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KCCI proposes to improve ‘Doing Business Ranking’ to reap benefits of CPEC


5/10/2018
KARACHI: The Karachi Chamber of Commerce and Industry (KCCI),has proposed that the Doing Business Ranking should be improved drastically by taking concrete steps where the rankings should be improved by almost 50 ranks in order to reap the benefits of CPEC. 
 
The Doing Business Ranking of Pakistan has slipped by three notches from 144 to 147 in 2018 as per World Bank which is mostly contributed by the business environment of Karachi. This means that by improving situation in Karachi, the whole country will progress through improved foreign investment inflows and better perception of the country. 
 
The World Bank annually issues its Doing Business report which ranks 190 countries on how easy it is to set up and conduct business in the respective countries. Since its inception in 2003, this ranking has evolved to become a global benchmark for countries wanting to improve on their business environment. In fact more than 60 countries (including Pakistan, India and Bangladesh) have formed special committees and task forces to improve on their Doing Business Rankings as foreign investors now tend to ponder on this report before finalizing their choice for an investment destination. 
 
Throughout the last year, many seminars were held in the leading business hubs of the country and the Ministry of Commerce tried to increase Pakistan’s rankings. The KCCI also presented a list of recommendations to all cadres of the govt. advising what steps need to be taken in order to move Pakistan up on the ranking scales. However, in spite of many efforts the ranking of Pakistan declined three notches from 144 to 147. 
 
Pakistan continues to remain the 3rd last in South Asia, only ahead of Bangladesh and Afghanistan. On the contrary, Pakistan’s main competitor India improved its rankings by leaps and bounds (from 130 to 100), resulting in the World Bank recognizing it as one of the 10 economies that improved the most in the areas measured by Doing Business, along with Thailand and Uzbekistan in Asia. 
 
Recognizing the importance of having improved doing business rankings for promoting business and investment to reap the benefits of CPEC, KCCI extended proposals to Sindh govt. for the upcoming Sindh Budget. The improvements have to be brought in the operational efficiency of all the institutions particularly operating in Karachi for which KCCI recommends the following measures: 
 
The Chamber proposed to reduce the number of days to register for Professional Tax with the Excise and taxation department, SESSI, EOBI, District Labor Department from a total of 2-4 weeks to 1 or 2 days at maximum altogether. 
 
It is proposed to be done through a single window online portal which should eventually be integrated with the federal agencies. 
 
The high number of procedures in Pakistan requiring the entrepreneur to run from pillar to post not only increases the startup costs but also increases the time taken for registration. By reducing time and procedures to start a business, investments will be promoted. 
 
Red-Tapism also proves to be a major deterrent for new businesses, which many times resulting in the potential entrepreneur choosing another destination for his investment. There is severe waste of time and lengthy procedure which are creating great hurdles in promotion of investment and doing business. It should be simplified where the number of days should be reduced from 260 days to not more than 155 days which is the average of OECD. It can be done by reducing the lag time at each of the department involved in dealing with construction permits. It can also be improved by digitalizing the data and allowing option of online applications at each department preferably through a single online platform. It takes 14 days to get a letter from the land owning authority confirming land title. Obtaining building permit costs Rs. 224,000 & 60 days. Then 30 days & cost of Rs. 30,000 are wasted at Environmental Protection Agency. Then the completion of foundations, subsequently 1st & 2nd floor have to be notified to SBCA and wait for 15 days each time for inspection. Another 30 days are spent on getting property tax valuation & certificate from the Excise & Taxation Dept. Water & sewerage connection takes 60 days while completion certificate from SBCA takes another 45 days which is just too much. In Korea it just takes 27.5 days to complete all the formalities of obtaining construction permits. 
 
The price of electricity in Karachi should be reduced from 18.8 to 12 cents. The time lag of 215 days should be reduced to 30 days while the exorbitant cost of Rs. 2.7 million should not be more than Rs. 0.37 million as the case in India. Pakistan ranks very poorly at 167 in getting electricity, with price of electricity at 18.8 Cents/Kwh which is among the highest in the region. The electricity prices are around 12 cents in the region. KE not only has exorbitant cost of new connection; the price of electricity and the time delay are also way too high in the region. 
 
Registering property: 
 
The time of registering property should be reduced from 208 days to just 22 days which is the average OECD benchmark. 
 
It take 2 weeks for obtaining NOC from district officer revenue; 8 days for newspaper ad for inviting objections, 1 week for conducting title search; 3-7 for preparing sale purchase agreement; 1 days for payment of duties/fees; 1 day for receipt of payment taken to stamp office; execution & registration of deed by Sub-Registrar of Conveyance / Assurance take 6 month & 1 week for mutation. 
 
All of these inefficiencies create great hurdles in execution of simple tasks and it is in the best national interest to remove these difficulties and streamline procedures to promote business and investments. 
 
Paying Taxes: 
 
The number of tax payments needs to be reduced from 47 payments to 11 payments and the time lag should also be lowered from 311.5 hours to 161 hours. The monthly payments in pension contributions and social security can be reduced to half yearly or quarterly payments combined while some taxes may be clubbed together. Corporate tax: 5 payments; Employer paid –pension contribution:12 payments; Social Security contributions: 12; Education Cess: 1; Property Tax:1; Professional Tax: 1; Vehicle Tax: 1; Stamp Duty: 1; Fuel Tax: 1; Goods and Sales Tax: 12; This is a very simple procedural rectification without making any fund allocation or taking a hit on the revenue but it will greatly improve the country’s doing business rankings. 
 
Trading Across borders: 
 
Time to export: border compliance be reduced from 75 hours to 13 hours; documentary Compliance from 55 hours to 3 hours. Cost to export: border compliance be reduced from $ 406 to $150 and documentary compliance $ 257 to $ 35. 
 
Time to import: border compliance be reduced from 129 hours to 9 hours; documentary Compliance from 143 hours to 3 hours. Cost to export: border compliance should be reduced from $ 937 to $112 and documentary compliance $ 735 to $ 26. 
 
Clearance and inspections by customs for exports takes 31 hours & by other agencies 24 hours while for imports customs take 34 hours and other agencies take 90 hours. 
 
Port handling for export takes 75 hours and for imports 120 hours. 
 
Trade efficiency is very important for a country’s long term sustainability. It should be improved on priority basis to facilitate businessmen.