Ease of Doing Business Index: Pakistan secures a better position, ranks 136th amid 189 economies

Ease of Doing Business Index: Pakistan secures a better position, ranks 136th amid 189 economies

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ISLAMABAD: Pakistan has jumped up 11 places on the Word Bank’s Ease of Doing Business Index and clinched 136th position — for the first time in 15 years — due to reforms introduced by previous federal and provincial governments.

Pakistan carried out three reforms during the past year in the areas of starting a business, registering property and resolving insolvency, according to the World Bank’s annual flagship report titled “Ease of Doing Business 2019” released on Wednesday.

In addition to that, the country showed some progress on the indicators of getting electricity, securing construction permits, getting credit, paying taxes and trading across borders.

Pakistan improved its distance to frontier (DTF) score, from 51.62 to 51.69, but slid in the list of 189 economies of the world, ranked in terms of the ease it offers to entrepreneurs in doing business.

Last year, Pakistan was ranked 147th among the 190 nations surveyed.

The Ease of Doing Business index is mostly used as a guide by foreign investors to learn more about a country, aiding decisions on pouring money into the economy. The credit of reforms goes to the last Pakistan Peoples’ Party (PPP) government in Sindh and the Pakistan Muslim League-Nawaz (PML-N) governments in the centre and Punjab.

The report is based on surveys carried out in Lahore and Karachi. The results are based on the work done from November 2017 to June 2018, which was validated by the World Bank from July to August this year.

“It was for the first time when I could really see people from federal and provincial governments putting energy to improve the country’s position,” commented World Bank Country Director to Pakistan Illango Patchamuthu.

“Of course, the 136th position is not pretty” and there was a need to further build up on the work done last year, he said.

The report measures how close each economy is to best global practices in business regulations. On the measure of absolute progress towards best practices, Pakistan has improved the score to 52.8, suggesting the country did some real work this time around.

In South Asia, India at the 77th place in doing business rankings is the highest-ranked economy followed by Bhutan (89th), Sri Lanka (100th) and Nepal (110th). Pakistan, at the 136th position, was fifth in South Asia, followed by the Maldives (139th), Afghanistan (167th) and Bangladesh (176th).

International investors consult the report and the Global Competitiveness Index of the World Economic Forum before taking decisions on investment plans.

Of the 10 indices, Pakistan improved ranking on four and its position deteriorated on the other four indicators whereas the ranking on the remaining two remained unchanged.

Starting a business

Pakistan improved its ranking on starting a business by 12 notches and it stood at 130th position among 190 nations. It has eased regulations for starting a business, which will largely help small and medium enterprises. Still, there are 10 procedures and at least 17 days are required to start a business.

Paying taxes

Pakistan lost one position on the indicator of paying taxes, standing at 173rd place. Key bottlenecks were delay in payment of tax refunds and multiple and frequent audits of corporations, said a World Bank official. More than 50% firms were subject to annual audits, he added.

Due to multiplicity of taxes, companies made 47 tax payments every year, which consumed 293.5 hours, according to the report. But time to pay taxes has come down as compared to last year. Despite the 30% corporate tax rate, firms are still paying 34.1% of their profits in taxes.

Getting credit

Pakistan also lost seven positions on the indicator of getting credit for doing business. The ranking remained poor due to the absence of a centralized database of collaterals, said the World Bank official.

This creates issues of more than one charge on a single property and priority right of creditors in the case of default. The official said there was a need to set up a central collateral registry, which is done even by Afghanistan. The lender’s rights are also not fully protected.

Getting electricity

Pakistan’s ranking on the getting electricity index remained unchanged at 167. However, the number of days required to get electricity connection dropped from 215 to 185 in Karachi.

There were about six kinds of procedures that an applicant has to complete for getting a connection. The country did not make any progress on the issue of reliability of supply and transparency in electricity tariffs.

Construction permits

On this index, Pakistan’s ranking significantly deteriorated by 25 places and stood at 166. There are 19 types of procedures that require 263 days for an investor to get a construction permit. The number of procedures and time increased last year instead of showing improvement.

Trading across borders

There is a big jump by Pakistan on the index of trading across borders. Pakistan improved its position by 29 places, standing at 142. The cost of documentation for exports fell from $257 to $118 while the cost for border compliance also dipped from $406 to $356. In the case of imports, the cost of documentary compliance halved from $937 to $476 and the cost of border compliance for imports decreased from $735 to $250.

The World Bank official said there was a need to connect all the relevant government agencies with the automated system to further show progress.

Enforcing contracts

There was no change on this index and the country was ranked at 156th position. The biggest problem was the enforcement of contracts in Karachi and Lahore. It requires 1,071 days to resolve a dispute of over $5,000, said the official.

Resolving insolvency

Pakistan has made a big jump of 29 positions and clinched 53rd position.

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