Prime Minister Khan, Chief Minister, and distinguished guests.
It’s a pleasure to be here in Pakistan, and join those of you who have championed the ease of doing business in this country.
Today, I want to talk about the important strides the government has taken to create a more business-friendly environment. Over time, the reforms you have undertaken will create better jobs and higher incomes, attract more investments, and generate more tax revenues.
I also want to talk about other reforms necessary to spur growth and raise living standards: reforms needed to protect women’s welfare and include them in the economy, reforms needed to strengthen the energy and education sectors, and reforms needed to simplify taxation.
We see youth and women around the world demanding jobs and economic opportunities. Structural reforms are necessary to heed their calls, raise living standards and reduce poverty.
DOING BUSINESS: GAINS
Last week we launched our annual Doing Business report, which provides a snapshot of the rules and regulations that affect businesses in every country. Pakistan emerged as one of the top 10 reformers this year. These will add to growth and jobs over time.
According to the Doing Business report, Pakistan carried out the most reforms in the South Asia region. Your country jumped to 108th place in the rankings, from 136th last year.
Your country made it easier for entrepreneurs to start a business, get electricity and construction permits, register property, pay taxes, and trade across borders. Many of these advances leverage digital technologies to make the process more transparent and streamlined.
I congratulate you—Prime Minister Khan, Chief Minister, and your teams—for this achievement. Ownership of reforms at the highest level makes a big difference!
The federal government and two provincial governments showed great cooperation in working together to improve the ease of doing business. Pakistan’s federation is key in implementing long-lasting reforms. It will be important to harness this collaborative spirit between the federal and provincial government as you turn to broader structural reforms, which are critically needed today.
The improvements in the ease of doing business will give a boost to the overall investment climate for the private sector, especially for micro, small and medium enterprises. We are already seeing positive investor interest in a number of sectors, including energy and access to finance.
DOING BUSINESS: OPPORTUNITIES FOR IMPROVEMENT
While the gains this year are significant, Pakistan has opportunities for further improvements in the ease of doing business.
For example, in the area of enforcing contracts, where it ranks low at 156th. It takes 1,025 days to resolve a commercial dispute in Lahore and 1,096 days in Karachi. This is almost twice the 573-day average among high-income OECD economies.
Pakistan can still work on improving the quality of judicial processes: an area where it performs below the South Asia regional average.
It’s important to note that Doing Business isn’t intended to be an investment guide. Potential investors consider many other factors, such as the overall quality of an economy’s business environment and its national competitiveness, macroeconomic stability, development of the financial system, market size, rule of law, and the quality of the labor force.
Certainty of the regulatory environment is very important for business confidence as well.
I would like to offer a few thoughts about reforms required to spur growth and development.
EDUCATION
Earlier today, I had a very constructive conversation with Federal Education Minister Shafqat Mahmoud, several provincial education ministers, and Minister of Planning, Development and Reform, Makhdum Bakhtyar.
A concerted effort is needed to decrease the number of out of school children and increase school completion. Education standards need to evolve to guarantee a minimum level of learning in the country, and to focus on learning and acquiring skills, rather than simply getting a credential. Skills training is critical to match skills to available jobs. Provincial and federal governments need to work together to reduce learning poverty in the country.
We at the World Bank stand ready to help in this.
WOMEN INCLUSION
I also met today with women parliamentarians working hard to drive real change and push the women’s agenda.
Fully including women in the economy is essential to broad-based growth.
Today, only one in four Pakistani women is part of the workforce. Pakistani women face many constraints to work. These include transportation, physical safety, restrictions on working hours, and social norms. Girls are marrying too young to complete their education. When they make it to work, they face hurdles in rising through the ranks. Women occupy less than seven percent of managerial positions in Pakistan. Addressing some of these gaps would give a major boost to the economy.
Pakistan has already made progress: an upcoming World Bank report on Women, Business, and the Law will report this progress.
ENERGY SECTOR
In the energy sector, creating a stable, predictable environment is needed so that investors and project developers can harness Pakistan’s natural resources, and invest in low cost energy projects, which are critical to reduce the cost of electricity generation.
This will not only, over time, reduce the burden on circular debt, but will also translate in the long run into lower electricity prices, which will benefit industries and households.
TAX REFORM
Tax reforms are key. Today, Pakistan operates like five separate markets rather than one national market. Businesses must file around 60 tax returns! This is a big barrier to private investment in the country. It also creates a tax-revenue shortfall of about 4.4 trillion rupees per year.
Harmonizing sales tax across the federation would be a win-win, allowing lower rates and faster growth. For the private sector, it would mean lower compliance costs and more innovation. This is especially important for micro, small and medium enterprises that simply do not have the manpower to file this many tax returns! For the government, it would mean more revenue.
Mr. Prime Minister, I’m impressed to hear that federal and provincial governments have already begun to map, harmonize, eliminate, and automate tax filing procedures. This is critical, and I urge you to go even further and make the process fully digital.
TARIFF REFORMS
It’s also important to liberalize trade and investment, by creating a simple, transparent tariff structure with reduced tariffs. Government revenue objectives and incentives for exports need to be well balanced.
It’s also important to extend the automated border-management system to all regulatory agencies.
INCREASED TRANSPARENCY
Increased transparency and accountability are fundamental to any reform effort.
Transparency about the terms, collateral and liens of large public infrastructure contracts is important.
Another area for improved transparency is the timely disclosure of the government’s budget documentation and audited state-owned enterprises accounts.
Why is this important? It’s important to do this to give the public and investors a true picture of the government’s debt burden. This in turn attracts more investments and private sector capital.
Information technology should be leveraged to improve transparency. For example, through e-procurement that can enhance competition and save money.
CONCLUSION
Mr. Prime Minister, Chief Minister, I’d like to thank you again for your hospitality. We’re in this room today, thanks to your efforts, and the efforts of many committed reformers who want to see Pakistan achieve its full potential. At the World Bank Group, we share the same vision.
I know that the optimistic scenario of Pakistan@100 is possible. Yet it will require some tough decisions, from you and fellow reformers in your government. It will require the will to execute them.
Many of these decisions will meet resistance from vested interests, and your leadership will be required to stay the course. However, the Doing Business exercise over the last two years has demonstrated that Pakistan has the ability to make difficult but necessary reforms.
I encourage you to build on that momentum to put in place structural reforms that would take the country to the next level. I’m confident Pakistan will rise to the challenge.
The World Bank stands ready to support.
Thank you.
