Few business chambers in Pakistan have lately been as active as the Lahore Chamber of Commerce and Industry (LCCI) in terms of evidence-based business advocacy. LCCI’s most recent initiative is their component specific research on different aspects of the Ease of Doing Business rankings measured by the World Bank. Today’s column features one of those aspects, namely: starting a business.
LCCI begins by asking why New Zealand, a much smaller economy compared to Pakistan, saw an average 45600 new companies per year being registered between 2013 and 2014, whereas new firm incorporation in Pakistan in the same year stood at an average 4270 per year. One of the obvious answers is that the procedures and cost of starting a firm in Pakistan are much complicated and costlier than in New Zealand.
Consider the following procedures for incorporating a firm in Lahore.
First, the sponsors or the owners of the company have to reserve a company name online via the Securities Exchange Commission Pakistan. Then they make a payment against the name reserved, following which they have to obtain a digital signature from NIFT and then complete the registration form on SECP’s e-portal. Once all that is done, then the firm obtains a National Tax Number from the FBR. It also has to apply for sales tax registration at FBR. Outside of FBR, it also has to register for Professional Tax with Excise & Taxation Department, Government of Punjab. The new firms also register with the Punjab Employees Social Security Institution (PESSI), Employees Old Age Benefits Institution (EOBI), Labour Department, Government of Punjab, and the Punjab Revenue Authority.
In contrast, new firms in New Zealand only have to deal with Companies Office New Zealand that in turn deals with all the other relevant departments including their Inland Revenue Department (IRD) number application and registration for GST.
How does this translate into costs and the time spent in the incorporation process? According to LCCI’s research, even fast-track processing of registering a company in Pakistan costs Rs44000 in person and Rs23200 online. In New Zealand, however, online registration is the only option – and costs PKR equivalent Rs11407 in Kiwi currency. Likewise, it takes about 19 days to register a firm in Lahore, as against half a day in New Zealand.
The Lahore chamber recommends that one single online portal is established at Department of Industries, Commerce & Investment of Government of Punjab. It is proposed that the job of that portal is to take a one-time online application for registration, automatically transfer information to relevant departments, and issue registration certificates and registration numbers originally issued by various departments. All this is proposed to be done against a one-time submission of lump sum fee required by the departments through debit/credit card or online-banking to be later transferred automatically transferred to all relevant departments.
In order to achieve all this, the LCCI asserts that only slight amendments in procedures are required and no major changes are required in the legal framework relating to the various bodies that pertain to company registration process.
While BR Research will share key findings of LCCI’s research on Ease of Business in the ensuing columns, one cannot help but wonder whether the Karachi Chamber of Commerce and Industry (KCCI) is also conducting detailed evidence-based research on the subject. If not, then it’s about time the KCCI starts doing so, because many components of the Ease of Doing Business lie in the provincial domain. And if the KCCI is indeed researching on exactly which laws and procedures are needed to be amended, then it is best advised if the two chambers join hands to push respective provincial governments as well the federal government to roll out the much-needed reforms. There is strength in unity.
First published in the BR Research on March 1, 2016.
