Pakistan's industrial gas tariff is 173 percent higher that in Bangladesh, 44 percent higher than India's and 12 percent higher than Vietnam's. Its industrial electricity tariff is 19 percent higher that in Bangladesh and India and 41 percent higher than the tariff in Vietnam. Pakistan's minimum wages is 98 percent higher than in Bangladesh, 17 percent higher than in India and 16 percent higher than in Vietnam.
Pakistan's declining competitiveness in global markets is reflected in its declining exports. Pakistan, which once was the market leader in textile exports, has conceded this position to Bangladesh and Vietnam. Under fierce competition, Pakistan could not even avail the quota allocated to it.
The alarming news is that in the coming years, no improvement is expected in any of the three inputs in Pakistan. The current fuel oil input for power plants, partly replaced or supplemented by coal and LNG, is not going to provide a cost advantage in accordance with the tariffs notified by Nepra and Ogra. In the meantime, our competitors in the region have moved to renewable energy, notably India, while the others are catching up. On the other hand, renewable energy is not even the focus of Pakistan's energy managers.
Also, the third input of minimum wages in Pakistan is expected to rise ahead than our competitors'. Pakistan's competitiveness is therefore not expected to improve in the coming years under the present business strategy. Pakistan's global ranking in "Doing Business" has dropped to 138th out of 189 countries on the list of the survey conducted by the World Bank's Report of 2017.
In the "Ease of Doing Business," however, there have been some positive developments. The Securities and Exchange Commission of Pakistan (SECP) had taken measures in the Companies Act, 2017 to facilitate in Ease of Doing Business, notably:
a) Simplified business registration and post incorporation compliance:
Under this, companies can incorporate with a simple one-page memorandum and carry out all lawful business activities. This means easier alteration of memorandums and articles of association, ease of company business through resolution by circulation, a two-year time period allowed for overdue fillings by small companies, fast track mediation and alternative dispute resolution.
b) A simpler and softer regime of small companies:
This offers reduced filling requirements for small companies and single-member companies. Audit requirement is waived with paid-up capital up to one million rupees. A director's report not required for private companies with paid-up capital up to Rs 3 million not required to appoint the company secretary and hold general and board meetings.
c) Maximum use of technology:
This encourages optimal utilization of ICT for effective e-governance of companies and allows for documents/notices being served through electronic means and participation in meetings through video links
d) Administrative reforms:
This includes a simplified user registration system in e-services, establishment of incorporation and facilitation desks at company registration offices, swift company registration the same day and expanded physical outreach through new offices and facilitation centre.
Another significant development is the unanimous recognition by the responsible government entities, judiciary, civil society and the business community that the weak and outdated civil laws around business contracts are the biggest impediment to their enforcement and the need to improve Pakistan's global contract enforcement ranking.
For foreign direct investment contract enforcement and sanctity of contracts is cited as the biggest impediment in Pakistan.
Of the 10 parameters considered by the World Bank in its annual country ranking of "Doing Business" four are influenced by the legal and judicial system prevalent in the country.
In the meeting of the second Working Group in mid-June to improve "Contract Enforcement Ranking," held by Policy Research Institute of Market Economy (PRIME), the subject was deliberated on by members of civil society and the business community, and by government functionaries and the media.
A similar meeting had been held in end May in Peshawar at the Judicial Academy of Khyber Pakhtunkhwa where members of the judiciary, legal experts, provincial government functionaries and leaders from the business community deliberated on the role of judicial and legal system and the changes required to upgrade Pakistan's ranking in "Doing Business."
There is hope in achieving improvements and better global ranking in Ease of Doing Business, but there appears to be no strategy, nor even recognition by the government, for bringing about a positive change in the competitiveness of Pakistan in global markets. And unless this happens there is no chance for the growth in exports and foreign or local investments.
(The writer is former President, Overseas Investors Chamber of Commerce & Industry)
Copyright Business Recorder, 2017