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DOING BUSINESS
INDEX:
TRANSFORMING PAKISTAN
A COMPARATIVE ANALYSIS
The Lahore Chamber of Commerce & Industry
Trend in Pakistan’s Ranking in
Ease of Doing Business
-105 -107 -110
-128
-138-148 -144
2012 2013 2014 2015 2016 2016 R 2017
Pakistan’s Ranking in Each Factor
Sr. # FACTOR 2017 2016(Revised)
1 Starting a Business 141 135
2 Dealing with Construction Permits 150 150
3 Getting Electricity 170 163
4 Registering Property 169 173
5 Getting Credit 82 134
6 Protecting Minority Investors 27 25
7 Paying Taxes 156 154
8 Trading Across Borders 172 172
9 Enforcing Contracts 157 156
10 Resolving Insolvency 85 85
Improvements reported in 2017
Pakistan is now in the list of ten economies making the
biggest improvements in their business regulations.
The only from South Asia - having improved its position
under the new methodology.
On the Distance to Frontier metric, Pakistan’s score went up
from 49.48 (DB2016) to 51.77 (DB2017)
Reform in Property Transfers:
Punjab has launched automated Land
Records Management and Information
Program (LRMIS).
During the five-years, this improved quality
of service provided.
Reforms in Getting Credit
Pakistan improved access to credit
information, giving borrowers right to
inspect their own data.
Methodology
To compare procedures of Pakistan with the best ranked countries in each factor
To identify the gaps between the procedures of Pakistan and the best ranked countries
To formulate recommendations in consultation with stakeholders
To lobby and engage with government for implementation
Companies registered in Pakistan and New Zealand
3,953 4,5876,200
44,04547,261
50,419
0
10,000
20,000
30,000
40,000
50,000
60,000
2013-13 2013-14 2014-15
Pakistan New Zealand
Procedure for Incorporation of a Company
Lahore, Pakistan New Zealand
1Reserve a company name online via SECP E-Services
Website
Apply online
for registration
with the
Companies
Office New
Zealand
(including
Inland Revenue
Department
(IRD) number
application and
registration for
GST)
2 Pay the name reservation/Incorporation at MCB
3 Obtain a digital signature from NIFT system
4 Complete registration form on the SECP e-portal
5 Open a Bank account for tax registration
6 Apply for NTN and register for Income tax
7Apply for Sales Tax Registration Number at Regional FBR
office
8Registration for Professional Tax with E&T Dept. of the
District
9 Registration with PESSI
10 Registration with EOBI
11 Registration with Labor Department
12 Register CEO at SECP
Comparison of Govt./Other Agencies involved in
Starting a Business
Lahore, Pakistan New Zealand
1Security and Exchange Commission of Pakistan
(SECP)
New Zealand
Companies
Office
2National Institutional Facilitation Technologies
(NIFT)
3Tax Facilitation Center of the Regional Tax Office
(RTO), Federal Board of Revenue (FBR)
4 Excise and Taxation Department of the District
5 Punjab Employees Social Security Institution (PESSI)
6 Employees Old Age Benefits Institution (EOBI)
7 Labor Department, Government of Punjab
Cost and Time involved in Registering a
Company
Pakistan New Zealand
Regular Fast Track
Online In person Online In person Online
12,800 26,010 23,600 47,300 12,136.088
Pakistan New Zealand
18 Days 0.5 Day
(Amounts in PKR)
- Online application for
registration
- Lumpsum payment of fees
through debit/credit,
Mobile banking and other
electronic means
Excise &
Taxation Dept PESSI
Labor Dept
Applicant downloads all information from One-Portal
- Registration certificates
and registration numbers
issued by departmentsExcise &
Taxation Dept PESSI
Labor Dept
Registration through
One-PortalTo be hosted at Securities and Exchange Commission of Pakistan
- Online application for
registration
- Lumpsum payment of fees
through debit/credit card,
online/mobile banking
and other electronic
means
SECP• Company
Name,
• Digital
Signatures
• Complete
Registration
EOBI
FBR
• NTN
• Sales Tax
Applicant downloads all information from One-Portal
- Registration certificates
and registration numbers
issued by departments
SECP• Company
Name,
• Digital
Signatures
• Complete
Registration
EOBI
FBR
• NTN
• Sales Tax
Time and Cost
involved in Getting Construction
Permits
PAKISTAN New Zealand
Lahore
93 Days
332 Days
PAKISTAN New Zealand
Lahore
PKR 4,437,008.14
(NZD 58,018)
PKR 240,150
Comparison of Procedure with LDA
Sr.
No
LDA Procedures according
to World Bank
LDA (Existing) (29+29days) New Zealand (93 days)
Cost: PKR 4,437,008.14
1
Obtain letter from
concerned authority
confirming the land title
(Fard) from LRMIS (2days,
PKR 150)
Submit application with all
required docs and deposit fee at
the bank located at LDA
premises. (7days, PKR 15/sq.ft
of covered area of the building,
Stamp paper of PKR 500)
Obtain resource consent
(planning) from District
Council (30days)
2
Obtain a No-Objection
Certificate from
Environmental Protect
Agency (150days, PKR
10,000)
Obtain a No-Objection
Certificate from Environmental
Protect Agency
Obtain works over CCTV
approval by Watercare
Services (7days)
3
Obtain a building permit
from LDA (60 days, PKR
70,000)
Survey of the plot & verification
of ownership & possession (10
days)
Obtain building consent
from District Council
(30days)
4
Notify LDA in writing of
the completion of
foundations (1day)
Verification of paid challan and
detailed scrutiny of the
drawings (6days)
Receive foundation
inspection by a building
inspector from the Auckland
Council (1day)
Comparison of Procedure With LDA (Cont.)
Sr.
No
LDA Procedures
according to World Bank
LDA (Existing 29+29days) New Zealand (93 days)
PKR 4,437,008.14
5 Receive foundation work
inspection from LDA (1
day)
Sanctioning and issuance of
Construction Permit (6day)
Receive structural inspection
by a building inspector from
the Auckland Council (1day)
6 Submit the 1st floor
Certificate Form to the
LDA (1days)
Application for Completion
Certificate (CC) (1day if
requirements are met.
Ownership docs, LESCO
connection, NOC from Civil
Defence, Form BR-9 if multi-
storey, WASA, E&T’s PT1
form if building period is
expired)
Receive plumbing inspection
by a building inspector from
the Auckland Council (1day)
7 Receive 1st floor slab
casting inspection from the
Lahore Development
Authority (LDA) (1day)
Survey of the plot & issuance
of fee challan for completion
certificate (16days, PKR
12,000)
Receive cladding inspection by
a building inspector from the
Auckland Council (1day)
8 Submit the 2nd floor
Certificate Form to LDA
(1days)
Receive fire protection
inspection by a building
inspector from the Auckland
Council (1day)
Comparison of Procedure With LDA (Cont.)
Sr.
No
LDA Procedures
according to World
Bank
LDA (Existing 29+29days) New Zealand (93 days)
PKR 4,437,008.14
9 Receive 2nd slab
casting inspection
from LDA (1day)
Payment & verification of
paid fee challan (4days)
Obtain water and sewerage
connection (28 days)
10 Request assessment
copy of property unit
from the Excise and
Taxation Department
(30 days)
Issuance of Completion
Certificate (12days)
Receive final inspection for
a code compliance
certificate (CCC) (25days)
11 Receive inspection
from the E&T Dept
and obtain the
assessment copy of
property unit (1 day)
Comparison of Procedure With LDA (Cont.)
Sr.
No
LDA Procedures
according to World Bank
LDA (Existing
29+29 days)
New Zealand (93 days)
PKR 4,437,008.14
12 Request water and
sewerage connection (60
days , PKR 90,000)
13 Apply for completion
certificate and request
final inspection (7 days,
PKR 70,000)
14 Receive final inspection
from LDA (1 day)
15 Receive completion
certificate from LDA (60
days)
LDA’s proposed plan
Process
Before
Automation
(Existing)
After
Automation
Reduction
in days
Double Exemption Report 3days 1 day 2
Ownership verification Report 3 days 1 day 2
Account Verification Report 3 days 1 day 2
Site Report 3 days 1 day 2
Balloting Report 3 days 1 day 2
Building Plan approval / Completion
Certificate verification3 days 1 day 2
Total No. of Days 18 6 12
Reduction in the No. of days for verification ONLY after improvement of
the Internal Processes of LDA:
Source: LDA
ProcessBefore
Automation
After
Automation
Reduction in
days
Building Plan Approval 24 days 7 days 17
Completion Certificate 26 days 7 days 19
Transfer Process 23 days 2 days 21
No Objection
Certificate12 days 5 days 7
Total No. of Days 85 21 64
LDA’s proposed plan (Cont.)
Source: LDA
Reduction of days in Application Response Time:
Recommendations• Reform program like LDA’s should be designed for
TMAs.
• Representatives from private sector should be included
in TMA’s High Level Design Committee (HLDC) and
its sub committee.
• Weekly meetings of HLDC and its sub committee
should be arranged to deal with the backlog.
• Expedite the automation of urban land record on Land
Record Management Information System (LRMIS).
• LDA and TMA should accept survey and inspection of
sites done by private certified inspectors.
Recommendations (Cont.)
• LRMIS should also display court proceedings or stay
orders, if any.
• All rules, regulations and procedures for dealing with
construction permits be listed and placed on ONE
WEBSITE.
• Commercialization fee of land be eliminated and zoning
be clearly demarked so that conversion is not needed.
• All Stakeholders be added in committee which decides
zoning for commercial and industrial activities.
• Water and Sewerage connection be provided automatically
within 30 days of approval of construction permits.
Time and Cost involved in Getting Electricity
Connection
Pakistan Republic of Korea
Lahore18 Days
117 Days
Pakistan Republic of Korea
Lahore PKR 1,084,239.30
(KRW 11,839263.4)PKR 2,714,567.73
Procedures in Getting Electricity
Procedures of LESCO
according to World
Bank
Consumer Service
Manual, LESCO
(496 days)
Republic of Korea
(18 days)
1 Submit application and
await site inspection
• LESCO:30days, no
charge
Registration of
Application (1day)
Request and receive
internal wiring inspection
by Korea Electrical Safety
Corporation (KESCO) (5
days, KRW 148,740)
2 Obtain site inspection and
receive estimate
• LESCO: 30days, no
charge
Site Survey (15days)
Customer submits
application to KEPCO
and signs contract (1 day,
KRW 11,658,832.94)
3 Obtain wiring inspection
• LESCO:14 days, no
chargeService Cost
Estimation (24days)
Receive external works,
meter installation and
electricity flow (12 days,
no charge)
Procedures in Getting Electricity (Cont.)
Procedures od LESCO & K-Electric
according to World Bank
Consumer
Service Manual,
LESCO
(496 days)
Republic
of Korea
(18 days)
4 Pay estimate and submit internal wiring
test report
• LESCO(1day, PKR 2,713,087.73)
Approval of
Service Cost
Estimate (21days)
5• LESCO: Receive external works and
await final inspection (28days, no
charge)
Issuance of
Demand Notice
(7days)
6 LESCO: Receive inspection of external
works, meter installation and electricity
flow (14 days, PKR 0)
Verification of
Test Report
(10days)
Procedures in Getting Electricity (Cont.)
World Bank
Consumer Service
Manual, LESCO
(496 days)
Republic of
Korea
(18 days)
7 Service Connection Order
(3days)
8 Store Requisition and
Issuance of Material
(400days)
9 Installation of Connection
(15days)
Recommendations
• An E-Portal should be established for the new
connections and other services where applicant may
submit his application along with all other required
documents online.
• This E-Portal should be integrated with SECP, LRMIS
and NADRA database for the verification of company’s
information.
• The E-Portal should also allow online banking,
credit/debit card, mobile banking and other electronic
transfers for fee submission.
• After submission of verified safety inspection report,
demand notice should be generated through E-Portal.
Recommendations [Cont.]
• LESCO should accept the internal wiring report of
private certified and registered contractors. Currently,
internal wiring inspection is being conducted by
Electric Inspector, Punjab.
• Electric Inspector should upload the Internal Wiring
report on this E-Portal within 10 days.
• Review and reduce the Timeframe of New
Connections as described in Customer Service Manual
(Annexure – VI, Page 59).
• All infrastructure cost up to the point of connection
should be borne by the government/LESCO.
Comparison of top countries in
Registering Property
Pakistan New Zealand
Ranking 169 1
Procedures 7.7 2.0
Time (Days) 154.8 1
Cost
(% of the property value)4.6% 0.10%
Quality of Land
Administration Index (0-30)6.8 26.0
Score in Quality of Land
Administration Index 2016
Quality Index (Score) Pakistan New Zealand
Quality of Land Administration Index
(0-30)
5 26
Reliability of Infrastructure Index (0-8) 0 8
Electronic database for Recording Land
Boundaries
None /partial Yes
Transparency of Information Index (0-6) 1.5 4
Geographic Coverage Index (0-8) 0 8
Land Dispute Resolution (0-8) 3.5 6
Equal Access to Property Rights Index 0 0
Procedure for Registration of Property-
Lahore (According to World Bank)
Steps Procedure (Time) Cost (PKR)
1 Obtain Fard (ownership and non-encumbrance)
certificate from LRMIS (Days 2)
150
2 Advertisement of a transaction in newspaper and
inviting objections (Days taken 8)
10,000
3 Hire a deed lawyer or writer to draft sales
purchase agreement (Days taken 3 )
8,000
4 Payment of stamp duty, capital value tax, Town
tax and registration fee (Days 1)
• Stamp duty 3%
• CVT 2% and
• 1% of property
price (registration
fee)
• 1% Town Tax
Procedure for Registration of
Property-Lahore (According to World Bank) Cont.
Steps Procedure (Time) Cost (PKR)
5 Receipt of the payment is submitted to
the Stamp Office (Day: 1)
6 Execution and registration of a deed
before the registration authority (Sub-
registrar) (Days: 38)
500
7 Mutation Process at the relevant land
authority ( by buyer) for transfer of
ownership (Days: 3)
500
Recommendations• Good practices of land ownership and transfer, from DHA should
be adopted.
• Tax on land transfer should be eliminated, one lump sum fee
should be charged
• LRMIS should be linked directly with NADRA database.
• All court proceedings and stay orders should be recorded on
LRMIS
• A Local Commission should only be Hired in exceptional
circumstances as provided by the law. In person attendance should
be mandatory.
• Mutation should also be done through LRMIS.
Domestic Credit to private sector (As % of GDP)
New Zealand 146.2%
China 141.8%
Singapore 131.5%
India 51.1%
Pakistan 15.4%
Source: World Bank Indicators
Ranking is done on the basis of
• Strength of Legal Rights Index (0=Weak to 12=Strong). This measures
the degree to which collateral and bankruptcy laws protect the rights of
borrowers and lenders and thus facilitate lending.
• Depth of Credit Information Index(0=Low to 8=High). Scope and
Accessibility of Credit Information distributed by Credit Bureaus and
Credit Registries.
Index-Wise Score Summary
Pakistan New Zealand
Strength of Legal Rights Index (0=Weak to
12=Strong)3 12
Depth of Credit Information Index (0=Low to
8=High)7 8
Recommendations
• Credit Insurance Guarantee Fund (CIGF) be created.
• Local Made Machinery (LMM) loan for SMEs to be covered
by CIGF.
• Banks should have the access to the LRMIS and SECP for
easy verification of company data and its asset.
• Set up DFIs and instruments for long term capital
investments
• Better legal rights for secured creditors so that in case of
liquidation of a business, they should be paid first (before tax
claims and employee claims).
Ranking is done on the basis of:
Index Pakistan New
Zealand
Extent of Disclosure Index (0–10) 6 10
Extent of Director Liability Index (0–10) 6 9
Ease of Shareholder Suits Index (0–10) 6 9
Extent of Conflict of Interest Regulation Index (0–10) 6 9.3
Extent of Shareholder Rights Index (0-10) 8 8
Extent of Ownership and Control Index (0-10) 9 7
Extent of Corporate Transparency Index (0-10) 5 7.0
Extent of Shareholder Governance Index (0–10) 7.3 7.3
Strength of Minority Investor Protection Index (0-10) 6.7 8.3
What the Paying Taxes Indicators measure?
• Tax payments for a manufacturing company in 2014 (number
per year adjusted for electronic and joint filing and payment)
• Total number of taxes and contributions paid, including
consumption taxes (value added tax, sales tax or goods and
service tax)
• Method and frequency of filing and payment
• Time required to comply with 3 major taxes (hours per year)
• Collecting information and computing the tax payable
• Completing tax return forms, filing with proper agencies
• Arranging payment or withholding
• Preparing separate tax accounting books, if required
What the Paying Taxes Indicators
measure?• Total tax rate (% of profit before all taxes)
• Profit or corporate income tax
• Social contributions and labor taxes paid by the employer
• Property and property transfer taxes
• Dividend, capital gains and financial transactions taxes
• Waste collection, vehicle, road and other taxes
• Post-filing Index
• The time to comply with a VAT or GST refund
• The time to receive a VAT or GST refund
• The time to comply with a corporate income tax audit
• The time to complete a corporate income tax audit
Tax / Mandatory Contributions – Pakistan
Tax / Mandatory ContributionsNo. of Payments
(per year)
Time
(hours per
year)
Corporate Income Tax 5 40
Social security contributions 12 40
Employer paid -Pension contributions 12
Education cess (Omitted through PFA 2015) 1
Property tax 1
Tax on interest 0
Professional tax 1
Vehicle tax 1
Fuel tax 1
Employee paid - Pension contributions (paid
jointly)0
Goods and Sales Tax (VAT) 12 232
Stamp duty 1
Total 47 311.5
Paying Taxes - Comparison with leading countries
Ranking in
Paying TaxesEconomy
Number of Payments
(per year)
Time
(hours per
year)
3 Hong Kong 3 74
8 Singapore 5 66.5
5 Ireland 9 82
61 Malaysia 9 164
172 India 25 241
158 Sri Lanka 47 179
156 Pakistan 47 311.5
Sr. No. Tax / Mandatory Contributions Relevant Department
1 Social Security Contribution PESSI
2 Education cess E&T - Provincial
3 Property tax E&T - Provincial
4 Professional tax E&T - Provincial
5 Vehicle tax E&T - Provincial
6 Sales Tax on ServicesPunjab Revenue
Authority (PRA)
PROVINCIAL TAXES AND RELEVANT
MINISTRIES / DEPARTMENT(S)
RECOMMENDATIONS
• Number of taxes and frequency of paying taxes must be
reduced (Half Yearly/Quarterly)
• Workers' Profit Participation Fund (WPPF) and
Worker’s Welfare Fund (WWF) should either be merged
in income tax or be given to industrial associations to
benefit their workers.
• Electronic communication between taxpayers and tax
departments.
• Mandatory electronic filing and online payment for all
departments. Payments should be accepted through
‘Credit card / debit card, direct debit or using internet /
mobile banking’.
Tax / Contribution Proposed amendments
Property TaxProperty tax should be
collected on the basis of per
square foot rate published on
the website.
Payments should be accepted
through ‘Credit card / debit
card, direct debit or using
internet / mobile banking’.
Professional Tax
Vehicle Tax
EXCISE & TAXATION DEPARTMENTRECOMMENDATIONS
SALES TAX ON SERVICES - PRA
• Section 35(2) of Punjab Sales Tax on Services Act 2012 states that“Notwithstanding anything in sub-section (1), the Authority may,by notification in the official Gazette, require any registered personor class of registered persons to submit returns on a quarterly, sixmonthly or annual basis in lieu of monthly return”.
• Notification be issued to allow filing of returns on six monthlybasis.
• According to section 11(1) of Punjab Sales Tax on Services(Filing ofReturns) Rules 2012, “A registered person filing return electronicallyor otherwise shall make payment of the amount of tax due, if any, inany of the designated branches of the National Bank of Pakistan orany other designated Bank on the prescribed payment challan asspecified in Form PST – 05 or through electronic payment systemdevised for the purpose.”
• Notification be issued to allow payments through ‘Credit card /debit card, direct debit or using internet / mobile banking’.
Regional Economies – Comparative Analysis
[EXPORTS]
Trading
Across
Borders’
Ranking
Economy
Border ComplianceDocumentary
Compliance
Time
[hours]
Cost
[US$]
Time
[hours]
Cost
[US$]
175 Afghanistan 48 453 228 344
173 Bangladesh 100 408 147 225
26 Bhutan 5 59 9 50
143 India 106 413 38 92
147 Maldives 42 596 48 300
69 Nepal 56 288 19 85
172 Pakistan 75 426 59 307
90 Sri Lanka 43 366 76 58
Regional Economies – Comparative Analysis
[IMPORTS]
Trading
Across
Borders
Ranking
Economy
Border ComplianceDocumentary
Compliance
Time
[hours]
Cost
[USD]
Time
[hours]
Cost
[USD]
175 Afghanistan 96 750 324 900
173 Bangladesh 183 1294 144 370
26 Bhutan 5 110 8 50
143 India 283 574 61 135
147 Maldives 100 981 61 180
69 Nepal 61 190 48 80
172 Pakistan 129 957 147 786
90 Sri Lanka 72 300 58 283
RECOMMENDATIONS
• Combining Documents; like in Singapore where only
FOUR documents are required for import/export
• If infrastructure, particularly RAILWAY CARGO, is
made efficient, it will bring time and cost down.
• Frequency of physical inspections carried out at ports
should be reduced by introducing scanners
• Post-destination clearance for preapproved
companies, reducing the number of containers subject
to physical inspection
• Addressing internal bureaucratic inefficiencies
Time and Cost for Resolving a Standardized
Commercial Dispute
Country
Comparison Ranking
Time
(Days)
Cost
(% of value of
claim)
Korea, Rep 1 290 12.70%
Singapore 2 164 25.80%
Australia 3 395 21.80%
Pakistan 157 1071.2 20.5%
Procedure Comparison
Indicators Lahore,
Pakistan
Korea, Rep
Total Time (Days) 1,025 290
Filing and Service 60 20
Trial and Judgment 600 150
Enforcement of Judgment 365 120
Cost (% of claim) 25.0 12.7
Attorney cost 15 9.0
Court cost 7 3.0
Enforcement cost 10 0.7
Recommendations
• There should be specialized courts for
commercial disputes (like banking courts).
• The lower courts should automate their legal
process. The parties to a case should be able to
file, pay court fee and access their case history
and status online.
• A Pretrial Conference mechanism should be
incorporated.
Recommendations (Cont.)
• Adjournments (Order 17 of the Civil Procedure Code) should
be limited to only special circumstances. The parties of a case
should be heavily penalized after requesting the third
adjournment. A judge should not grant a date in a case which
exceeds a week from the previous hearing.
• Judges should be given yearly targets to dispose of a case and
should be allocated a tentative time frame - depending on the
nature of a case.
• All judgments should be enforced within a year and penalties
for non-compliance should be introduced.
• Enforcement Agency should be identified and given authority
for automatic enforcement of judgment after the decree has
been issued.
Ranking is done on basis of
1. Recovery Rate PAK FIN
Recovery Rate (Cents recovered by secured
creditors on a loan of 1 dollar through insolvency
proceedings)
43.0 Cents
90.3Cents
Time (years on average) 2.6 0.9
Cost (% of Debtor’s Estate) 4 3.5
2. Strength of Insolvency Framework
Index(0=weak to 16=strong)
PAK FIN
1. Commencement of proceedings index (0-3) 2 3
2. Management of debtor’s assets index (0-6) 3 6
3. Reorganizing proceedings index (0-3) 0 2.5
4. Creditor participation Index (0-4) 2 3
Total Score 7 14.5
Insolvency procedure in Pakistan-According to
World Bank
Step 1
• Creditor would initiate foreclosure proceedings by filing petition at theCivil Court, 3 months after Debtor’s default (3 months).
Step 2
• The Court will then review the case, notify all relevant parties, hold a public hearing and appoint an official receiver.(4 months)
Step 3
• The Court appointed official receiver finalizes Creditor’s claims. (6 months)
Step 4• The final decision of the Court is made (4 months).
Step 5
• The Court would appoint auctioneer to conduct sale of Debtor’s assets.
• Execution of the auction sale until Creditor is repaid.. (12 months)
Reforms in Process
• The Corporate Rehabilitation Bill has been
drafted and is awaiting the approval of the
parliament. This will significantly improve the
score of Pakistan on this indicator.
Recommendations
A proper legal framework for Reorganization should
be added in the bankruptcy laws which would give
the debtor/creditor an option to also file for
Reorganization instead of only liquidation (an
example is Chapter 11 in USA).
Bankruptcy laws should ensure greater creditor
participation in bankruptcy proceedings
Recommended