Making it easy to do business
Pakistan’s comparison with BRIC (Brazil, Russia, India, China) and other emerging markets for ease in doing business can largely be attributed to the fast developing entrepreneurial landscape of the country. Despite floods, terrorism and corruption, the benefits of economic investment in Pakistan have never been found amiss. Claims like ‘Pakistan is entrepreneurial to the core’, have been established by the country’s business sector even through tough times.
The website lists the top five reasons for foreign investment in Pakistan as being: abundant land and natural resources; human resources (huge English speaking population); a large and growing domestic market (a growing middle class); well-established infrastructure and legal systems (road, rail, sea, IT); and geographic location – as principal gateway to the Central Asia Republics and connections to the Middle East and South Asia.
In other words, labour and raw materials are cheap in Pakistan, the population is the 6th largest in the world and growing fast with over 50 per cent of the 180 million people being under the age of 20, and tax and set-up incentives for foreign investment are good.
For the last seven years, the World Bank has issued a report called Doing Business, which measures the ease with which private enterprises can conduct business in various countries around the world. It measures such metrics as the amount of time it takes to register a business, how many procedures are involved, how many official signatures and how much would it cost. It does so for dozens of other relatively simple interactions between government and businesses in any given country.
Pakistan has been an easier place to do business than the BRIC countries and commonly thought of as one of the most important emerging markets in the world. Pakistan’s overall ranking is 85 out of 183 countries, which places it somewhere in the middle. Of the 10 categories, the country does best in the category of “Protecting investors,” coming in at number 27. This is largely due to the fact that it is relatively easy for investors to sue management in the event of a suspected act of fraud. Indeed, the strength of Pakistan’s investor protection places the country higher than the average for the OECD, a group of the 30 mostly rich countries. While Pakistan has some strengths, it also has a number of weaknesses. In terms of ease of paying taxes and ease of enforcing contracts, Pakistan has considerably poor ranking.
While its current rankings may be generally low, Pakistan’s problems in the Doing Business report are remarkably easy to fix. In most cases, all that is required is the removal of redundant procedures, which would reduce the time and cost associated with the interaction between government and businesses. The report shows that for attracting foreign investment, a country does not require a massive incentive scheme. Sometimes it can be as simple as just removing a little bit of red tape, which in the case of Pakistan needs to be done immediately.