Pakistan's ranking drops

Pakistan's ranking in the Global Competitiveness Index tabulated by the World Economic Forum dropped from 107 in 2018 to 110 during 2019 out of a total of 141 countries - a drop that critics of the present government claim reflects flawed fiscal and monetary policies. India was ranked at 68, Sri Lanka at 84, Bangladesh at 105, Nepal 108 thus within the region Pakistan was in fifth place, just above war-torn Afghanistan. One reason behind this poor performance was attributed to failure of government departments to provide relevant information to international agencies on time and relevant departments like the Finance Division and the Foreign Office not giving due attention to improving the country's competitiveness vis-a-vis other countries.

Two major sources of data are used to determine this ranking - 30 percent reliance on the results of a survey of senior executives of small and large companies while the remaining 70 percent is from data compiled by international organisations including the World Bank (WB) and the International Monetary Fund (IMF). The decline in our ranking must therefore have come as a surprise to our officials given that the World Bank recently ranked Pakistan amongst the top 20 improvers in Doing Business 2020 with the Country Director tweeting this month "we laud the collective action of Federal, Sindh, and Punjab governments for an impressive feat." One may assume that the two concepts notably Global Competitiveness Index and Doing Business are not identical; however, there are quite a number of similar if not identical indicators.

The World Bank itemized six factors as contributing to the improvement notably: a) starting a business was made easier through more procedures being available through the online one-stop shop; (b) improvements in property registration - obtaining a construction permit was easier after the Sindh Building and Control Authority and the Lahore Development Authority streamlined approval workflows and improved the operational efficiency of their one-stop shops; (c) launching online portals for new commercial connections made getting electricity connections easier; (d) tariff changes announced in advance; (e) tax compliance easier through online payment modules for value-added tax and corporate income tax, and a lower corporate income tax rate; and (f) trading across borders easier by enhancing the integration of various agencies into an electronic system and by improving coordination of joint physical inspections at the port.

Be that as it may, one of the officials of the World Economic Forum maintained "that is of the greatest concern today is the reduced ability of governments and central banks to use monetary policy to stimulate economic growth." And disturbingly, one would be compelled to agree given that Governor State Bank of Pakistan Reza Baqir is supporting an undervalued rupee and a discount rate that is in excess of headline inflation - policy measures that are crippling the growth rate of the private sector leaving the entire onus of growth on the government sector which, in turn, is unwilling to reduce expenditure and instead is relying on unrealistic tax revenue targets (which is further crippling private sector activity) and non-tax revenue (essentially from privatisation proceeds, a process likely to be stalled as the Pakistan Tehrik-i-Insaaf is ideologically opposed to it).

It is apprehended that with a growth rate of 3.3 percent last year and a projected 2.4 percent this year, stagnant exports due to domestic policies (fiscal and monetary as well as higher utility rates) and external factors including a global recession Pakistan's competitiveness is likely to go down further in ranking next fiscal year unless remedial measures are not taken urgently.