invest.gov.pkinvest.gov.pk/boi/userfiles1/file/db strategy/dbstrategy.docx · web viewthe first...

List of Abbreviations

BOI Board of InvestmentBOR Board of Revenue

EDE Electronic Data ExchangeEOBI Employees Old-Age Benefit Institution

FBR Federal Board of Revenue

K-E Karachi Electric

LESCO Lahore Electricity Supply CompanyLRMIS Land Record Management Information SystemLTU Large Taxpayers UnitMoF Ministry of FinanceMoWP Ministry of Water & Power

PCA Post Clearance AuditPESSI Punjab Employees Social Security Institution

SBCA Sindh Building Control AuthoritySBP State Bank of PakistanSCADA Supervisory Control and Data AcquisitionSECP Securities & Exchange Commission of Pakistan

SHC Sindh High CourtSESSI Sindh Employees Social Security InstitutionTEPA Traffic Engineering and Transport Planning AgencyTFA Trade Facilitation AgreementTIR International Road TransportsVOSS Virtual One stop ShopWASA Water and Sanitation Agency

WBG World Bank GroupWTO World Trade OrganizationWeBOC Web Based One Customs system

Ease of Doing Business Strategy 2018-21

Board of Investment in consultation with Finance Division, Federal Board of Revenue, Securities & Exchange Commission of Pakistan, State Bank of Pakistan, Provincial Governments, World Bank and the Private Sector.

Prime Minister's Office Board of Investment

Islamabad.

Ease of Doing Business in Pakistan

A conducive investment climate is instrumental in attracting both domestic and foreign

investment by providing a more facilitative institutional, policy and regulatory

environment for businesses to operate. World Bank’s Report on Doing Business (DB)

ranks economies across the world annually on the basis of 10 comprehensive areas in

the life cycle of a business; including starting a business, dealing with construction

permits, getting electricity, registering property, getting credit, protecting investors,

paying taxes, trading across borders, enforcing contracts and resolving insolvency

(formally closing a business). For countries having population of more than 100 Million,

WB takes two cities in the final ranking. In case of Pakistan these include Karachi and

Lahore with ratio of 65% and 35% weightage respectively in total DTF score. Doing

Business Report takes the perspective of domestic, primarily smaller companies and

measures the regulations applying to them through their life cycle. The government of

Pakistan, in order to improve the country’s ranking in the world has taken this report as

a starting point to make changes in the macroeconomic environment. The elements

such as efficiency, quality and transparency in the government procedures make the

doing business reforms pertinent to improve economic governance.

The first plan, developed to improve business climate in October 2014, was a joint effort

by the Board of Investment (BOI) and the Economic Reforms Unit (ERU), Ministry of

Finance (MoF), with the assistance of the World Bank Group. Owing to these efforts at

national and sub-national level, Pakistan improved its ranking from 148 out of 189

countries to 144th out of 190 economies for 2017 on the Word Bank’s Doing Business

(EODB) Index. However, in 2018, Pakistan dropped three ranks and came at 147 out of

a total of 190 economies. The main contributing factor was decline in ranking in two

important areas such as paying taxes and getting credit. Following graph reflects the

changes in Pakistan’s DB Rank since 2007;

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

74 76 77 85 83105 107 110

128138 144 147

136

Doing business rank (pakistan)

In DB report 2019 Pakistan improved 11 ranks. Since the launch of DB report in 2002, it

is the first time that Pakistan has jumped 11 points in one year with three approved and

many positive data corrections.

Pakistan made starting a business easier by introducing the online one-stop registration

system, replacing several forms for incorporation with a single application and

establishing information exchange between the SECP and FBR the tax authority. For

registering property, Pakistan (Lahore) made registering property easier by

streamlining and automating administrative procedures and by increasing the

transparency of its land administration system. Pakistan (Karachi) made registering

property easier by increasing the transparency of the land registry. In Resolving

insolvency, Pakistan made resolving insolvency easier by introducing the reorganization

procedure and improving the continuation of the debtors business during insolvency

proceedings.

Along with ranking in Doing Business another factor is a Distance to Frontier score.

Distance to Frontier (DTF) score measures the gap between the regulations of low

income profile economies and the high income OECD countries and here Pakistan

stands at an encouraging 55.31 – an improvement of 3.66 over the last year.

Table given below reflects the position of each indicator for the last two cycles:

Indicator DB 2018 DB 2019 DB 2018 DTF

DB 2019 DTF

Overall - out of 190 147 136 51.65 55.31

Starting a business (reform) 142 130 78.61 81.89

Dealing with Construction Permits

141 156 59.72 53.59

Getting Electricity 167 167 42.39 44.15

Registering Property (reform) 170 161 41.41 45.63

Getting Credit 105 (-23) 112 45.00 45.00

Protecting Minority Investors (reform)

20 26 71.67 71.67

Paying Taxes 172 (-16) 173 46.43 47.05

Trading Across Borders (reform) 171 142 41.94 60.12

Enforcing Contracts 156 156 43.49 43.49

Resolving Insolvency 82 53 45.83 59.86

Doing Business Report gives an insight into an ever changing and evolving step that

government take to improve their business climate in business hubs. In a bid to fast

track implementation of reform, the BOI in consultation with stakeholders and World

Bank Group launched an accelerated DB 100 days sprints. Sprint I and Sprint II have

already been completed while Sprint III has been started recently. It is expected that

country’s DB ranking by 2019 would continue to improve. The current government is

firmly committed to reduce the cost of doing business and improve country’s ranking in

the ease of doing business index. The government is aiming to get Pakistan fewer than

100 ranking by extending maximum facilitation and simplification of the procedures.

The idea is to create enabling environment in Karachi and Lahore and replicate the

same in other business hubs.

The Prime Minister Imran Khan in his first speech to the Nation mentioned his

commitment to improve business climate. The “Doing Business Reform Strategy 2018-

21” is the national roadmap for improving Pakistan’s Investment Climate. The Strategy

is designed to create an enabling environment for attracting higher investment (both

foreign as well as domestic) to help boost the country’s growth prospects. In order to

achieve this objective, the Strategy encompasses a set of comprehensive reform actions

not only at the federal government level but also includes provinces in the reform

initiatives falling within their domains. The reforms focus on regulatory changes,

improving technology and simplification of procedures.

In DB report 2019, Pakistan was ranked within the top 100 countries in business

indicators such as protecting minority investors (26th) and Resolving Insolvency

(53rd), among the 190 countries surveyed. Pakistan’s worst rank was in paying taxes,

where it was placed 173rd. It ranked 167th in getting electricity, 161 in registering

property, 156th in enforcing contracts and 142 in trading across borders. The new

strategy will have special focus on areas where Pakistan’s performance remained

poorest.

The timelines for implementation of reform actions range from six months to a year for

the short term, and from one to three years for the medium and long term. The Strategy

also encompasses development of a communication strategy to build effective feedback

mechanisms so that bottlenecks in implementation are identified in a timely manner

and dealt accordingly. The communication strategy is two pronged and covers

communication within the government departments as well as with the general public

and direct beneficiaries of reforms.

Proposed Action plan / strategy for the next three years reflecting reform actions (Short

term- one year, Medium term 1-2 years and Long term 2-3 years ) in various business

areas along with timelines and entities responsible is give below:

STARTING A BUSINESS

This topic measures the number of procedures, time, cost and paid-in minimum capital

requirement for a small- to medium-sized limited liability company to start up and

formally operate in each economy’s largest business city. To make the data comparable

across 190 economies, uses a standardized business that is 100% domestically owned,

has start-up capital equivalent to 10 times the income per capita, engages in general

industrial or commercial activities and employs between 10 and 50 people one month

after the commencement of operations, all of whom are domestic nationals. Starting a

Business considers two types of local limited liability companies that are identical in all

aspects, except that one company is owned by 5 married women and the other by 5

married men. The ranking of economies on the ease of starting a business is determined

by sorting their scores for starting a business. These scores are the simple average of

the scores for each of the component indicators.

COMPARISON OF PAKISTAN WITH SOUTH ASIA & BEST PERFORMER

PLANNED REFORMS

Reform Action Timelines Responsibility

Integration of Federal and Provincial Company Registration Portals

Short Term SECPPITB and Govt. of

Sindh

Availability of online fee payment facility at federal and provincial levels;


SindhCreate a set of incentives to ensure uptake of the electronic business start-up in Sindh and Punjab;


Sindh

Indicator South Asia

OECD high income

Best Regulatory Performance

Procedure – Men (number)

10 7.6 4.9 1 (New Zealand)

Time – Men (days)

16.5 13.7 9.3 0.5 (New Zealand)

Cost – Men (% of income per capita)

6.8 11.0 3.1 0.0 (Slovenia)

Procedure – Women (number)

10 7.8 4.9 1 (New Zealand)

Time – Women (days)

16.5 13.9 9.3 0.5 (New Zealand)

Cost – Women (% of income per capita)

6.8 11.0 3.1 0.0 (Slovenia)

Paid-in min. capital (% of income per capita)

0.0 0.2 8.6 0.0 (117 Economies)

PAKISTAN

Conducting mapping of business permits and licenses and integrate licensing and permitting with the business startup system in Sindh and Punjab;

Medium to Long term

Punjab Govt.Sindh Govt.

Conduct mapping of agencies authorized to conduct inspections and integrate inspections tracking into the business start-up system in Sindh and Punjab;

Medium to Long term

Punjab Govt.Sindh Govt.

DEALING WITH CONSTRUCTION PERMITS

This topic tracks the procedures, time and cost to build a warehouse—including

obtaining necessary the licenses and permits, submitting all required notifications,

requesting and receiving all necessary inspections and obtaining utility connections. In

addition, the Dealing with Construction Permits indicator measures the building quality

control index, evaluating the quality of building regulations, the strength of quality

control and safety mechanisms, liability and insurance regimes, and professional

certification requirements.


Indicator Pakistan South Asia

OECD high income


Procedures (number) 18.7 15.2 12.7 None in 2017/18

Time (days) 262.8 165.5 153.1 None in 2017/18

Cost (% of warehouse value)

9.0 13.2 1.5 None in 2017/18

Building quality control index (0-15)

12.3 9.2 11.515.0 (3

Economies)Reform Action Timelines Responsibility

Automation of construction permits at LDA, including electronic submission of applications

Short Term LDA

Link LDA system with Punjab LARIMS Short Term LDA

Establishment of electronic One Window Operation at SBCA

Short Term SBCA

Link SBCA system (currently under development) with Sindh LARIMS

Short Term SBCA

Establishment of electronic One Window Operation at SBCA

Medium to Long term

SBCA

PLANNED REFORM

GETTING ELECTRICITY

This topic measures the procedures, time and cost required for a business to obtain a

permanent electricity connection for a newly constructed warehouse. Additionally, the

reliability of supply and transparency of tariffs index measures reliability of supply,

transparency of tariffs and the price of electricity.


PLANNED REFORMS


OECD high

income


Procedures (number) 5.4 5.4 4.5 3 (25 Economies)

Time (days) 161.2 98.3 77.2 18 (3 Economies)

Cost (% of income per capita) 1585.3 1054.7 64.2 0.0 (3 Economies)

Reliability of supply and transparency of tariff index (0-8)

0 2.1 7.5 8.0 (27 Economies)

Pakistan


Ensuring that K-Electric notifies its customers of a change in tariff ahead of the billing cycle;

Short Term

K-Electric

Ensuring that LESCO notifies its customers of a change in tariff ahead of the billing cycle;

Short Term

LESCO

Introducing a set of measures to reduce a number of outages to enable Sindh to score on the Reliability of supply and transparency of tariff index;

Medium to Long term

K-Electric

Introduce a set of measures to reduce a number of outages to enable Punjab to score on the Reliability of supply and transparency of tariff index.

Medium to Long term

LESCO

REGISTRING PROPERTY

This topic examines the steps, time and cost involved in registering property, assuming

a standardized case of an entrepreneur who wants to purchase land and a building that

is already registered and free of title dispute. In addition, the topic also measures the

quality of the land administration system in each economy. The quality of land

administration index has five dimensions: reliability of infrastructure, transparency of

information, geographic coverage, land dispute resolution, and equal access to property

rights.



OECD high income


Procedures (number)

7.3 6.8 4.7 1 (4 Economies)

Time (days) 144.1 114.1 20.1 1 (New Zealand)

Cost (% of property value)

4.2 6.9 4.2 0.0 (Saudi Arabia)

Quality of the land administration index (0-30)

9.5 8.8 23.0 None in 2017/18

PLANNED REFORMS


Complete electronic database for checking for encumbrances (liens, mortgages, restrictions and the like) in Lahore and make it available online;

Short Term PLRA-Punjab/BOR-Sindh

Establish and publish statistics on the number of land disputes

Short Term PLRA-Punjab/BOR-Sindh

Online issuance of Fard Short Term PLRA-Punjab

Online submission of Fard Short Term PLRA-Punjab

Inter-government electronic procedure to obtain non-objection certificate

Medium to Long term Revenue Authorities

GETTING CREDIT

Pakistan

Doing Business assesses the sharing of credit information and the legal rights of

borrowers and lenders with respect to secured transactions through 2 sets of

indicators. The depth of credit information index measures rules and practices affecting

the coverage, scope and accessibility of credit information available through a credit

registry or a credit bureau. The strength of legal rights index measures the degree to

which collateral and bankruptcy laws protect the rights of borrowers and lenders and

thus facilitate lending. For each economy it is first determined whether a unitary

secured transactions system exists. Then two case scenarios, case A and case B, are used

to determine how a non-possessory security interest is created, publicized and enforced

according to the law. Special emphasis is given to how the collateral registry operates (if

registration of security interests is possible). The case scenarios involve a secured

borrower, company ABC, and a secured lender, BizBank.



OECD high income


Strength of legal rights index (0-12)

2 5.5 6.1 12 (5 Economies)

Depth of credit information index (0-8)

7 4.0 6.7 8 (42 Economies)

Credit registry coverage (% of adults)

10.7 4.8 21.8100.0 (4

Economies)Credit bureau coverage (% of adults)

7.2 18.5 65.3100.0 (25

Economies)

PLANNED REFORMS


Operationalization of e-registry Short Term

SECP and Finance Division

Complete implementation of the Collateral Registry

Medium to Long term

SBP, SECP & FIN DIV

Revise Secured Lending legal framework to ensure compliance with DB methodology

Medium to Long term

SBP, SECP & FIN DIV

Enable collection and distribution of credit data from retailers or utility companies

Medium to Long term

SBP & FIN DIV

PAYING TAXES

Pakistan

This topic records the taxes and mandatory contributions that a medium-size company

must pay or withhold in a given year, as well as the administrative burden of paying

taxes and contributions and complying with post filing procedures (VAT refund and tax

audit).Using a case scenario, records taxes and mandatory contributions a medium size

company must pay in a year, and measures the administrative burden of paying taxes,

contributions and dealing with post filing processes. Information is also compiled on

frequency of filing and payments, time taken to comply with tax laws, time taken to

comply with the requirements of post filing processes and time waiting.


Indicator South AsiaOECD high

incomeBest Regulatory

Performance

Payments (number per year)

47 27.6 11.2 3 (Hong Kong SAR,

China)

Time (hours per year) 293.5 274.8 159.4 49 (Singapore)

Total tax and contribution rate (% of profit)

34.1 43.5 39.826.1% (32

Economies)

Post filing index (0-100) 10.49 41.78 84.41 None in 2017/18

PLANNED REFORMS


Reduce a number of payments. Complete implementation of E-payments of social security contributions;

Short Term PESSI & SESSI

Complete implementation of E-payments of pension contributions;

Short Term EOBI-PESSI & SESSI

Reduce time to obtain VAT refund (Federal level reform)

Short Term FBR

Improve risk-management system audits Short Term FBR

Enable filing and payment of all taxes and contributions electronically.

Short Term FBR -PESSI & SESSI

TRADING ACROSS BORDERS

Pakistan

Doing Business records the time and cost associated with the logistical process of

exporting and importing goods. It measures the time and cost (excluding tariffs)

associated with three sets of procedures—documentary compliance, border compliance

and domestic transport—within the overall process of exporting or importing a

shipment of goods.


Indicator South AsiaOECD high income


Time to export: Border compliance (hours)

75 62.9 12.51 (19

Economies)Cost to export: Border compliance (USD)

356 347.2 139.10 (19

Economies)Time to export: Documentary compliance (hours)

55 74.1 2.41 (26

Economies)

Cost to export: Documentary compliance (USD)

118 160.3 35.20 (20

Economies)

Time to import: Border compliance (hours)

120 95.8 8.50 (25

Economies)Cost to import: Border compliance (USD)

475.7 504.6 100.20 (28

Economies)Time to import: Documentary compliance (hours)

143 100.8 3.41 (30

Economies)

Cost to import: Documentary compliance (USD)

250 276.7 24.90 (30

Economies)

PLANNED REFORMS

Reform Action Timelines

Responsibility

Ensure 50% reduction of customs-related processing time at the border (Karachi)

Short Term

FBR-Customs

Ensure availability of on-line payment facilities at the border of duty, taxes and all other charges

Short Term

FBR-Customs

Complete integration of WeBOC with Plant Protection Department;

Short Term

FBR-Customs

Complete Integration of WeBOC with Animal Quarantine Department;

Short Term

FBR-Customs

Pakistan

Reduce hours to prepare import/export documents from 55 to 20 (export) from 143 to 50 (import) through expansion of electronic document exchanges.

Short Term

FBR-Customs

Establishment of National One Window Long Term FBR-Customs

ENFORCING CONTRACTS

The enforcing contracts indicator measures the time and cost for resolving a

commercial dispute through a local first-instance court, and the quality of judicial

processes index, evaluating whether each economy has adopted a series of good

practices that promote quality and efficiency in the court system.



OECD high income


Time (days) 10712 1101.6 582.4None in

2017/18

Cost (% of claim value) 20.5 29.8 21.2None in

2017/18Quality of judicial processes index (0-18)

5.7 7.0 11.5None in

2017/18

PLANNED REFORMS


Introduce efficient rules for Commercial Court and accompanying Bench Book for Punjab and Sindh

Medium to Long term

LHC, KHC

Operationalize the Commercial Bench in Punjab and Sindh High and District Courts;

Medium to Long term

LHC, KHC

Introduce provisions limiting adjournments at the Commercial Bench in Punjab and Sindh to improve the Judicial Quality Index;

Medium to Long term

LHC, KHC

Improve case management system at Punjab and Sindh High and District Courts in increase the Judicial Quality Index from 5 to 10.

Medium to Long term

LHC,KHC

SECP in consultation with provincial government will lead the reforms drive for starting

a business, FBR and Ministry of Maritime Affairs will ensure that the cost and time to

export and import gets reduced substantially to bring Pakistan’s rank within top 100

businesses. FBR and provincial governments will work to reduce the multiplicity of

Pakistan

taxes and tax payments. SBP and SECP in consultation with Finance Division will

introduce necessary reforms to improve Pakistan’s position in strength of legal rights

index. Ministry of Energy in consultation with stakeholders will ensure reforms in

getting electricity. Provincial governments (Planning & Development Departments) will

lead reform drive in provincial indicators. BOI will proactively pursue with the federal

institutions and provincial governments as well as the high courts for necessary

reforms.

Communication Strategy

One key issue that has held Pakistan from achieving a bigger change in ranking is weak

Public Sector Reforms Marketing. Board of Investment strongly recommends all

stakeholders both federal and provincial to make sure that every reform is

communicated nationwide not only through print media but also through social media.

There is a dire need of having a communication strategy/framework to build feedback

mechanisms between public and private sectors and to disseminate the reforms

undertaken through each available communication media. The forum should be as high

as the Prime Minister’s Office’s press releases, regular talks/ dialogues between public

officials and private business houses.

BOI, in its capacity as Secretariat of DB Reforms Steering Committee, has started a

dedicated website and a dashboard that monitors the performance of all agencies and

generates final progress online for an online communication tools. BOI will also hold

intensive stakeholder consultation to get their feedback on the reforms undertaken and

also engage with the respondents to ensure that the reforms are felt at the ground level.

Each department will review the progress every week for carrying out the necessary

reforms. The strategy will also include more reforms based on further review and

deliberation with stakeholders including private sector during course of implementing

sprint III. Same process will be followed by updating the strategy annually.

Outcomes

i. Improving the efficiency and effectiveness of investment procedures and enhancement of Transparency of business processes

ii. Reducing procedures, cost and time involved to reduce administrative burden on businesses

iii. Enhancing investor and consumer confidence.

iv. Improving awareness about automation of procedures in relevant departments

v. Strengthening inland clearance facilities, improving electronic data interchange system and inland transportation infrastructure capacity

vi. Enhancing predictability and consistency in investment-related policies

The types of reforms envisaged under the Strategy will facilitate business start up, improve security of title by streamlining land and property procedures, improve access to credit through expanding availability of credit information and enhancing secured lending framework, improve contract enforcement through enhancing judicial case management and capacity building of judiciary. This will facilitate cross border trade and improve tax collection through enhanced tax administration.

Indicators Short Term

Medium to Long term

Total

Starting a Business 3 2 5

Dealing with Construction

Permits

4 1 5

Getting Electricity 2 2 4

Registering Property 4 1 5

Getting Credit 1 3 4

Paying Taxes 5 5

Trading Across Borders 5 1 6

Contract Enforcement 4 4

Total 24 14 38

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