Pakistan’s economic freedom score improves

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ISLAMABAD:


Pakistan’s score on the 2019 Economic Freedom Index improved by a nominal point as judicial efficiency and property rights exceeded modest performance in monetary freedom and fiscal health.

According to a report compiled by the Washington-based Heritage Foundation, Pakistan’s economic freedom score improved 0.6 points to an overall score of 55, ranking the economy 131st in the 2019 index.

However, Pakistan is ranked 32nd out of 43 countries in the Asia-Pacific region, and its overall score is lower than regional and global averages, the report adds.

Globally, Hong Kong, Singapore and New Zealand are the top three countries ranked on the Global Economic Freedom Index.

Meanwhile, in South Asia, Bhutan is ranked 78, Sri Lanka 115, Bangladesh 121, India 129, Pakistan 131, Nepal 136, Maldives 141, and Afghanistan 152.

The report further states that although some aspects of economic freedom have progressed modestly in Pakistan in recent years, decades of internal political conflict and low levels of foreign investment have led to erratic growth and underdevelopment.

“Excessive state involvement in the economy and ubiquitous regulatory agencies have inhibited the creation of private enterprises,” he added.

In addition, the lack of access to bank credit undermines entrepreneurship and the isolation of the financial sector from the outside world slows down innovation.

According to the report, around 25% of adult Pakistanis have access to an account with a formal banking institution.

Next Capital chief executive Muzammil Aslam said there had been no improvement on the ground as companies continued to face hurdles. He said the regulations in Pakistan were not business-friendly and instead of having a one-stop-shop solution, we were still involved in the paperwork.

The foundation defines economic freedom as “the fundamental right of every human being to control their own work and property”.

The report pointed out that in economically free societies, governments allow labor, capital and goods to flow freely and refrain from any coercion or constraint of freedom beyond the extent necessary to protect and maintain the freedom it -same.

The report further states that in an economically free society, “individuals are free to work, produce, consume and invest as they see fit. “

The international foundation measures economic freedom by assessing the rule of law, the size of government, the effectiveness of regulation and access to the free market. Data is also shared with investors, business and financial leaders, policy makers, academics, journalists, students and teachers.

The report pointed out that Pakistan’s tax system is complex despite reforms aimed at reducing rates and broadening the tax base.

Aslam said that in Pakistan the tax structure is very complex and everyone is a tax officer, adding that even today there is under and overcharging in trade.

The top personal income tax rate is 30% and the top corporate tax rate has been reduced to 30%. The overall tax burden is equivalent to 12.4% of total national income.

Also commenting on tax culture, an ABL Asset Management Company official said the introduction of tax reforms had been brutal.

Over the past three years, public spending has amounted to 20.3% of the country’s output (GDP) and budget deficits have averaged 5.1% of GDP.

Sufficient progress has been made in improving the business environment. The government’s 2018-2019 budgets increased spending on subsidies for the construction sector and on items such as food (especially sugar), electricity, water and textiles by 36%.

The combined value of exports and imports is equal to 25.8% of GDP. The average tariff rate applied is 10.1%. As of June 30, 2018, according to the WTO, Pakistan had 66 non-tariff measures in force.

[with additional input by our correspondent]

Posted in The Express Tribune, January 28e, 2020.

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