mechanism. The BoI will take up with Finance Division the matters relating to appointment of Registrar of Collateral Registry, pursue the passage of the Corporate Rehabilitation Act 2017 and amendments to the Federal Treasury Rules.

Gaps in trading across borders were also identified by Customs. The merger of STN with NTN was highlighted as a serious bottleneck.

The reduced time period to obtain VAT refunds from 79 weeks to 20 weeks, another policy decision, will be taken by steering committee. A look at issues of Securities and Exchange Commission of Pakistan shows that the Commission is required to reduce time now taken to register the chief executive officer of a corporate entity. Although the SECP claims that they register 80 percent of the applications they receive in one day, the contributors have been making contradictory claims. This was flagged as a serious bottleneck. The SECP portal is linked to the FBR and their facilitation centres are fully functional in Karachi, Lahore and Islamabad.

The SECP will resolve the issue of e-payment by making payments by mobile and debit cards, etc. The matter pertaining to integration of two frameworks for corporate and non-corporate sectors to have a unified registry will be taken up at a steering committee’s meeting later this month with the input from State Bank of Pakistan.

The World Bank has been supporting the government of Pakistan through seminars and workshops organised to apprise the stakeholders about the dynamics of ease of doing business. But it has so far been an academic exercise. The Prime Minister’s ‘ease of doing business reform’ initiative is the need of the hour. The challenge is its delivery on ground with measureable results.