Doing business - not getting any easier

Overly burdensome regulations and inefficient institutions that discourage the creation and expansion of businesses compound the problems in an economy. It is because of this reason that more and more economies, especially low and lower-middle-income ones, are focusing their reform efforts on strengthening legal institutions such as courts and insolvency regimes; while enhancing legal protections of investors and property rights. In sub-Saharan Africa, which has long been considered the economic equivalent of the Wild West; governments are becoming increasingly proactive in introducing business-friendly frameworks that facilitate the establishment of new enterprises, while encouraging the progress of existing firms. Unfortunately, Pakistan has lagged behind in such endeavors and as a consequence the country has slid further down in the global rankings of ease of doing business from an already dismal 96 position among 183 countries in 2011 to a woefully unimpressive 105 in 2012. Over the past nine years, most economies have made their regulatory environments more business friendly. Firms create jobs, and policy makers play a key role in creating a regulatory environment that encourages job creation, growth and investment. Overall in 2010/11, governments in 125 economies implemented 245 institutional and regulatory reforms as measured by "Doing Business"- 13 percent more than in the previous year. Pakistan, however, made no reforms in the period under consideration despite the fact that a faster pace of regulatory reforms is essential for encouraging entrepreneurs in developing economies. Not only has the local government not made constructive efforts to encourage investment and entrepreneurship; it has in fact added to the never-ending list of barriers that make it more difficult to do business in Pakistan. Recent changes that have increased the rate of tax on profits of small firms is an additional disincentive in the pile of existing issues such as lack of provision of structural facilities like electricity and the dismal state of law and order. Little wonder then, that the countrys investment to GDP ratio continues to head the South. The country has registered some modest improvements among the individual criterion judged in the survey. The cost of acquiring an electricity connection in the country has dropped from last years tally of 1,829.2 percent of GDP per capita, to 1,346 percent. However, this sum is still significantly high compared to other countries. Meanwhile, in terms of the ease of obtaining construction permits, Pakistans ranking worsened from 98 to 104. Similarly, the ranking for the ease of getting credit has also fallen marginally from 65 to 67. Trading across borders has improved in rank from 81 to 75 since last year, owing to the introduction of efficient equipment and Pakistans efforts to reduce the time to export by improving electronic communication between the Karachi Port authorities and the private terminals. However, now that the automated container clearing option has been shut down, there is a high likelihood that this improvement may soon fade away. All in all, the recent "Doing Business Report" asserts that investment in Pakistan is becoming less attractive due to policy inaction and that slumbering over reform will only lead to a rude awakening that new investments are drying up as a consequence. ========================================================= PAKISTANS DOING BUSINESS RANKINGS ========================================================= 2012 2011 ========================================================= Overall ranking 105 96 Starting a Business 90 85 Dealing with construction permits 104 98 Registering property 125 126 Getting credit 67 65 Protecting Investors 29 28 paying taxes 158 145 Trading across borders 75 81 ========================================================= Source: World Bank