Ease of doing business

During the inaugural session of the 22nd Sustainable Development Conference co-hosted by the Sustainable Development Policy Institute and the World Bank, Dr Ishrat Husain, Advisor to the Prime Minister for Institutional Reforms and Austerity, stated that the key factor in the World Bank ranking on ease of doing business is not only the prevailing regulations but how an administration administers those regulations. As proof he pointed out that in 2007 Pakistan was ranked at 74th place in ease of doing business, with almost identical regulations as in later years when the country's ranking plummeted to 136th position; the improvement to 108 position last year reflects an improvement in the quality and attitude of the regulatory agency responsible for improving the business, Ishrat argued.

Government-released data reveals that while Pakistan's ranking in ease of doing business has improved, a ranking that the World Bank Country Director Illango Patchamuthu noted can and should be further improved despite that fact that most businesses are struggling and large-scale manufacturing sector has been witnessing negative growth for the past year. To put it facetiously, while the government is proactively engaged in improving administration of the regulations the fact remains that its economic policies are acting as an impediment to productivity notably a prohibitively high cost of borrowing given the discount rate of 13.25 percent, higher costs of other key inputs, particularly electricity tariffs compared to other regional competitors which is also fuelling smuggling across our porous borders and inadequate releases of refunds in spite of frequent pledges to do so.

Ishrat while indirectly acknowledging this state of affairs by stating that "we have to create an environment in which the business process re-engineers," argued that the way forward would be to minimize the engagement between the regulator and those it seeks to regulate through greater use of Information Technology (IT). The Advisor added that "we will have to automate all business processes, reduce interaction between the tax collector and taxpayer through automation including automation of income tax, customs duty, sales tax and even refunds."

He maintained that there is no consistency of enforcement of reforms from one administration to another administration, adding that "our misfortune is that we have politicised the business of reforms." Sadly, one would have to agree with him in spite of the fact that those in the forefront of ushering in reforms have not changed from one administration to the next - Dr Hafeez Sheikh, for example, has held the portfolio of finance and privatisation during previous administrations, Omar Ayub held the minister of state of finance portfolio during the Musharraf years, and Dawood also held a portfolio during the Musharraf era.

The question then is why do the same people change their views on reforms once they change their party affiliation? This is partly attributable to the fact that as a perennial IMF borrower, Pakistani administrations implement reforms sponsored by international lending agencies as and when they go on a programme, reforms that in spite of some minor changes in the lending agencies mindset remain more or less the same; however, once the programme conditions begin to bite as they invariably do, Pakistani governments bow down to political considerations, thereby abandoning their economic compulsions.

While enhanced automation would resolve many of the discretionary powers currently acknowledged as impediments to growth, reduce corruption and improve the country's ranking in ease of doing business, yet there is a need to also change the mindset of those who get to head ministries/departments again and again without achieving any positive tangible long lasting results.