Good set of rules and simplified regulations for property rights, disputes resolution, partnerships, contractual arrangements, or economic viability are prerequisites for conducting businesses smoothly.
From starting up a business till its windup, various factors shape a business life cycle. According to the latest word by World Bank on the ease of doing business where business climate has swiftly improved on average around the world, South Asias progress has remained uneventful and dreary.
It is certainly not much less of a challenge in Pakistan. Once ranked as the best in South Asia, the country languished to the third slot in the unimpressive region and three places to 107 in the overall index.
Though it might give those at the helm of the matter a chance to boast about their self-styled efforts to keep the country ahead of South Asian giants, comparing Pakistan to the regional average makes little sense. Or at least it might not be prolific in improving the countrys standing as the entire lot lags behind in simplifying and cutting red tape.
What does it take for a startup? Starting a business in Pakistan requires at least 10 procedures that take on average 21 days compared to the five procedures over 12 days in OECD.
Regionally, the country enjoys the advantage of no required minimum capital and substantially lower cost. However, cost of registration remains high at 9.9 percent of income per capita versus 4.5 percent in OECD. Moreover, the cost of building a warehouse at 216 percent of income per capita is definitely standoffish for majority of the population in Pakistan.
However, one good sign has been the gradual trotting down of the registration cost over the last decade.
One major weakness of the region has been the lack of reforms that could speed up processes and abridge procedures. Besides the introduction of online sales tax registration in Pakistan back in 2010 to reduce the number of procedures and halve business startup process cost, not much has been simplified since then.
Amongst the basic indicators of Doing Business 2013, one important one is getting electricity connection for the business activity.
From application, inspection to payment, getting electricity for a new business in Pakistan is plagued with numerous procedures and costs as high as 1,674 percent of income per capita. Noteworthy is the fact that it has escalated from 1,346 percent in 2011.
Although now at a standstill, the reform initiatives to deepen the accessibility and coverage of credit information and protecting investors lift the overall raking of the country. But rampant tax evasion and the increase in profit tax rate for small firms in recent times cripple the gains.
An important aspect of better regulatory environment for entrepreneurship is its correlation with the foreign direct investment. FDI in Pakistan has nosedived to deadly lows, and studies have shown that besides the small and medium size domestic businesses, the indicators of doing business do insinuate towards the overall investment climate in a country.