Ease of doing business

Pakistan falls to 77th position (The NEWS)
By Mansoor Ahmad

LAHORE: Pakistan has been relegated from 74th to 77th rank in ‘ease of doing business’ by the World Bank and needs to introduce wide-ranging reforms in enforcement of contracts, employment of workers and payment of taxes in order to improve its ranking.

The World Bank report on Doing Business has rated Singapore as the best place in ‘ease of doing business’. Malaysia, ranked 20th, is the top Muslim country in the index which evaluated 181 economies, improving its ranking from 25th position in 2008. Pakistan which was ranked 74th in 2008 is placed at 77th place for 2009.

The World Bank has evaluated these rankings on the basis of official procedures and data gathered from member countries. It does not, for example, examine security, macroeconomic stability, corruption, labour skills of the population, underlying strength of institutions and quality of infrastructure.

All the above factors are negative in Pakistan which explains its bad performance compared with economies ranked much lower. India where investment is surging is ranked 45 places below Pakistan at 122nd.

The report points out where regulation is particularly burdensome and levels of informality are higher. Informality comes at a cost — firms in the informal sector typically grow more slowly, have poorer access to credit and employ fewer workers and their workers remain outside the protection of labour laws. The research finds that countries with burdensome regulation have larger informal sectors, higher unemployment rate and slower economic growth. This finding is in line with what is happening in Pakistan’s economy these days.

Small and medium enterprises are key drivers of competition, growth and job creation, particularly in developing countries, the report states. But in economies with inferior institutional capability, up to 80 per cent of economic activity takes place in the informal sector.

Firms may be prevented from entering the formal sector by excessive bureaucracy and regulation. The bureaucratic red tape is a norm in Pakistan.

Despite good laws and regulations, bureaucratic delays force entrepreneurs to spend a considerable time finding out where to go and what documents to submit. Or they may avoid legally required procedures altogether by not registering for social security, for example.

Doing business provides a quantitative measure of regulations for starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.

A business in Pakistan could be started after completing 11 procedures that take 24 days at a cost of 12.6 per cent of the per capita income. It is ranked 77th in starting a business. In dealing with construction permits, Pakistan is ranked 93rd as the applicant has to go through 12 procedures that take 223 days to complete and bear a cost equivalent to 734 per cent of the per capita income.

In employing workers, Pakistan is placed at 136 out of 181 economies. Pakistan got 78 out of 100 points in ‘difficulty of firing’ index, 20 in ‘rigidity of working hours’ index and 43 in ‘rigidity of firing’ index.

The country is ranked 97th in the registry of property. It involves 12 procedures taking 50 days at a cost of 12.6 per cent of the per capita income. In getting credit, the country is better placed at 59th position. It is best placed at 24th in protecting investors.

In paying taxes, Pakistan’s rank is 124th. Tax payments to be made in a year are 47 which consume 560 hours per year while tax on profit is 28.9 per cent. Under the ‘trading across border’ head, the country is ranked 71st. Documents required for exports are nine while the time taken for export is 24 days. Cost to export a container comes to $611. Import procedures are eight which take 18 days and the cost of an import container is $680.

It is worst placed in enforcing contracts at 154th out 181 countries evaluated. The procedures required in this regard are 54 which take 976 days to close a business legally while the cost of the claim consumes 23.8 per cent of the claim.

Closing business in Pakistan is relatively easier and its ranking on this account is 54. A business could be closed in 2.8 years at a cost of 4 per cent of the asset and average recovery rate is 39.2 per cent to a dollar.

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1 Comment

Filed under Growth

One response to “Ease of doing business

  1. One-Tec

    Great analysis that is where Pakistan’s government should take a step to provide ease for the opening and closing of the businesses and further the streamline the procedures for the employers.

    Web Designing

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