Chief Minister Murad Ali Shah has approved the setting up of a dedicated and specialized unit for improvement of the investment climate and ease of doing business in Sindh.
A Sindh Investment Climate Improvement Cell (SICIC) will be established within the Sindh Board of Investment, according to a statement issued by the Sindh government on Tuesday.
It will review and improve all necessary procedures for setting up business, obtaining permits, registering property, and other related matters for investors in the province.
Through the establishment of this cell the government of Sindh appears to demonstrate a commitment to making all procedures related to investment and setting up of a business easier, faster and cheaper in Sindh, it added.
The provincial government will hire experts in private-sector management and in technical subjects to work with government functionaries to improve efficiency and facilitate doing of business in Sindh.
According to the statement, the essential role of the cell will be to construct a modern, fully automated one-window facility for all businesses and investors in the province.
This facility will connect all relevant departments engaged in the setting up of all business operations, including SESSI, excise and taxation, SBCA, industry and laws.
The cell will co-ordinate the development, implementation and monitoring of legislative, regulatory, procedural and institutional reforms.
The provincial government is committed to creating an enabling business environment consistent with good international practices. It has partnered with the World Bank to expedite this imperative reform process, the statement said.
The action taken by the Chief Minister is commendable to the extent that his government, and notably the Sindh Board of Investment, has recognised ease of doing business as an issue needing to be addressed to invite investment. But it falls short in putting up a holistic strategy and a roadmap which could address this complex subject. Perhaps his province is the only one to recognise this as an impediment to investment and doing something about it, and this is a good start.
The subject is far more complex and setting of a cell within the SBI alone will not be able to resolve the issue.
Last year's World Bank Report classifies Pakistan, ranking 141 out of 190 countries, as a difficult country to invest in. On top is Singapore, at No. 1, as the best country in Doing Business; the most difficult is Eritrea, ranked at 190.
Each year the World Bank conducts a survey and publishes a comprehensive report on Ease of Doing Business and country ranking. The parameters considered in the survey are:
1. Starting a Business (Standard Administrative processes).
2. Construction Permits (Standard administrative processes).
3. Getting Electricity (Standard administrative processes).
4. Getting Credits (investors' credit ratings).
5. Paying taxes (investors' transparency).
6. Cross-border trading (Customs regulations and conduct).
7. Property Registration (mechanism to protect and resolve land disputes v/s legal framework for property registration).
8. Contract Enforcement (time and cost to resolve commercial disputes and application of arbitration clause v/s quality of judicial processes).
9. Resolving Insolvency (time, cost, outcome and recovery rate for a commercial insolvency v/s the strength of a legal system).
10. Protecting Rights of Minority Shareholders (mechanism for alternate dispute resolution).
The cell being created under the Sindh Board of Investment will be able to well address items (1) to (3), being mostly administrative in nature and any improvement in it may make Pakistan's rank a bit better. Whereas items 4) to (6) are influenced by the credentials and conduct of the investors.
The more complicated ones are items (7) to (10) which are largely pulling down Pakistan's Ease of Doing Business ranking. All these impediments have a cost attached to it where Pakistan falls out, both on Ease and Cost of Doing Business.
All four are influenced by Pakistan's prevalent legal framework where the Sindh government has little influence to change much. It requires administrative and structural reforms in the country's judicial system and awareness of what investment means to it.
In the yearly review conducted by the World Justice Project on global benchmarking on Rule of Law and Judicial Risks v/s Cost of Business, Pakistan's ranking is as low as 98 out of 102 countries. The parameters considered in the ranking are:
1. Constraints on government powers
2. Corruption
3. Civil justice
4. Criminal justice system
5. Fundamental rights
6. Security
7. Limited government powers
8. Regulatory enforcement
All countries which have ranked well in Rule of Law and Judicial Risks have done well in securing investments too.
Pakistan's judicial system and legal framework are much isolated from the investment dynamics and sensitivity of the issue of the investors. Our legal framework and laws related to contract enforcement, dispute resolutions and similar issues are by and large governed by the laws of the last century.
The effluent emerging countries have moved on to a reformed legal structure, such as an on-line system in the regulatory process, electronic filing of court proceedings, citizens' and stakeholders' enlargement in rule making, expanding court automation, speedy small-claims commercial courts, enforcing judgement more efficient, respect of arbitration clauses and proceedings, a streamlined and shortened timeframe for insolvency proceedings, reformed legislation and regulations investors' interest and workers' protection and social benefits.
All these reforms have reduced cost of doing business and have improved Ease of Doing Business.
Pakistan's ranking at 141 out of 190 and its constant decline over the past years should have been worrisome for the government, but it appears not to have been so. What we are seeing around us as development is project business in the energy sector and infrastructure funded largely against project loans. What is not there is foreign direct investment, which is the real driver of a country's economy and a source of employment for the masses. What we are missing are our exports, which if not corrected will severely deplete our foreign reserves so far sustained through remittances from overseas Pakistanis.
The government needs sincerely to go through massive economic, legal and administrative reforms and bold decisions to make Pakistan attractive for investment and exports. The question is whether the government considers it as a priority and has a will to do this. Probably not. (The writer is former President Overseas Investors Chamber of Commerce and Industry)
Copyright Business Recorder, 2017