A business report of World Bank.....
Overview
The subnational Doing Business in Pakistan 2010 project benchmarked business regulations in 6 Doing Business areas across 13 cities and covered all provinces in Pakistan. It found a number of local level business reforms complementing nationwide effort, made reform recommendations and highlighted local best practices. The project results were delivered despite difficult security issues in many of the areas covered. Doing Business in Pakistan 2010 gave specific locations in Pakistan an opportunity to tell their story and compare their regulations with other cities in the same country and with over 180 locations around the globe. Local-level performances are becoming increasingly important in a globalized world, where specific locations, rather than countries, compete for investment—Karachi versus Shanghai, rather than Pakistan versus China.
Challenge
Small and medium-size enterprises are key drivers of competition, growth and job creation, particularly in developing countries. But in these economies up to 80% of economic activity takes place in the informal sector. Firms are often prevented from entering the formal sector by excessive bureaucracy and regulation. Study of regulatory constrains to businesses is especially important in Pakistan where small and midsize firms constitute nearly 90% of all companies. Pakistan is ranked number 83 out of 183 economies on the "Ease of Doing Business" and is the highest-ranking economy in South Asia. Despite recentand ongoing reforms, Pakistan needs to improve the doing business environment further to make it easier to set up and operate a business.
Approach
In the Doing Business report, each economy is represented by its largest business city—Karachi for Pakistan, for example, or Mumbai for India. Business regulation and their enforcement, particularly in federal states and large economies present marked differences within a single country. In recognizing the interest of governments in these variations and high potential for peer-to-peer learning among locations within the same country, the Subnational Doing Business studies cover regulations at all levels of government across a number of cities within the same country. The subnational project followed the global Doing Business methodology. The survey used a simple business case to ensure comparability across locations and over time—with assumptions about the business. The survey was customized to the particular case of Pakistan. The subnational Doing Business in Pakistan 2010 project provided a quantitative measure of the national and local business regulations for starting a business, dealing with constructionpermits, registering property, paying taxes, trading across borders and enforcing contracts. These indicators were selected because they cover areas of local jurisdiction or practice. Surveys were administered through more than 130 local experts, including lawyers, architects, and other professionals routinely administering or advising on legal and regulatory requirements. These experts had several rounds of interaction with the Doing Business in Pakistan team, including face-to-face interviews and visits by the team. The team also interacted with over 120 national and local officials and visited the local registration and other offices. Based on the findings, the team made a set of policy reform recommendations in each of the six areas measured by the report.
Results
The repeated benchmarking confirmed that the approach used by subnational projects is a catalyst of reform. Doing Business in South Asia 2007 pointed out bottlenecks and provided recommendations for reforms in 5 Pakistani cities and Karachi. Three years later, Doing Business in Pakistan 2010 tracked reform progress over time. All 6 cities implemented 2 or more national level reforms. Three cities showedimprovements in at least 2 of the three areas where local level reforms were measured (see figure 1). Together these elements helped to improve the quality of business regulations in Pakistan.
Figure 1 – National and local reforms made business easier in all Pakistani cities measured in 2006 and 2009
All cities benefited from the rollout of nation-wide reforms, although results on the ground vary depending on implementation. For example, in starting a business, the introduction of e-Services reduced the time needed to register a company with the Security and Exchange Commission of Pakistan by 1 day to a total of 2 days in Faisalabad, Lahore, and Peshawar. The fees for online business registration were set at 50% of the in person registration. In Karachi, the time needed to import was reduced by half from 2006 to 2009 following implementation of an electronic data interchange system. At the provincial level, Punjab cut 4 days from the business start-up process by delegating the registration with the Employees Social Security Institution to the local district level. As a result of adopting uniform building and zoning regulations, the time needed to obtain a building permit has been reduced by 22 and 15 days in Sialkot and Lahore. Lahore and Sialkot also continued to computerize their land records. The pilot program in Sialkot led to a reduction in property registration time by half: from 13 days in 2006 to 6 days in 2009. In Lahore the time to register property was reduced from 37 to 30 days (figure 2).
Figure 2 – Computerization of land records reduced the time to register property in Lahore
Voices
The report will encourage healthy competition among the cities and the provinces … the government has already embarked upon comprehensive reforms agenda and it will take maximum guidance from the report.
Bank Contribution
Doing Business in Pakistan 2010 was prepared at the request from Pakistan’s Ministry of Finance and the Government of Punjab’s Planning and Development Department. The Economic Reform Unit of Pakistan’s Ministry of Finance was the national government counterpart. Governments of Balochistan, Khyber Pakhtunkhwa, Punjab and Sindh provided support in their provinces. The Bank Group was able toleverage resources from both USAID and DFID in support of the project, due to the high level of interest surrounding the regulatory environment in Pakistan, and the strategic plans of both bilateral donors in following up recommendations on the reform agenda. USAID is now supporting reforms in several cities throughout all four provinces, and reforms are carried out in Khyber Pakhtunkhwa (KP) with support of the World Bank’s KP/FATA Economic Revitalization project. DFID is supporting the Government of Punjab in the private sector development agenda.
Beneficiaries
“The report will encourage healthy competition among the cities and the provinces … the government has already embarked upon comprehensive reforms agenda and it will take maximum guidance from the report.” - Hina Rabbani Khar, Minister of State for Finance and Economic Affairs (Source: The Express Tribune)
Toward the Future
Doing Business contributes to the development impact agenda of the World Bank Group. The specificity with which the Doing Business indicators measure business regulations make it possible to measure and attribute results to specific policy interventions. The comparisons among cities within a large country—such as Pakistan—are even stronger drivers for reform than global comparisons and promote peer to peer learning. The combination of an intense engagement strategy with the subnational clients together with the media appeal of Doing Business engenders ownership at all levels of government which is crucial to enable space for reform.
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