COMPARING REGULATION IN 13 CITIES AND 183 ECONOMIES in Pakistan 2010 74680 COMPARING REGULATION IN 13 CITIES AND 183 ECONOMIES A COPUBLICATION OF THE WORLD BANK AND THE INTERNATIONAL FINANCE CORPORATION © 2010 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, D.C. 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail feedback@worldbank.org All rights reserved. A publication of the World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clear- ance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone 978-750-8400; fax 978-750-4470; Internet: www.copyright. com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. Doing Business in Pakistan 2010 and other subnational and regional Doing Business studies can be downloaded at no charge at http:// subnational.doingbusiness.org. Additional copies of the Doing Business global reports: Doing Business 2010: Reforming through Difficult Times; Doing Business 2009; Doing Business 2008; Doing Business 2007: How to Reform; Doing Business in 2006: Creating Jobs; Doing Business in 2005: Removing Obstacles to Growth; and Doing Business in 2004: Understanding Regulations, may be obtained at www.doingbusiness.org. About the Investment Climate Advisory Services of the World Bank Group The Investment Climate Advisory Services of the World Bank Group helps governments implement reforms to improve their business environment, and encourage and retain investment, thus fostering competitive markets, growth, and job creation. Funding is provided by the World Bank Group (IFC, MIGA, and the World Bank) and over fifteen donor partners working through the multi-donor FIAS platform. Contents About Doing Business and Doing Business in Pakistan 2010 is the jab), Multan (Punjab), Peshawar (Khy- Doing Business in Pakistan 2010 1 first country-specific subnational report ber Pakhtunkhwa), Quetta (Balochis- Overview 6 of the Doing Business series in Pakistan. tan), Rawalpindi (Punjab), Sheikhupura Starting a business 13 The report builds on the regional Doing (Punjab), Sialkot (Punjab), and Sukkur Dealing with construction permits 17 Business in South Asia 2005-7 series, (Sindh). Regulations affecting six stages which created quantitative indicators of the life of a business are measured at Registering property 22 on business regulations for 6 Pakistani the subnational level in Pakistan: star- Paying taxes 27 cities. Doing Business in Pakistan 2010 ting a business, dealing with construction Trading across borders 31 documents progress in the previously permits, registering property, enforcing Enforcing contracts 35 measured cities and extends the analysis contracts, trading across borders, and to a total of 13 cities. paying taxes. These indicators have been Data notes 40 Comparisons with Karachi and the selected because they cover areas of local rest of the world are based on the indica- jurisdiction or practice. The data in Doing Doing Business indicators 47 tors in Doing Business in 2010: Reforming Business in Pakistan 2010 are current as City tables 51 Through Difficult Times, the seventh in of December 2009. The exchange rate is List of procedures 55 a series of annual reports published by the same as in Doing Business 2010 to Starting a business 55 the World Bank and the International allow comparisons across economies. Dealing with construction permits 71 Finance Corporation. The indicators in This report was prepared by the Registering property 86 Doing Business in Pakistan 2010 are also World Bank Group. The Economic Re- Acknowledgments 95 comparable with the data in other subna- form Unit of the Pakistan’s Ministry of tional Doing Business reports. All Doing Finance was the national government Business data and reports are available at counterpart. Governments of Balochis- http://subnational.doingbusiness.org. tan, Khyber Pakhtunkhwa, Punjab and Doing Business investigates the ways Sindh provided support in their provin- in which government regulations en- ces. The project was funded by the United hance or restrain business activity. The States Agency for International Develop- cities covered in Doing Business in Pa- ment, the UK AID from the Department kistan 2010 were selected jointly with for International Development, and the Pakistan’s Ministry of Finance and are World Bank Group. The Government of the following: Faisalabad (Punjab), Gu- Switzerland, through the State Secreta- jranwala (Punjab), Hyderabad (Sindh), riat for Economic Affairs (SECO), also Islamabad (Islamabad Capital Territory contributed in-kind to the project. —ICT), Karachi (Sindh), Lahore (Pun- 1 About Doing support economic adjustment. Easy entry and exit of firms, and flexibility particularly in federal states and large economies present marked differences Business and in redeploying resources, make it easier to stop doing things for which demand within a single country. In recogniz- ing the interest of governments in these Doing Business has weakened and to start doing new variations, the Doing Business report has things. Clarification of property rights complemented its global indicators with in Pakistan 2010 and strengthening of market infrastruc- subnational studies in India, Indonesia, ture (such as credit information and Philippines, China, Kenya, Brazil, Mex- collateral systems) can contribute to con- ico, Colombia and others. Doing Busi- fidence as investors and entrepreneurs ness has also begun a program on small look to rebuild. islands that are independent states. Until very recently, however, there were no globally available indicator sets WHAT DOING BUSINESS IN for monitoring such microeconomic fac- PAKISTAN 2010 COVERS tors and analyzing their relevance. The first efforts, in the 1980s, drew on per- Doing Business in Pakistan 2010 provides In 1664 William Petty, an adviser to ceptions data from expert or business a quantitative measure of the national, England’s Charles II, compiled the first surveys. Such surveys are useful gauges and local regulations for starting a busi- known national accounts. He made 4 of economic and policy conditions. But ness, dealing with construction permits, entries. On the expense side, “food, hous- their reliance on perceptions and their registering property, paying taxes, trad- ing, clothes and all other necessaries” incomplete coverage of poor countries ing across borders and enforcing con- were estimated at £40 million. National constrain their usefulness for analysis. tracts—as they apply to domestic small income was split among 3 sources: £8 The Doing Business project, launched and medium-sized companies. million from land, £7 million from other 8 years ago, goes one step further. It looks A fundamental premise of Doing personal estates and £25 million from at domestic small and medium-sized Business is that economic activity re- labor income. companies and measures the regulations quires good rules. In later centuries estimates of coun- applying to them through their life cycle. These include rules that establish try income, expenditure and material Doing Business and the standard cost and clarify property rights and reduce inputs and outputs became more abun- model initially developed and applied the costs of resolving disputes, rules that dant. But it was not until the 1940s that in the Netherlands are, today, the only increase the predictability of economic a systematic framework was developed standard tools used across a broad range interactions and rules that provide con- for measuring national income and ex- of jurisdictions to measure the impact tractual partners with core protections penditure, under the direction of British of government rule-making on business against abuse. The objective is: regula- economist John Maynard Keynes. As the activity.1 tions designed to be efficient, to be ac- methodology became an international The first Doing Business report, pub- cessible to all who need to use them and standard, comparisons of countries’ fi- lished in 2003, covered 5 indicator sets to be simple in their implementation. nancial positions became possible. Today in 133 economies. This year’s report, Accordingly, some Doing Business in- the macroeconomic indicators in national Doing Business 2010, covers 10 groups of dicators give a higher score for more accounts are standard in every country. indicators in 183 economies. The proj- regulation, such as stricter disclosure re- Governments committed to the eco- ect has benefited from feedback from quirements in related-party transactions. nomic health of their country and op- governments, academics, practitioners Some give a higher score for a simplified portunities for its citizens now focus on and reviewers. The initial goal remains: way of implementing existing regulation, more than macroeconomic conditions. to provide an objective basis for under- such as completing business start-up They also pay attention to the laws, regu- standing and improving the regulatory formalities in a one-stop shop. lations and institutional arrangements environment for business. Doing Business in Pakistan 2010 that shape daily economic activity. In the Doing Business report, each encompasses 2 types of data. The first The global financial crisis has re- economy is represented by its largest come from readings of laws and regula- newed interest in good rules and regu- business city—Karachi for Pakistan, for tions. The second are time and motion lation. In times of recession, effective example, or Mumbai for India. Busi- indicators that measure the efficiency business regulation and institutions can ness regulation and their enforcement, in achieving a regulatory goal (such as 2 DOING BUSINESS IN PAKISTAN 2010 granting the legal identity of a business). stability, corruption, labor skills of the a limited liability company. This choice Within the time and motion indicators, population, the underlying strength is in part empirical: private, limited li- cost estimates are recorded from official of institutions or the quality of infra- ability companies are the most prevalent fee schedules where applicable. Here, structure. Nor does it focus on regula- business form in most economies around Doing Business builds on Hernando de tions specific to foreign investment. the world. The choice also reflects one Soto’s pioneering work in applying the t Doing Business in Pakistan 2010 does focus of Doing Business: expanding op- time and motion approach first used not assess the strength of the financial portunities for entrepreneurship. Inves- by Frederick Taylor to revolutionize the system or market regulations, both tors are encouraged to venture into busi- production of the Model T Ford. De Soto important factors in understanding ness when potential losses are limited to used the approach in the 1980s to show some of the underlying causes of the their capital participation. the obstacles to setting up a garment fac- global financial crisis. tory on the outskirts of Lima, Peru.2 t Doing Business does not cover all reg- FOCUSED ON THE FORMAL SECTOR ulations, or all regulatory goals, in any In defining the indicators, Doing Business WHAT DOING BUSINESS IN city. As economies and technology ad- in Pakistan 2010 assumes that entrepre- PAKISTAN 2010 DOES NOT COVER vance, more areas of economic activ- neurs are knowledgeable about all regu- ity are being regulated. For example, lations in place and comply with them. It is important to know the scope and the European Union’s body of laws In practice, entrepreneurs may spend limitations of Doing Business in Pakistan (acquis) has now grown to no fewer considerable time finding out where to 2010 in order to interpret the results of than 14,500 rule sets. go and what documents to submit. Or this report. t Doing Business in Pakistan 2010 mea- they may avoid legally required proce- sures just 6 phases of a company’s life dures altogether—by not registering for LIMITED IN SCOPE cycle, through 6 specific indicators. social security, for example. Doing Business in Pakistan 2010 focuses The indicator sets also do not cover all Where regulation is particularly on 6 topics, with the specific aim of mea- aspects of regulation in the particular onerous, levels of informality are higher. suring the regulation and red tape rel- area. For example, the indicators on Informality comes at a cost: firms in evant to the life cycle of a domestic small starting a business do not cover all the informal sector typically grow more to medium-sized company. Accordingly: aspects of commercial legislation. slowly, have poorer access to credit and t Doing Business in Pakistan does not employ fewer workers—and their work- measure all ten indicators covered BASED ON STANDARDIZED CASE ers remain outside the protections of SCENARIOS in the general Doing Business report. labor law.3 Doing Business in Pakistan The report covers only those 6 areas of The indicators analyzed in Doing Busi- 2010 measures one set of factors that business regulation that are the prove- ness in Pakistan 2010 are based on stan- help explain the occurrence of informal- nance of the municipal or district gov- dardized case scenarios with specific as- ity and give policy makers insights into ernments and where local differences sumptions, such as that the business is potential areas of reform. Gaining a fuller exist—starting a business, dealing located in one of the 13 cities in Pakistan. understanding of the broader business with construction permits, registering Economic indicators commonly make environment, and a broader perspective property, enforcing contracts, trading limiting assumptions of this kind. Infla- on policy challenges, requires combining across borders and paying taxes. Four tion statistics, for example, are often insights from Doing Business in Pakistan of the Doing Business indicators—em- based on prices of consumer goods in a 2010 with data from other sources, such ploying workers, protecting investors, few urban areas. Such assumptions allow as the World Bank Enterprise Surveys.4 getting credit and closing a business— global coverage and enhance compara- are based solely on the provisions bility, but they inevitably come at the WHY THIS FOCUS contained in national laws. expense of generality. Doing Business in Pakistan 2010 func- t Doing Business in Pakistan 2010 does In areas where regulation is com- tions as a kind of cholesterol test for not measure all aspects of the busi- plex and highly differentiated, the stan- the regulatory environment for domestic ness environment that matter to firms dardized case used to construct each businesses. A cholesterol test does not or investors—or all factors that affect Doing Business in Pakistan 2010 indica- tell us everything about the state of our competitiveness. It does not, for exam- tor needs to be carefully defined. Where health. But it does measure something ple, measure security, macroeconomic relevant, the standardized case assumes important for our health. And it puts us ABOUT DOING BUSINESS AND DOING BUSINESS IN PAKISTAN 3 on watch to change behaviors in ways by excessive bureaucracy and regulation. DOING BUSINESS IN PAKISTAN that will improve not only our cholesterol Where regulation is burdensome 2010 AS A BENCHMARKING rating but also our overall health. and competition limited, success tends EXERCISE One way to test whether Doing Busi- to depend more on whom you know ness serves as a proxy for the broader than on what you can do. But where Doing Business in Pakistan 2010, in cap- business environment and for competi- regulation is transparent, efficient and turing some key dimensions of regulatory tiveness is to look at correlations be- implemented in a simple way, it becomes regimes, can be useful for benchmark- tween the Doing Business rankings and easier for any aspiring entrepreneurs, ing. Any benchmarking—for individu- other major economic benchmarks. The regardless of their connections, to oper- als, firms or economies—is necessar- indicator set closest to Doing Business ate within the rule of law and to benefit ily partial: it is valid and useful if it helps in what it measures is the Organization from the opportunities and protections sharpen judgment, less so if it substitutes for Economic Co-operation and Devel- that the law provides. for judgment. opment’s indicators of product market In this sense Doing Business values Doing Business in Pakistan 2010 regulation; the correlation here is 0.75. good rules as a key to social inclusion. It provides 2 approaches on the data it The World Economic Forum’s Global also provides a basis for studying effects collects: it presents “absolute” indicators Competitiveness Index and IMD’s World of regulations and their application. For for each city for each of the 6 regulatory Competitiveness Yearbook are broader in example, Doing Business 2004 found that topics it addresses, and it provides rank- scope, but these too are strongly corre- faster contract enforcement was associ- ings of cities, both by indicator and in lated with Doing Business (0.79 and 0.72, ated with perceptions of greater judicial aggregate. Judgment is required in inter- respectively). These correlations suggest fairness—suggesting that justice delayed preting these measures for any city and that where peace and macroeconomic is justice denied.6 in determining a sensible and politically stability are present, domestic business In the current global crisis policy- feasible path for reform. regulation makes an important differ- makers face particular challenges. Both Reviewing the Doing Business rank- ence in economic competitiveness. developed and developing economies are ings in isolation may show unexpected A bigger question is whether the seeing the impact of the financial crisis results. Some cities may rank unexpect- issues on which Doing Business focuses flowing through to the real economy, edly high on some indicators. And some matter for development and poverty re- with rising unemployment and income cities that have had rapid growth or duction. The World Bank study Voices loss. The foremost challenge for many attracted a great deal of investment may of the Poor asked 60,000 poor people governments is to create new jobs and rank lower than others that appear to be around the world how they thought they economic opportunities. But many have less dynamic. might escape poverty.5 The answers were limited fiscal space for publicly funded But for reform-minded local govern- unequivocal: women and men alike pin activities such as infrastructure invest- ments, how much their indicators im- their hopes above all on income from ment or for the provision of publicly prove matters more than their absolute their own business or wages earned in funded safety nets and social services. ranking. As cities develop, they strengthen employment. Enabling growth—and en- Reforms aimed at creating a better in- and add to regulations to protect investor suring that poor people can participate vestment climate, including reforms of and property rights. Meanwhile, they find in its benefits—requires an environment business regulation, can be beneficial for more efficient ways to implement existing where new entrants with drive and good several reasons. Flexible regulation and regulations and cut outdated ones. One ideas, regardless of their gender or ethnic effective institutions, including efficient finding of Doing Business: dynamic and origin, can get started in business and processes for starting a business and effi- growing economies continually reform where good firms can invest and grow, cient insolvency or bankruptcy systems, and update their regulations and their generating more jobs. can facilitate reallocation of labor and way of implementing them, while many Small and medium-sized companies capital. And regulatory institutions and poor economies still work with regulatory are key drivers of competition, growth processes that are streamlined and acces- systems dating to the late 1800s. and job creation, particularly in develop- sible can help ensure that, as businesses ing countries. But in these economies up rebuild, barriers between the informal to 80% of economic activity takes place and formal sectors are lowered, creating in the informal sector. Firms may be pre- more opportunities for the poor. vented from entering the formal sector 4 DOING BUSINESS IN PAKISTAN 2010 DOING BUSINESS— strongest performer on Doing Business cost indicators are backed by official fee A USER’S GUIDE indicators—as a source of good prac- schedules. Doing Business respondents tices for reform. In the words of Egypt’s both fill out written surveys and provide Quantitative data and benchmarking can Minister of Investment, Dr. Mahmoud references to the relevant laws, regu- be useful in stimulating debate about Mohieldin: lations and fee schedules, aiding data policy, both by exposing potential chal- checking and quality assurance. lenges and by identifying where pol- What I like about Doing Business... is For some indicators part of the that it creates a forum for exchanging icy makers might look for lessons and cost component (where fee schedules knowledge. It’s no exaggeration to say good practices. These data also provide are lacking) and the time component that we checked the top ten in every a basis for analyzing how different policy indicator and we just asked them, “How are based on actual practice rather than approaches—and different policy re- did you do it?” If there is any advantage the law on the books. This introduces a forms—contribute to desired outcomes to starting late in anything, it’s that you degree of subjectivity. The Doing Busi- such as competitiveness, growth and can learn from others. ness approach has therefore been to work greater employment and incomes. with legal practitioners or professionals Seven years of Doing Business data Over the past 7 years there has who regularly undertake the transac- have enabled a growing body of research been much activity by governments in tions involved. Following the standard on how performance on Doing Busi- reforming the regulatory environment methodological approach for time and ness indicators—and reforms relevant for domestic businesses. Most reforms motion studies, Doing Business breaks to those indicators—relate to desired relating to Doing Business topics were down each process or transaction, such social and economic outcomes. Some nested in broader programs of reform as starting and legally operating a busi- 405 articles have been published in aimed at enhancing economic competi- ness, into separate steps to ensure a bet- peer-reviewed academic journals, and tiveness. The same can be said at the ter estimate of time. The time estimate about 1,143 working papers are available subnational level. for each step is given by practitioners through Google Scholar.7 Among the In structuring their reform pro- with significant and routine experience findings: grams, governments use multiple data in the transaction. sources and indicators. And reformers The Doing Business approach to t Lower barriers to start-up are associ- respond to many stakeholders and inter- data collection contrasts with that of ated with a smaller informal sector. est groups, all of whom bring impor- enterprise or firm surveys, which capture t Lower costs of entry encourage entre- tant issues and concerns into the reform often one-time perceptions and experi- preneurship, enhance firm productiv- debate. World Bank support to these ences of businesses. A corporate lawyer ity and reduce corruption. reform processes is designed to encour- registering 100–150 businesses a year t Simpler start-up translates into greater age critical use of the data, sharpening will be more familiar with the process employment opportunities. judgment and avoiding a narrow focus than an entrepreneur, who will register on improving Doing Business rankings. a business only once or maybe twice. A HOW DO GOVERNMENTS USE bankruptcy judge deciding dozens of DOING BUSINESS? METHODOLOGY AND DATA cases a year will have more insight into bankruptcy than a company that may A common first reaction is to doubt Doing Business in Pakistan 2010 covers undergo the process. the quality and relevance of the Doing 13 cities. The data are based on national Business data. Yet the debate typically and local laws and regulations as well DEVELOPMENT OF THE METHODOLOGY proceeds to a deeper discussion explor- as administrative requirements. (For a ing the relevance of the data to the detailed explanation of the Doing Busi- The methodology for calculating each economy and areas where reform might ness in Pakistan 2010 methodology, see indicator is transparent, objective and make sense. the Data notes section at the end of this easily replicable. Leading academics col- Most reformers start out by seek- report). laborate in the development of the indi- ing examples, and Doing Business helps cators, ensuring academic rigor. Seven of in this. For example, Saudi Arabia used INFORMATION SOURCES FOR THE the background papers underlying the DATA the company law of France as a model indicators have been published in lead- for revising its own. Many countries in Most of the indicators are based on laws ing economic journals. Africa look to Mauritius—the region’s and regulations. In addition, most of the Doing Business uses a simple aver- ABOUT DOING BUSINESS AND DOING BUSINESS IN PAKISTAN 5 aging approach for weighting sub-indi- cators and calculating rankings. Other approaches were explored, including 1. The standard cost model is a quantitative methodology for determining the admin- using principal components and unob- istrative burdens that regulation imposes served components. The principal com- on businesses. The method can be used ponents and unobserved components to measure the effect of a single law or of selected areas of legislation or to perform approaches turn out to yield results a baseline measurement of all legislation nearly identical to those of simple aver- in a country. aging. The tests show that each set of in- 2. De Soto, Hernando. 2000. The Mystery dicators provides new information. The of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. New simple averaging approach is therefore York: Basic Books. robust to such tests. 3. Schneider, Friedrich. 2005. “The Informal Sector in 145 Countries.” Department of IMPROVEMENTS TO THE Economics, Linz University. METHODOLOGY AND DATA REVISIONS 4. http://www.enterprisesurveys.org 5. Narayan Deepa, Chambers Robert, Kaul Shah Meera, Petesch Patti. 2000. Voices of The methodology has undergone contin- the Poor: Crying Out for Change. Wash- ual improvement over the years. Changes ington D.C.: World Bank Group. have been made mainly in response to 6. World Bank. 2003. Doing Business in country suggestions. In accordance with 2004: Understanding Regulation. Wash- the Doing Business methodology, these ington D.C.: World Bank Group. changes have been incorporated into the 7. http://scholar.google.com Doing Business in Pakistan 2010. For starting a business, for example, the minimum capital requirement can be an obstacle for potential entrepreneurs. Initially, Doing Business measured the required minimum capital regardless of whether it had to be paid up front or not. In many economies only part of the minimum capital has to be paid up front. To reflect the actual potential barrier to entry, the paid-in minimum capital has been used since 2004. All changes in methodology are ex- plained in the Data notes section of this report as well as on the Doing Business website. In addition, data time series for each indicator and city are available on the website. The website also makes available all original data sets used for background papers. Information on data corrections is provided on the website. A transparent complaint procedure allows anyone to challenge the data. If errors are con- firmed after a data verification process, they are expeditiously corrected. 6 DOING BUSINESS IN PAKISTAN 2010 Overview The success of its industrial growth made idea can test the waters and succeed or worldwide. The results of the extended Pakistan a model of economic devel- fail. Where commercial regulations are 13-city comparison are presented here opment around the world during the simple, efficient, and accessible to all, (table 1.1). Doing business is easier in 1960s. Since then, Pakistan has been entrepreneurs can focus on what they Faisalabad and Multan, and more dif- swept more than once by strong winds do best—running their businesses. This ficult in Quetta and Hyderabad. of change: the transition from civilian is important for Pakistan, where small Three things stand out. First, con- to military rule, the secession of Bangla- and medium-size firms constitute nearly sistent reformers outperform others. desh, the Bhola cyclone of 1970. Despite 90% of all enterprises, employ 80% of the Since the publication of Doing Business the profound impact of these events, nonagricultural labor force, and contrib- in South Asia 2007, Faisalabad and La- and thanks to economic reforms imple- ute 40% of annual GDP.2 hore have both maintained their high mented in late 1990s and early 2000s, the Doing Business studies business reg- ranking by introducing reforms in more country successfully transformed itself to ulations from the perspective of a small than 1 area measured in this report. Both become again one of the most promising to medium-size domestic company. Ka- cities are now using e-Services for busi- South Asian economies. Between 2000 rachi, the most populous city in Pakistan, ness start-up and have adopted new uni- and 2007, Pakistan boasted an average represents the country in the annual form building and zoning regulations for annual GDP growth of 5.16% and GNI Doing Business report, which compares construction permits. Other cities—like per capita of US$ 2,042 compared to commercial regulations and their en- Karachi or Sialkot—dropped, relative to 3.99% and US$ 1,493 from 1990 to 1999.1 forcement in 183 economies. However, their peers. Some of these changes can Today, Pakistan is once again facing sev- in large countries like Pakistan, local be attributed to the addition of 7 new eral storms: external shocks such as the business regulations and the enforce- cities—some of them, like Multan, with global financial crisis, rising oil and food ment of national legislation differ across competitive regulatory frameworks. prices, and ongoing conflicts combined locations. The regional Doing Business in Second, no single city does well on all with internal security issues and po- South Asia 2005–2007 series built bench- indicators. For example, Islamabad ranks litical tensions. For citizens caught in marks for 5 cities beyond Karachi— well on the ease of starting a business and the maelstrom, the certainty of a job, the Faisalabad, Lahore, Peshawar, Quetta, ease of paying taxes but lags behind on guarantee of an income, or the security of and Sialkot. Doing Business in Pakistan enforcing contracts and trading across a business are more important than ever. 2010 updates the information presented borders. Karachi ranks ninth overall on There is no blueprint for how to grow in these reports and tracks the progress the ease of doing business. While it is and prosper in a challenging environment, of the implementation of reforms. It efficient in trading across borders and but one factor is creating an investment also expands the analysis to 7 additional contract enforcement, Karachi lags be- climate conducive to starting and running cities to provide a more representative hind other cities on the ease of obtaining a a business, where complying with regula- map of the ease of doing business in construction permit, transferring a prop- tions brings more benefits than costs, and Pakistan. The cities are compared against erty title, and paying taxes. These results where an entrepreneur with an innovative each other, and with over 180 economies can guide policy makers regarding areas OVER VIE W 7 TABLE 1.1 Where is it easier to do business in Pakistan? Dealing with Ease of doing Starting a construction Registering Paying Trading across Enforcing business business permits property taxes borders contracts City, Province (rank) (rank) (rank) (rank) (rank) (rank) (rank) Faisalabad, Punjab 1 2 6 1 3 4 2 Multan, Punjab 2 6 1 7 3 5 4 Lahore, Punjab 3 3 3 4 3 13 8 Islamabad, ICT 4 1 8 3 1 11 10 Sheikhupura, Punjab 5 9 8 5 3 7 6 Gujranwala, Punjab 6 13 2 6 3 10 4 Sukkur, Sindh 7 10 4 10 11 3 1 Peshawar, Khyber Pakhtunkhwa 8 3 6 9 10 8 8 Karachi, Sindh 9 3 10 11 11 1 3 Rawalpindi, Punjab 10 8 5 7 3 12 10 Sialkot, Punjab 11 12 11 1 3 5 10 Quetta, Balochistan 12 6 12 13 2 9 13 Hyderabad, Sindh 13 11 13 11 11 2 7 Note: The ease of doing business is calculated as the ranking on the simple average of city percentile rankings on each of the 6 topics covered. The ranking on each topic is the simple average of the percentile rankings on its component indicators. See the Data notes section for details. Source: Doing Business database. where improvements are possible. Cities ating Jobs by introducing reforms in the procedure, and costs half as much. As a can learn from each other and adopt the areas of starting a business, registering result, Pakistan moved up 17 positions good practices that already exist elsewhere property, protecting investors, and trad- to rank 63 on the ease of starting a busi- in Pakistan. For example, Sukkur can look ing across borders. Since then, Pakistan ness in Doing Business 2010: Reforming to Faisalabad for ways to improve starting introduced 5 major regulatory reforms through Difficult Times. a business and registering property. to make it easier for firms to start up Other reforms are underway. In the Third, size does not determine rank- and operate. area of paying taxes, the government ini- ing. Cities can compare themselves both In 2008, the Securities and Exchange tiated an overhaul of the Federal Board with their peers and their larger and Commission of Pakistan (SECP) and the of Revenue. It set up 3 taxpayer units and smaller neighbors. Both smaller cities, e-Government Directorate developed an 16 regional tax offices in the large cities. such as Multan and Sheikhupura, and e-Services website to enable online com- It also introduced a Universal Self As- larger cities, like Faisalabad and Lahore, pany registration. Now entrepreneurs can sessment Scheme and conducts taxpayer are ranked in the upper half. Smaller cit- submit the documents to the registrar satisfaction surveys. ies may be more competitive by promot- office to reserve a company name and A new National Judicial Policy was ing the use of technology, while main- register electronically. In addition, the introduced in 2009. The purpose of the taining low costs. Government offices in Securities and Exchange Commission policy is to focus on justice at the grass- large business centers deal with a high signed an agreement with the National roots level by ensuring the judiciary’s in- volume of operations, which can lead to Institute of Facilitation Technologies to dependence, clearing the backlog of cases bottlenecks and higher costs for profes- provide online digital signatures. The in the superior and subordinate courts, sional services. On the other hand, these company start-up is twice cheaper for and setting a time limit for disposal cities benefit from economies of scale an entrepreneur, if she registers online. of civil and criminal cases. It provides and may have more resources at their While she still must pay the fees at a short-term and long-term measures to disposal to invest in administrative mod- designated bank in person, the option of address these issues, includes steps to ernization than their smaller neighbors. online payment is being implemented by check for corrupt practices, and directs The government of Pakistan has the SECP. In the first 12 months after the the courts to prepare plans for effective long recognized the importance of smart introduction of e-Services, almost 30% of implementation of the new policy. regulations. The country, as represented companies registered online in Karachi.3 Despite the hardship imposed by by Karachi, became one of the top 10 Thanks to these reforms, business start- the economic crisis on businesses glob- reformers in Doing Business 2006: Cre- up became 4 days faster, requires 1 less ally, June 2008 to May 2009 was a record 8 DOING BUSINESS IN PAKISTAN 2010 TABLE 1.2 National and local level reforms implemented in all cities benchmarked in 2006 Provincial or municipal reforms Implementation of national reforms* Dealing with Dealing with Trading Starting construction Registering Starting construction Registering across City, Province a business permits property a business** permits property borders*** Faisalabad, Punjab    Karachi, Sindh  Lahore, Punjab     Peshawar, Khyber Pakhtunkhwa  Quetta, Balochistan  Sialkot, Punjab    Local level National level Negative reform * National reforms reflected in Doing Business in Pakistan 2010 by city. ** Reform counted for cities where high numbers of entrepreneurs register online. *** Reform affecting all cities trading through the ports of Karachi. Note: The reforms were implemented between April 2006 and December 2009. Source: Doing Business database. year for regulatory reforms. Doing Busi- reforms (table 1.2). advanced electronic data interchange sys- ness 2010 recorded 287 reforms in 131 All cities benefited from the rollout tem and ongoing efforts to improve do- of 183 economies—20% more than in of nation-wide reforms, although results mestic transport and port infrastructure. the previous year. In South Asia, 6 of the on the ground vary, as not all national In Karachi, the time needed to import 8 economies introduced reforms. Such reforms have been implemented and was reduced by half from 2006 to 2009. reforms are timelier than ever. Firms in taken full effect at the local level yet. Registering property in Pakistan re- developing countries have been affected In starting a business, the introduction cently got more expensive. The Finance by lower demand for their exports and of e-Services cut 1 day from the time Law enacted on July 1, 2009 raised the a drop in capital flows and remittances. needed to register a company with the federal capital value tax from 2% to 4% At the same time, businesses in low- SECP in Faisalabad, Lahore, and Pesha- across Pakistan. This reform contributed income economies still face twice as war—now it takes a total of only 2 days to the increase in the average cost of many regulatory burdens as their coun- to incorporate a new business in these registering property, which jumped from terparts in high-income economies cities. Islamabad is another city where 5% to 8.6% of the property value since when starting a business, transferring the number of online registrations is Doing Business in South Asia 2007. property, filing taxes, or resolving a growing. Provincial- or municipal-level re- commercial dispute through the courts. Across Pakistan, dealing with con- forms can be found across Doing Busi- There is more work to be done at both struction permits became easier thanks ness areas: Punjab made it easier to start the national and local level. to improvements in telephone services a business by reforming registration with following the privatization of the Paki- the Employees Social Security Institu- REFORMS IMPLEMENTED AT THE stani Telecommunication Company tion. As part of the 2003 Punjab Indus- LOCAL LEVEL Limited. Currently, applications for new trial Policy, the authority to register with connections can be submitted either by the Punjab Employees Social Security Doing Business in South Asia 2007 phone or online. As a result, this report Institution was delegated to the local pointed out bottlenecks and provided finds that since Doing Business in South district level. As a result, the verification recommendations for reforms in 5 Paki- Asia 2007, average processing times for of documents became faster by 4 days in stani cities and Karachi. Three years later, obtaining a new telephone connection both Faisalabad and Lahore. this report tracks progress over time. have been considerably reduced and Local governments also reformed The results are presented here. Three costs have dropped by 64.8%. their processes for dealing with con- cities show improvements in at least Importing and exporting has also struction permits. Over the last 3 years, 2 of the three areas where local level become easier since Doing Business in the Development Authorities and Town reforms were measured.4 All 6 cities South Asia 2007. The most important Municipal Administrations in Lahore, implemented 2 or more national-level reforms include the implementation of an Faisalabad, and Sialkot adopted uniform OVER VIE W 9 building and zoning regulations that pro- conditions restrict or encourage busi- in Sialkot. The process takes less than vide a clear reference for building com- nesses across Pakistan. Different local 170 days in those cities of Punjab that panies, architects, and entrepreneurs.5 requirements and practices and different have recently adopted new building and As a result, the time needed to obtain a levels of efficiency drive the variations in zoning regulations. In contrast, Karachi building permit in Sialkot and Lahore procedures, time, and cost across cities. is the slowest, with 223 days. Variations has been reduced by 22 and 15 days, Some cities have used the benefits of in time are mainly due to delays in ob- respectively. technology to simplify procedures, while taining building permits and electricity To make it easier to register prop- others are lagging. connections. In Karachi and Quetta, it erty, Lahore and Sialkot are continuing takes 2 months to have the building plan to computerize land records. When land STARTING A BUSINESS approved. Obtaining an electricity con- titles can be accessed with the click of Despite the same regulatory framework, nection is easier in Peshawar, where it a mouse, local officials can more easily there are differences in the time and cost takes 40 days. The same process takes 5 check the ownership, register the trans- needed to start a business in Pakistan, weeks longer in Sukkur and Hyderabad. action, and transfer the property title. mainly due to differences in the efficiency Dealing with construction permits costs The pilot program in Sialkot led to a re- of local branches of national agencies, on average 527.6% of income per capita, duction in registration time by half: from practices at the local government level, cheaper than in India but considerably 13 days in 2006 to 6 days in 2009. and variations in the use and availabil- more expensive than in Brazil or Turkey. Despite these recent and ongoing ity of online services. Continued reforms Differences in cost are mainly due to reforms, Pakistan needs to improve the have reduced start-up times and costs but variances in the cost of the building per- doing business environment further to the number of procedures remains high. mit and the certificate of completion. The make it easier to set up and operate a Entrepreneurs must complete the same highest costs are registered in Islamabad business. 10 business start-up procedures across the (797.9% of income per capita), while the country. Post-registration procedures are lowest are registered in the industrial COMPARING BUSINESS the main reason behind the high number town of Sheikhupura (380.3%). REGULATIONS ACROSS 13 CITIES of procedures and delays. Business start- up time varies from 16 days in Islam- REGISTERING PROPERTY Young entrepreneurs with innovative abad to 24 days in Gujranwala. Company All 13 cities require 6 procedures to reg- ideas and ambitious dreams would need name verification and incorporation takes ister property, but there are variations in 24 days to start their businesses in Gu- 6 days in cities with a high usage of e- the time and cost involved. It is fastest to jranwala. The same process would be at Services and between 7 to 10 days in cities register property in Lahore (30 days) and least 1 week faster in Islamabad. Obtain- where the vast majority of entrepreneurs slowest in Quetta (52 days). Islamabad ing all clearances and permits to build a continue to submit documents in person. has the lowest cost (7% of the property new warehouse and hook it up to utilities Incorporation fees represent more than value) as opposed Quetta (11%). Time would take 4 months in Peshawar, which 95% of the total cost to open a business variations are due mostly to differences is faster than the OECD average of 157 across the 13 cities. In order to promote in the efficiency of the Revenue Office, days. It takes 3 months longer in Karachi online registration, the fees are lower for in charge of issuing the fard (proof of to achieve the same. In Sheikhupura, the this option. Business start-up costs range ownership) and transferring the property cost of a construction permit amounts to from 13.2% of income per capita in cit- title. Property transfer is still a manual 380.3% of income per capita—but it is ies with online registration to 26.2% of process in most of Pakistan, but several more than twice as expensive in Islam- income per capita in Sialkot, where busi- cities, such as Lahore and Sialkot, have abad (797.9%). If an entrepreneur chose nesses continue to register in person. reformed by computerizing their land-re- to purchase a property in Lahore, she cord and deed-registration systems. Local would need only 30 days to have it reg- DEALING WITH CONSTRUCTION differences in costs remain, which can be PERMITS istered, three times faster than the South explained by different stamp-duty rates, Asia average of 106 days. Resolving a Obtaining all the necessary clearances which are set at the provincial level. While commercial dispute through the courts to build a warehouse and hook it up to Quetta charges a stamp duty of 5% of the would take 6 years in Peshawar, but only utilities is a simple, but rather expensive, property value, Peshawar and the cities 2 years in Faisalabad. process across Pakistan. Faisalabad, La- in the province of Sindh charge 3%, and The above examples highlight hore, and Multan have the fewest proce- Islamabad and the cities in the province of widespread differences in the way local dures—11—while 15 steps are necessary Punjab only 2%. Businesses in Islamabad, 10 DOING BUSINESS IN PAKISTAN 2010 where it is cheapest to transfer property, LEARNING FROM EACH OTHER: launched a one-stop shop for business are also exempted from paying the urban ADOPTING GOOD LOCAL registration, which connected the mu- immovable property tax. PRACTICES nicipal and state governments, eliminat- ing 11 procedures, including obtaining PAYING TAXES Benchmarking exercises like Doing Busi- sanitation and fire department certifi- There are few local variations in the total ness inspire governments to reform. They cates. Thanks to this and other reforms, tax burden, the number of payments, point out potential challenges and iden- Neiva became the top reformer in Doing and the time frame for paying taxes in tify where policy makers can look for Business in Colombia 2010. Similarly, Pakistan. In all 13 cities, except Islam- good practices. Comparisons between Doing Business in India 2009 showed that abad, which does not collect social secu- cities within the same country are even 9 of the 10 Indian states benchmarked rity contributions, small entrepreneurs stronger drivers of reform, because local for the second time had introduced re- spend 560 hours and approximately governments have a hard time explain- forms. As a result of these reforms, the 31.5% of their commercial profits spread ing why doing business in their city may average time to start a company dropped over 47 yearly payments. be harder than in neighboring cities. The from 45 to 35 days and the time needed good news is that sharing a national legal to obtain a building permit was reduced TRADING ACROSS BORDERS framework facilitates the implementa- by 25 days, on average. It requires the same number of docu- tion of existing good practices within a These examples show that there is ments to export (8) and import (9) from country. National governments can also no need to reinvent the wheel: it is suffi- and to any of the Pakistani cities covered use Doing Business data to monitor how cient to start by introducing reforms that by the report. It is easiest to import and local branches of their agencies imple- have been successfully implemented in export from Karachi, where the country’s ment changes in national regulations other cities. In fact, Pakistani cities have two major ports are located—22 days to and administrative practices. In a world a lot to gain from adopting the best regu- export and 18 days to import—followed where locations compete against each lations and practices that are working by Hyderabad and Sukkur. There are sub- other to attract investment, subnational elsewhere in the country. A hypothetical stantial differences in the cost of trading Doing Business indicators allow local city, “Pakistana,” adopting all the best across the 13 cities, especially when it governments to review the regulatory practices identified in this report, would comes to importing. It costs 57% more to conditions facing entrepreneurs in their rank 69th of 183 economies globally—16 import a container to Lahore (US$ 1,088) cities from a comparative perspective. places ahead of Pakistan’s position in than to Quetta (US$ 693). The distance to Subnational data are now available for Doing Business 2010 (table 1.3). the port is a determining factor and as a almost 300 locations in 41 countries. For example, reducing start-up pro- result Karachi is the cheapest city from The example of Colombia is telling. cedures to the 16 days they take in Islam- which to conduct trade. Doing Business in Colombia 2010 docu- abad would shorten starting a business ments that all 13 cities evaluated in 2008 almost to the OECD average of 13 days. ENFORCING CONTRACTS have since reformed in at least one of Fast construction permit approval, like Resolving a commercial dispute takes the areas measured and that these im- in Peshawar, would mean that dealing 6 years in Peshawar compared with 2 provements are attributable to local-level with construction permits also became years in Faisalabad and Lahore. The time reforms.6 The experience of Neiva high- speedier in Pakistan than the OECD av- needed to go through trial and judgment lights how reform-minded local govern- erage of 157 days. To register property in is the lengthiest of the three stages of ments can use Doing Business indicators 30 days, as in Lahore, would put Pakistan commercial dispute—service and filing, to motivate and sustain reform efforts. on the same level as Austria. A low tax trial and judgment, and enforcement of Neiva was the worst-performing city in rate, like in Islamabad, would fix the total judgment. Court efficiency, case back- 2008. In response, the mayor decided to tax rate at 26.0% of commercial profit— logs, and the provision of legal services set up an “anti–red tape” committee that similar to Ireland. Importing a container are the main sources of time differences. brings together the municipality, cham- to this hypothetical Pakistani city would The cost to enforce a contract ranges ber of commerce, business associations, take 18 days and exporting would take from 20.6% of the claim value in Sukkur and representatives of national agencies, 20 days, comparable to Italy. Resolving a to 42.8% in Lahore. Differences in court such as the police and the tax authority. commercial dispute would be as speedy fees, legal fees, and the cost of enforce- This committee meets every month to as in Faisalabad (730 days), and faster ment explain these variations. propose changes to the regulatory envi- than in Cyprus. ronment and monitor progress. The city If it is easy to start and operate a OVER VIE W 11 TABLE 1.3 workers.8 Second, formal enterprises pay Best practices in Pakistan compared internationally taxes, increasing government revenue. As Global ranking more companies move into the formal (183 economies) How Pakistani economy, governments can lower the cor- cities would porate tax burden. This gives businesses compare globally more incentives to expand by producing Number of procedures to start a business All 13 cities (10 procedures) 132 more and employing more people. And formally registered companies have better Days to start a business Islamabad (16 days) 71 access to courts, credit, and markets and Cost to start a business hence tend to be larger and more produc- Faisalabad, Islamabad, Karachi, Lahore, Peshawar (13.2% of income per capita) 89 tive than informal ones. Conversely, grea- Number of procedures to deal with construction permits ter barriers to entry are correlated with Faisalabad, Lahore, Multan (11 procedures) 13 more perceived corruption and a larger Days to deal with construction permits informal sector. Vulnerable groups, such Peshawar (124 days) 42 as youth and women, are more adversely Cost to deal with construction permits affected than others, because they operate Sheikhupura (380.3% of income per capita) 124 primarily in the informal sector.9 This is Number of procedures to register property important in Pakistan, where only 22% All 13 cities (6 procedures) 79 of women are in the formal workforce. Days to register property According to Women, Business and the Lahore (30 days) 64 Law10 in Pakistan, men and women do Cost to register property not have equal rights under the law when Islamabad (7.0% of the property value) 119 it comes to testifying in court, inheritance Days to enforce a contract Faisalabad (730 days) 142 law, and statutory retirement age in the private sector. Cost to enforce a contract Sukkur (20.6% of the claim value) 47 The national and local governments in Pakistan can follow the example of Days to export Hyderabad (20 days) 87 consistent reformers globally. These re- Days to import formers follow a long-term agenda and Karachi, Sukkur (18 days) 66 continually push forward. For example, Cost to export the top-ranked economy on the ease of Karachi (US$ 611) 7 doing business, Singapore, introduces Cost to import reforms every year. The reforms are com- Karachi (US$ 680) 13 prehensive, thus increasing their impact Number of tax payments and chances of success. Consistent re- Islamabad (35 payments) 119 formers are also inclusive, involving all Total tax rate relevant actors and institutionalizing the Islamabad (26% of profit) 26 reform effort. Finally, they stay focused Time to pay taxes by setting specific goals and regularly Islamabad (558.5 hours) 168 monitoring progress. Best practices hypothetical city of “Pakistana” 69 Source: Doing Business database. business, more businesses will be set up prices fell by 1% because of competition 1. World Bank. World Development Indica- tors database. According to the Pakistan and more jobs will be created. Reforms from new entrants.7 Enticing enterprises Economic Survey 2009-10, the economy in Mexico cut the time needed to start into the formal economy through easier grew by approximate 4.1% in the last fis- a business from 58 to 27 days. A recent start-up procedures has two employ- cal year (www.finance.gov.pk/survey). study reports the payoffs: the number ment-related benefits. First, formally re- 2. Data from the Small and Medium Enter- prises Development Authority (SMEDA); of registered businesses rose by nearly gistered enterprises tend to grow to more available at http://www.smeda.org.pk. 6%, employment increased by 2.6%, and efficient sizes and hence employ more 3. December 2009 statistics received from 12 DOING BUSINESS IN PAKISTAN 2010 the Securities and Exchange Commission of Pakistan (SECP). 4. The report does not track reforms for enforcing contracts because of a change in the methodology. The case study was revised to reflect a typical contractual dispute over the quality of goods rather than a simple debt default. See the Data notes for details. 5. Multan, Rawalpindi, and Gujranwala also have uniform building and zoning regu- lations. 6. World Bank. 2010. Doing Business in Colombia 2010. Washington, D.C.: World Bank Group. 7. Bruhn, Miriam. 2008. License to Sell: The Effect of Business Registration Reform on Entrepreneurial Activity in Mexico. Policy Research Working Paper 4538. Wash- ington, D.C.: World Bank. The results were obtained after controlling for gross domestic product per capita, number of economic establishments per capita, fixed assets per capita, and investments per capita in the benchmarked munici- palities. 8. On average, formal enterprises produce 40% more than informal enterprises in the same sectors, as reported in Doing Business in 2005. 9. Argadna, Silvia, and Annamaria Lusagi. 2009. Where Does Regulation Hurt? Evidence from New Businesses across Countries. NBER Working Paper 14747. Cambridge, MA: National Bureau of Eco- nomic Research. 10. World Bank. 2010. Women, Business and the Law: Measuring Legal Gender Parity for Entrepreneurs and Workers in 128 Economies. Data available at http://wbl. worldbank.org. 13 Starting a TABLE 2.1 Where is it easier to start a business in Pakistan? business 1 2 Islamabad, ICT (Easiest) Faisalabad, Punjab 8 9 Rawalpindi, Punjab Sheikhupura, Punjab 3 Karachi, Sindh 10 Sukkur, Sindh 3 Lahore, Punjab 11 Hyderabad, Sindh 3 Peshawar, Khyber Pakhtunkhwa 12 Sialkot, Punjab 6 Multan, Punjab 13 Gujranwala, Punjab 6 Quetta, Balochistan Note: Rankings are the average of the city rankings on the number of procedures, the associated time and cost (% of GNI per capita) required to start a business. See the Data notes section for details. Source: Doing Business database. After graduation, Kiran and Asma de- firms constitute nearly 90% of all enter- on average 8 procedures and 36 days cided to open their own shop selling local prises in Pakistan and employ 80% of the to start a business around the world. In fabrics. They worried that starting a busi- nonagricultural labor force.2 However, it New Zealand, the world’s top performer ness might be more difficult for women. is estimated that the share of informal in this area, the process takes 1 procedure Following a friend’s advice, they decided employment in the nonagricultural sec- and 1 day. Entrepreneurs in New Zealand to use the new online e-Services. They tor is more than 60%.3 can start a business by filing informa- created their login name, downloaded the Research shows that business reg- tion once, because receiving agencies are necessary documents, and within 6 days istration relates to informality and pro- linked through a unified database. they became the proud owners of a new ductivity. Requiring fewer procedures Pakistan performs relatively well in incorporated company, without leaving to start a business is associated with a starting a business—both regionally and their home. Unlike Kiran and Asma, most smaller informal sector.4 Formally reg- globally. Continued reforms have reduced Pakistani entrepreneurs still either regis- istered businesses grow larger and more start-up time and costs, but the number ter their businesses in person or choose productive than informal ones. In a re- of procedures remains high. Business not to register and remain informal. cent study on informality in São Paulo, start-up takes on average 21 days and Starting a business is a leap of faith entrepreneurs reported that they could costs 20.2% of income per capita for the even under the best of circumstances. double operations after registering.5 same 10 procedures required across the Business registration is the first contact Upon formal registration, entrepreneurs 13 cities benchmarked in this report. a new entrepreneur has with govern- could access courts and credit, supply That is 7 days less than the South Asian ment regulators. In some countries, the more important customers, and avoid average (28.1 days), and less than India process is straightforward and afford- harassment from government inspectors (30) and China (37). The cost is below the able, while in others it is so cumbersome or the police. Furthermore, formal enter- South Asian average of 26.9% of income and time-consuming that entrepreneurs prises pay taxes, adding to government per capita. However, the number of pro- either bribe officials to speed up the revenue. Reforms that ease new firms’ cedures (10) is higher than in 131 other process or simply run their businesses entry into the formal sector are relatively informally. The consequences of greater simple and inexpensive to implement,6 What is measured? barriers to entry are particularly severe and often do not require major legislative The starting a business indicator measures for vulnerable groups such as youth and changes. all procedures that are officially required to women, who are more likely to oper- Recognizing the potential gains start up and formally operate a commercial ate in the informal sector as a result.1 from reforms, a record 61 of 183 econo- or industrial small or medium-size limited liability company. These include obtaining With its large and growing labor force, mies made it easier to start a business necessary licenses and permits and complet- Pakistan has no choice but to encourage around the globe between June 2008 and ing required notifications, verifications, and potential entrepreneurs by creating an May 2009, according to Doing Business registrations for the company and its employ- ees with the relevant authorities. environment in which small enterprises 2010. However, in many economies bar- Note: See the detailed description of the standard case in the can flourish. Small- and medium-size riers to entry remain high. It still takes Data notes section. 14 DOING BUSINESS IN PAKISTAN 2010 FIGURE 2.1 e-Services site enables entrepreneurs to Number of procedures, time and cost to start a business in Pakistan and selected economies check availability of the proposed com- CHINA BANGLADESH 66.1 INDIA pany name and reserve it, download all INDIA 36.2 Pakistan BANGLADESH necessary forms, and incorporate their CHINA Range (all 13 cities) in Pakistan SOUTH ASIA new businesses online. Companies reg- SIALKOT 26.2 AVERAGE 10 Range INDIA istering through e-Services no longer in Pakistan 13-city MALAYSIA SOUTH ASIA average need to obtain a company seal; instead SOUTH ASIA GUJRANWALA AVERAGE AVERAGE 24 20.2 the applicants can obtain a digital signa- 13-city BANGLADESH average 21 ture online from the National Institute EGYPT, EGYPT, ARAB REP. ARAB REP. of Facilitation Technologies. 16 FAISALABAD 13.2 OECD ISLAMABAD MALAYSIA ISLAMABAD OECD KARACHI Going online has paid off. Com- MALAYSIA LAHORE PESHAWAR pany name verification and incorpora- AUSTRALIA EGYPT, tion takes 6 days in the 5 cities in which ARAB REP. CHINA AUSTRALIA most entrepreneurs currently register via 0 0 0 AUSTRALIA e-Services—Faisalabad, Islamabad, Ka- Procedures Time Cost (days) (% of income rachi, Lahore and Peshawar. Among the per capita) Source: Doing Business database. 6 cities previously covered in Doing Busi- ness in South Asia 2007 and for which it countries, including Egypt (6), Bangla- Entrepreneurs must register for a profes- is possible to track reform results, the desh (8), and Malaysia (9) (figure 2.1). sional tax with the Excise and Taxation e-Services portal reduced the company It is easier to start a business in Department of the district. Finally, they incorporation time by 4 days in Karachi Islamabad than in any other Pakistani must register for social contributions and by 1 day in Faisalabad, Lahore, and city measured in this report—it only with the provincial Employees Social Peshawar. takes 16 days and costs 13.2% of in- Security Institution and with the dis- Outside of Faisalabad, Islamabad, come per capita. In contrast, the busi- trict Labor Department under the West Karachi, Lahore and Peshawar, the im- ness start-up process is most difficult Pakistan Shops and Establishment Or- pact of the e-Services reform has yet to in Gujranwala, where it takes 24 days dinance. Overall, post-registration pro- be seen, as the vast majority of entre- and costs 24.5% of income per capita cedures are the main reason for the high preneurs continue to submit documents (table 2.1). The differences in time and number of procedures. in person. For them, the incorporation cost stem from the levels of efficiency The business start-up time varies process takes between 7 and 10 days. of local government offices and local from 16 days in Islamabad to 24 days The slight differences in time across lo- branches of national agencies, as well as in Gujranwala. There are small differ- cations reflect variations in the demand the availability and the degree of use of ences across cities in the time needed for services and efficiency of the local the recently introduced online business to register a new company, but the main Security and Exchange Commission of- registration services. sources of variation are the separate post- fices. Frequent electricity outages and a Entrepreneurs must complete the incorporation registrations for taxes and lack of well-functioning generators affect same 10 business start-up procedures social contributions. “We were happy to processing times, too. Also, since there across the country (figure 2.2). Seven of see our new company incorporated in are no Security and Exchange Commis- the 10 procedures are national require- about a week and we did not realize how sion offices in Gujranwala, Sheikhupura, ments, which apply across the country. tedious the post-incorporation process Sialkot, Hyderabad, and Rawalpindi, en- These procedures include 4 incorpora- would be, so that we could fully operate trepreneurs must travel to Lahore, Kara- tion steps—company name registration, our business,” complained Asma. chi, or Islamabad to register their compa- payment of registration fees, company The good news is that register- nies, adding up to 1 day and travel costs registration, and obtaining a digital sig- ing a new company became faster as of PKR 80–700 (US$ 1.2–11). nature or a company seal—and 3 post- a result of the national e-Services re- The post-incorporation procedures incorporation requirements—income form (table 2.2). In September 2008, the are burdensome, require considerable tax and sales tax registration and Em- Securities and Exchange Commission documentation, and involve 5 different ployee Old Age Benefits registration. together with the e-Government Direc- agencies. The first two steps after reg- Local requirements account for yet an- torate launched e-Services, a new web istering the company are applying for other 3 post-incorporation procedures. portal for business incorporation. The a national tax number and a sales tax STARTING A BUSINESS 15 FIGURE 2.2 High number of post-incorporation procedures in Islamabad and the rest of Pakistan Time (days) Cumulative cost (% of income per capita) Procedures 1. Obtain approval of company name 16 Cost 13.2% 12 2. Pay the fees for name registration and incorporation Time 16 days 3. Register the company 4. Obtain digital signatures 12 9 5. Register for income tax 6. Register for sales tax 7. Register for professional tax 8 6 8. Register for employees social security Cost Time 9. Register for employees old age benefits 10. Register with the Labor Department of the District 4 3 Post-incorporation procedures 0 0 1 2 3 4 5 6 7 8 9 10 Source: Doing Business database. Procedures number at the tax facilitation center of days). The main sources of delays are the are lower for this option. According to the Regional Tax Office (RTO) of the lengthy verification process for all ap- the Sixth Fee Schedule, effective since Federal Board of Revenue. plications and insufficient coordination June 2009, online incorporation fees for Registering for income tax takes between the local RTOs and the Central a company with an authorized capital 2–7 days in the 13 benchmarked cit- Registration Office in Islamabad. of up to PKR 600,000 (US$ 9,125) are ies. The time is longest in Sheikhupura, The Federal Board of Revenue is PKR 5,000 (US$ 76) for registration and which does not have an RTO office— introducing technology, similar to e- PKR 2,000 for filing (US$ 30). The fees entrepreneurs must travel to Lahore to Services, to make tax registration elec- for offline submission are double: PKR register. Registration for sales tax takes tronic. The reform is ongoing and the 10,000 (US$ 152) and PKR 4,000 (US$ on average 6 days across the 13 cities. prescribed processing time of 48 hours 61) for registration and filing, respec- The process is relatively fast in Karachi, has yet to be achieved. However, the tively. Companies also pay PKR 200 (US$ Islamabad, and Rawalpindi (1–4 days), good news is that already 66% of the 3) for online name verification compared and again slower in Sheikhupura (10 applications in Karachi, Lahore, and to PKR 500 (US$ 8) to do the same of- Multan were filed online. fline. For companies choosing to register TABLE 2.2 The Finance Act of each province online, there is an additional validation Local and national reforms implemented in cities benchmarked in 2006 regulates registration with the Employ- fee for the digital signature set at PKR ees Social Security Institution. As part 1,277 (US$ 19) nationally. Despite this Provincial or Implementation municipal of national of the Punjab Industrial Policy, 2003, extra fee, the cities with a high use of reforms reforms* the authority to register new enterprises online registration services have lower Reform of with the Punjab Employees Social Secu- overall costs to start a business. registration for Social Use of rity Institution was transferred from pro- The remaining procedures are cost- Security e-Services** vincial headquarters to the local district less, except for a fee of PKR 10 to register Faisalabad, Punjab  level. The revision of documents became with the district Labor Department, as Karachi, Sindh faster and the time to register for social required by the Pakistan Shops and Es- Lahore, Punjab  security fell by 4 days in Faisalabad and tablishments Ordinance of 1969. There Peshawar, Khyber Lahore as a result. are also additional costs when entrepre- Pakhtunkhwa Registrations with Employee Old neurs must travel to another city to com- Quetta, Balochistan Age Benefits and with the Labor Depart- plete their registrations, as is the case Sialkot, Punjab ment of the District take on average 9 in Sialkot. As a result, business start-up Local level National level and 6 days respectively. costs range from 13.2% of income per * National reforms reflected in Doing Business in Pakistan 2010 Incorporation fees represent more capita in cities with online registration to by city. ** Reform counted for cities where high numbers of entrepreneurs than 95% of the total cost to open a 26.2% of income per capita in Sialkot. register online. business across the 13 cities. In order Note: The reforms were implemented between April 2006 and December 2009. to promote online registration, the fees Source: Doing Business database. 16 DOING BUSINESS IN PAKISTAN 2010 WHAT TO REFORM? ELIMINATE ANTIQUATED AND UNNECESSARY REQUIREMENTS MAKE ONLINE INCORPORATION Some requirements are leftovers from 1. Argadna, Silvia, and Annamaria Lusagi. FULLY FUNCTIONAL 2009. Where Does Regulation Hurt? a bygone era and should be eliminated. Evidence from New Businesses across Although online name submission is One example is the company seal, which, Countries. NBER Working Paper 14747. available in Pakistan as a result of the in earlier centuries, symbolized the legal Cambridge, MA: National Bureau of Eco- nomic Research. e-Services reform, the registrar person- identity of a business and authenticated 2. Small and Medium Enterprises Develop- nel still have to check for company name all its contracts. Now most documents ment Authority (SMEDA). availability and appropriateness for each are sent electronically. Although Paki- 3. Gennari, Pietro. 2004. Informal Sector: application. Entrepreneurs would save stan has regulations allowing electronic Statistical Definition and Measurement precious time if checking availability and signatures, it is still a standard com- Issues. Bangkok: OECD/UNESCAP/ADB Workshop Assessing and Improving Data reserving the name could be done online mercial practice to make a company seal Quality. in just a few minutes. Furthermore, while and use it for commercial transactions, 4. Djankov, Simeon; La Porta, Rafael; entrepreneurs in Pakistan can file incor- including stamping of documents later López-de Silanes, Florencio; and Shleifer, poration forms and documents electroni- submitted online. Andrei. 2002. “The Regulation of Entry.” cally, the registration fees must still be The Quarterly Journal of Economics 117 (1): 1–37. Cambridge, MA: MIT Press. paid at a bank. Making the incorporation CREATE SINGLE ACCESS POINT FOR ALL TAX REGISTRATION AND FOR 5. Bertrand, Marianne; Djankov, Simeon; process fully electronic would reduce the SOCIAL SECURITY REQUIREMENTS Mullainathan, Sendhil; and Schnabl, time involved and make the work of the Phillip. 2006. Who Runs Informal Busi- registrar much easier. National and local authorities could cre- nesses in São Paulo? Cambridge, MA: Harvard University, Department of Eco- ate single-access points for all tax and nomics. PROMOTE THE USE OF ONLINE social security registrations, and issue an SERVICES 6. The introduction of a fast-track system identification number valid for all trans- to start a business in Portugal cut the Pakistan is one of the 40 economies in actions with the government. Entrepre- time by 46 days in 2006. The reform was implemented in 5 months and cost US$ the world that offer electronic registra- neurs must currently visit 5 different 350,000. World Bank. 2005. Doing Busi- tion services. To create awareness of the agencies after incorporation to register ness 2006: Creating Jobs. Washington, e-Services project, the Securities and Ex- for taxes and social security benefits. The D.C.: World Bank Group. change Commission of Pakistan (SECP) registrar of companies, the local Cham- 7. International Telecommunication Union (2009). Website: www.itu.int. organized a number of seminars in col- bers of Commerce and Industry, or a 8. World Bank. 2009. Doing Business in laboration with professional bodies, such newly appointed focal department could India 2009. Washington D.C.: World as chambers of commerce in Faisalabad, take responsibility for registering the Bank Group. Islamabad, Karachi, Lahore and Multan. new company with the various tax and Furthermore, to encourage entrepreneurs social security authorities and for circu- to go online, the government set the prices lating the company documents among for online registration at half that for them, preferably electronically. Cities registration in person—in line with best could follow the examples of the Indian global practices. However, in most cities states of Andhra Pradesh and Orissa, the majority of entrepreneurs still register which consolidated the registration for in person. To promote company registra- value-added tax and profession tax at the tion and online services, the SECP should same office. The national governments organize a new dissemination strategy of Jordan and Egypt put tax registration targeted at the private sector outside of into the hands of the registrars, speeding the main business centers. In Pakistan, up the process, which now takes only 1 where only 10.5% of the population cur- or 2 days, and allowing entrepreneurs to rently has access to the Internet,7 the focus on their businesses. SECP should consider making Internet stations available, where entrepreneurs would go to register more cheaply and efficiently. Similar booths function well across India for utility registrations.8 17 Dealing with TABLE 3.1 Where is it easier to deal with construction permits in Pakistan? construction 1 2 Multan, Punjab (Easiest) Gujranwala, Punjab 8 8 Islamabad, ICT Sheikhupura, Punjab permits 3 4 Lahore, Punjab Sukkur, Sindh 10 11 Karachi, Sindh Sialkot, Punjab 5 Rawalpindi, Punjab 12 Quetta, Balochistan 6 Faisalabad, Punjab 13 Hyderabad, Sindh 6 Peshawar, Khyber Pakhtunkhwa Note: Rankings are the average of the city rankings on the number of procedures, the associated time and cost (% of income per capita) required to deal with construction permits. See the Data notes section for details. Source: Doing Business database. By 2030 one Pakistani out of two will cedures are associated with an increased average 7 procedures, 67 days, and 18.7% be a city resident.1 Hundreds of thou- likelihood of informal payments in ex- of income per capita. sands of people leave the countryside change for construction permits (figure Since licenses for site development, in search of a better life each year. As a 3.1). In Pakistan, 1 entrepreneur out of 4 building permits, and utility connec- consequence, cities are facing pressing expects to pay facilitation fees to public tions are governed at the local level, the challenges—sprawling informal settle- officials in order to get things done.3 number of procedures, time, and cost ments and the degradation of urban In the last five years the country involved vary significantly across cit- infrastructure. Updated master plans was hit by two major earthquakes that ies. Expanding businesses that need to and efficient construction regulations brought national attention to the poor build a warehouse would find it easier to prepare cities to successfully cope with planning and construction standards in obtain all approvals and utility connec- the pressures of urbanization. the building sector. It is not easy to find tions in Multan, Gujranwala, and Lahore By some estimates 60–80% of con- the right balance between safety and ef- than in Hyderabad and Quetta (table struction projects in developing econo- ficiency. Good regulations ensure public 3.1). The best-performing city, Multan, mies are undertaken without a building safety and revenue for the government, would rank 56th among 183 economies permit, because the approval process is while making the permitting process on the ease of dealing with construction too complex or oversight too lax.2 An more transparent and affordable both for permits, ahead of Australia (62nd). analysis based on World Bank Enterprise those who use it and those who adminis- Over the past years building regula- Surveys and Doing Business data found ter it. Instead of promoting safety, overly tions have evolved considerably. Follow- that more cumbersome and costly pro- rigid rules may push the construction ing the devastating earthquake of 2005, sector into the informal economy, under- the Pakistani Engineering Council was FIGURE 3.1 mining their intent. tasked to develop a new building code Share of firms that expect to give gifts in exchange for construction permits Dealing with construction permits % is relatively fast but expensive across Pa- What is measured? 30 kistan. Obtaining all building approvals Doing Business looks at construction permits and utility connections in the 13 ben- as an example of licensing regulations that 20 chmarked cities requires on average 13 businesses face. It measures the procedures, time, and cost required for a business in the 10 procedures, 165 days, and costs 527.6% construction industry to obtain the necessary of income per capita (figure 3.2). The approvals to build a commercial warehouse 0 average city would rank 73rd globally and connect it to electricity, water, sewerage, Least Most and telecommunication services. It assumes difficult difficult on the ease of dealing with construction that the warehouse will be used for storage Economies ranked by ease of dealing permits,4 ahead of India (175th), but be- of nonhazardous goods and is located in the with construction permits, quintiles hind Indonesia (61st) and South Africa peri-urban area of the city. Note: Relationships are significant at the 1% level and remain (52nd). In the best performing economy, Note: See the detailed description of the standard case in the significant when controlling for income per capita. Data notes section. Source: Doing Business database; World Bank Enterprise Hong Kong, the same process requires on Survey database. 18 DOING BUSINESS IN PAKISTAN 2010 2,394.9 FIGURE 3.2 INDIA monitoring the enforcement of the new Best, average and worse practices in dealing with construction permits regulations by building up staff capacity CHINA, INDIA BRAZIL 797.9 and requisite skill sets. ISLAMABAD The number of steps to build a CHINA BANGLADESH warehouse and hook it up to utilities CHINA ranges from 11 in Multan, Lahore, and Range EGYPT, ARAB REP. 527.6 in Pakistan KARACHI Faisalabad to 15 in Sialkot. The process BANGLADESH Pakistan SIALKOT BRAZIL 223 EGYPT, ARAB REP. 380.3 generally includes securing a land re- SOUTH AFRICA INDIA SHEIKHUPURA 13-city average 15 BANGLADESH, SOUTH AFRICA EGYPT, cord, obtaining a building-plan approval, 13 165 INDONESIA ARAB REP. INDONESIA passing inspections during construction, 11 124 INDONESIA FAISALABAD, connecting to the utilities and—once the LAHORE, HONG KONG, PESHAWAR MULTAN CHINA HONG KONG, BRAZIL CHINA construction is over—obtaining a certifi- SOUTH AFRICA 0 0 0 HONG KONG, cate of completion. Some cities impose Procedures Time Cost CHINA additional requirements. In Sialkot, ap- (days) (% of income per capita) plicants must obtain an environmental Source: Doing Business database. clearance for every non-residential proj- that defines the levels of seismic haz- authorities in Quetta are working on new ect, irrespective of its scope or location. ard of each area. The Building Code of bylaws to replace those of 1937. In Quetta, the town municipal adminis- Pakistan: Seismic Provisions, 2007, also “Before the new uniform regula- tration inspects construction sites more provides guidelines on design and the tions came into effect,” says Ahmed, an frequently than in other cities. quality of materials used for new build- architect from Lahore, “I had to meet The time required to deal with con- ings. The code is being implemented several times with officials from the au- struction permits and utility connec- throughout the country. thority administering a particular area tions varies considerably among cities. In addition, much has been done of the city in order to get an idea of the Obtaining all approvals takes 124 days at the provincial and municipal level. specific requirements for each project. in Peshawar, but almost twice as long Lahore, Multan, Rawalpindi, Gujran- Now things are clearer than before. I in Karachi. Throughout the country, the wala, Faisalabad, and Sialkot adopted spend less time dealing with bureau- most time-consuming procedures are uniform building and zoning regulations cracy and more time on managing my those that take place during the pre- that clarify the permitting process and business.” Most of Ahmed’s colleagues construction stage and when connect- specify required documents. Hyderabad across Punjab agree that the develop- ing to utilities (figure 3.3). Gathering plans to enforce more detailed building ment authorities and municipal adminis- the necessary documents and obtaining and town-planning regulations, while trations should now shift their efforts on clearances to start construction can take up to 3 months in Karachi and Quetta. In FIGURE 3.3 contrast, in Lahore and Peshawar it takes Pre-construction procedures and utility connections—biggest bottlenecks one and a half months. In most cities, Days 0 50 100 150 200 hooking up a newly built warehouse to Peshawar the water, sewerage, and electricity net- Lahore works, and obtaining a fixed telephone Gujranwala line takes at least 2 months. In Peshawar, Islamabad Multan, Sialkot, and Faisalabad the pro- Multan cess is up to 20 days faster. Rawalpindi Post-construction procedures are Sukkur Faisalabad faster. Receiving the final inspection Sialkot and obtaining a certificate of comple- Sheikhupura tion takes 14 days in Islamabad and Hyderabad longer than 3 weeks in Gujranwala and Quetta Hyderabad. In Karachi, where the pro- Karachi cess is slower, it takes 53 days. Variations Pre- During Post- Utilities in time reflect different workloads of construction construction construction Source: Doing Business database. DEALING WITH CONSTRUC TION PERMITS 19 FIGURE 3.4 across the country benefit from national 2006 2009 Reformers are improving their performances Time Time reforms when applying for fixed tele- (Cities previously benchmarked) reduced increased phone lines. Since the Pakistani Tele- 60 60 60 60 2009 2006 communication Company Limited was 53 privatized, applications for new phone 53 45 connections can be submitted by phone 45 38 37 or online. Processing times have been 38 32 33 31 considerably reduced throughout the 30 country, from 18 to 7 days on average be- tween 2006 and 2009. Meanwhile, con- 17 nection costs have dropped by 64.8%. 12 The cost of obtaining construction- Days to obtain a building permit Days to obtain a completion certificate related permits varies considerably by Faisalabad Karachi Lahore Peshawar Quetta Sialkot Faisalabad Karachi Lahore Peshawar Quetta Sialkot city. In Sheikhupura, the administrative Note: The reforms were implemented between April 2006 and December 2009. costs of building a warehouse and hook- Source: Doing Business database. ing it up to utilities are 380.3% of income town-planning offices as well as different permit takes 1 week more than it did per capita. In Islamabad, the same pro- organizational structures. 3 years ago, while the time to obtain a cess is more than twice as expensive, Reforming cities are becoming completion certificate has doubled. Simi- costing 797.9% of income per capita. more efficient. After adopting the new larly, obtaining a certificate of comple- Variations among cities stem from building regulations, Sialkot has cut the tion in Peshawar takes 3 times longer staggering differences in fees for build- time to obtain a building permit by 22 than 3 years ago. ing permits and certificates of comple- days. In Lahore, an entrepreneur must Getting an electricity connection is tion. All cities charge building permit wait around 45 days to have a building slow across cities. Connecting a ware- fees, depending on the use and size of plan examined and approved, compared house to the power system takes on the building. The building permit for to 60 days 3 years ago (figure 3.4). In average 40 days in Peshawar. It takes up the warehouse in question costs PKR Islamabad, where most construction- to 5 weeks longer in Hyderabad, Sukkur, 70,000 (US$ 1,065) in Lahore, Peshawar, related applications can be submitted and Karachi. Comparing the situation Rawalpindi, and Sialkot and three times to the “One Window Operation” of the to 3 years ago, the process is becoming more in Hyderabad, where the develop- Capital Development Authority, obtain- increasingly time-consuming in a num- ment authority charges 6 different fees to ing a building permit takes no more ber of cities. In Quetta, it currently takes process and validate the building plan as than 45 days as well. an average of 70 days; it took 41 days in opposed to 1 or 2 in the other cities. After Where regulations and practices 2006. The situation also worsened in La- construction is completed, the certificate have not been modernized, the authori- hore and Faisalabad where the time has issued after the final inspection is free ties cannot keep up with the growing increased by 12 and 14 days, respectively, in most cities. However, authorities in demand that results from rapid urban- over the last 3 years. Gujranwala, Hyderabad, and Islamabad ization. In Quetta, obtaining a building On the other hand, entrepreneurs charge fees between PKR 5,000 (US$ 76) and PKR 70,000 (US$ 1,065). TABLE 3.2 National and local reforms implemented in all cities benchmarked in 2006 Finding out how much a construc- tion permit costs and how the building Adopted new building and Improved telephone zoning regulations services* process works is a challenge in itself. De- Faisalabad, Punjab  velopment authorities and town municipal Karachi, Sindh administrations do not make much infor- Lahore, Punjab  mation available online. And the available Peshawar, Khyber Pakhtunkhwa cost schedules are usually outdated. The Quetta, Balochistan Karachi Building Control Authority is a Sialkot, Punjab  noteworthy exception. When visiting the Local level National level KBCA website, builders can immediately * National reforms reflected in Doing Business in Pakistan 2010 by city. consult master plans and city bylaws and Note: The reforms were implemented between April 2006 and December 2009. download application forms. Source: Doing Business database. 20 DOING BUSINESS IN PAKISTAN 2010 Getting information about utility IDENTIFY AND ELIMINATE AREAS OF fectively. Smart regulations should en- OVERLAP AMONG AGENCIES connection fees is generally easier. All sure public safety and administrative electric companies provide detailed in- Dealing with construction permits in- efficiency. Complicated and risky proj- formation on costs and new connections volves multiple agencies and approvals. ects, such as skyscrapers and industrial online. Water and sewerage authorities Understanding how these agencies inter- plants, require high security and control in Karachi, Rawalpindi, Hyderabad, and act with one another and identifying and standards. On the other hand, simpler Lahore have similar services. eliminating areas of overlap can be the projects require a limited number of Builders are more likely to comply first step toward speeding up approvals inspections at clearly identified stages of with regulations when clear guidelines while maintaining control over the qual- construction. and fee schedules are easily available, ity of construction. In the Kyrgyz Repub- For a warehouse like the one de- when statutory time limits are enforced, lic, for example, the Union of Builders scribed in our case study, some Pakistani and authorities held accountable. When mapped the approval processes of rel- cities require several inspections. Den- regulation is predictable, companies evant agencies in 2007, identified bottle- mark requires only one, but this does spend fewer resources on chasing appli- necks, and proposed pragmatic solutions. not mean that buildings in Denmark are cations and paying bribes and more on Its detailed analysis helped persuade the less safe. One way to make inspections meeting project deadlines and obtaining central government to reform in 2008. more efficient is to change from a system financing. Aware of this, development In Hong Kong, China, 29 government of random inspections to a system of authorities and municipal administra- agencies worked with focus groups to risk-based inspections, where inspec- tions are embarking on reforms whose develop a comprehensive scheme identi- tions take place at critical phases of the effects are yet to be felt. With the reform fying which procedures could be merged construction process. process set in motion, the challenge is and simplified. Throughout this exercise, now building institutional capacity to Hong Kong, China, managed to cut the PROVIDE ON-THE-JOB TRAINING TO STAFF OF DEVELOPMENT improve implementation. number of procedures from 15 to 7—one AUTHORITIES AND MUNICIPAL of the most successful reforms in con- ADMINISTRATIONS WHAT TO REFORM? struction permitting. As cities get bigger and building projects Across Pakistan, the agencies ad- become more complex, development au- CONTINUE RATIONALIZING THE CONSTRUCTION PLANNING AND ministering bylaws and master plans and thorities and municipal administrations APPROVAL PROCESS presiding over inspections and approvals must update the technical skills of their Good regulations increase safety while often differ among neighborhoods of staff. Assessing building applications encouraging businesses to operate for- the same city. In Lahore, for example, and carrying out inspections requires a mally. Honduras is one example. In 2007 the responsible town planning agencies deep understanding of the bylaws and a the municipality of Tegucigalpa stream- include the Lahore Development Author- considerable degree of technical know- lined the process for obtaining a build- ity, Cantonment Board, and several Town how. Currently, such understanding and ing permit. The following year revenue Municipal Administrations. In smaller know-how are rare across different au- was up by 167%, an impressive result, cities, the situation is not much differ- thorities and cities. Not all officers are especially because the construction ent. This fragmentation is confusing for confident in implementing the building growth rate was only 3.5% at the time.5 investors and detrimental to the imple- and development control regulations and Since 2006, most cities in Punjab have mentation of master plans. In order to performing their duties. This lack of adopted uniform zoning and building solve such problems, areas of compe- confidence has dire consequences on en- regulations that clarify the construction tence should be clarified and simplified. forcement of regulations, master plans, planning and approval process (table Where possible, agencies performing and outline development plans and on the 3.2). In other cities, such as Hyderabad similar functions should be merged. overall quality of inspections. In order to and Quetta, new regulations are soon overcome such problems, public authori- to be implemented. The enforcement of RATIONALIZE INSPECTIONS ties should provide capacity training for modern regulations has often resulted in When city regulations envisage the same their employees and increase coordina- a sensible reduction of processing times inspections for all types of buildings or tion among different agencies to encour- for building permits. More cities should contain vague inspection requirements, age the spillover of best practices. follow this example. public agencies run the risk of not being able to supervise complex projects ef- DEALING WITH CONSTRUC TION PERMITS 21 1. United Nations Department of Econom- ics and Social Affairs, Population Divi- sion. 2005. “Urban Agglomerations.” United Nations. 2. Moullier, Thomas. 2009. Reforming Build- ing Permits: Why Is It Important and What Can IFC Really Do? International Finance Corporation. Washington, D.C.: World Bank Group. 3. http://www.enterprisesurveys.org/ 4. World Bank. 2009. Doing Business 2010: Reforming Through Difficult Times. Wash- ington, D.C.: World Bank Group. 5. World Bank. World Development Indica- tors. Registering TABLE 4.1 Where is it easier to register property in Pakistan? property 1 Faisalabad, Punjab (Easiest) 7 Rawalpindi, Punjab 1 Sialkot, Punjab 9 Peshawar, Khyber Pakhtunkhwa 3 Islamabad, ICT 10 Sukkur, Sindh 4 Lahore, Punjab 11 Hyderabad, Sindh 5 Sheikhupura, Punjab 11 Karachi, Sindh 6 Gujranwala, Punjab 13 Quetta, Balochistan 7 Multan, Punjab Note: Rankings are the average of the city rankings on the number of procedures, the associated time and cost (% of the property value) required to register property. See the Data notes section for details. Source: Doing Business database. Youssef, a jewelry maker, is planning to 2010, behind India (93rd) or Malaysia jections. And only in the provinces of buy a new property in order to open a (86th) (figure 4.1). In Saudi Arabia, the Punjab, ICT, Khyber Pakhtunkhwa, and shop closer to his clients. He is torn bet- best performer for this indicator, only 2 Balochistan must they personally follow ween buying and registering his property procedures and 2 days are necessary to up on the transfer of property title with officially, or just buying it unofficially, register property, at no cost at all. And the patwari, the local official at the Re- with cash and a handshake as the only registering property in Pakistan recently venue Office in charge of issuing the fard proof of the transaction. Youssef knows got more expensive. The Finance Law, and completing the property transfer. that a valid property title can be used enacted on July 1, 2009 increased the Local variations in time are more as collateral to obtain a loan, and offers federal capital value tax from 2% to 4% pronounced. Registering property is fas- better protection against fraud, eviction, across Pakistan. As a result, the cost for test in Lahore (30 days) and slowest in or even destitution.1 However, he also Karachi now jumped to 9.3%.4 Quetta (52 days). These differences are knows that registering property in Pakis- Youssef would find it easier to re- due to two main reasons. First, Sindh’s tan is quite burdensome and costly. gister his property in Faisalabad, Sialkot, requirement to have a newspaper publi- An efficient property system has and Islamabad than in the rest of Pakis- cation adds an additional 8 to 14 days to benefits. With a formal property title, tan (table 4.1). Due to differences in re- the total time needed to register property entrepreneurs have an incentive to invest gulations and practices, local variations in Sukkur, Karachi, and Hyderabad. Se- in their property, or use it as guarantee to in procedures, time, and cost can be cond, the Revenue Office’s efficiency in obtain credit and grow their businesses. found (figure 4.1). Within Pakistan, good transferring the property title varies de- A recent study in Peru finds that property practices exist that could be emulated by pending on the degree of computeriza- titles are correlated with a 10% increase less efficient cities. tion and workload. Transferring the pro- in loan approval rates for construction In all 13 cities entrepreneurs such perty title is the most time-consuming materials.2 Banks prefer using land titles as Youssef must complete 6 procedures procedure, accounting on average for as collateral since a plot is impossible to to register property. Five procedures are move or hide.3 Property registration also identical across the country: obtain a What is measured? benefits governments, as more property proof of ownership called a fard at the The registering property indicator records registered translates into higher property Revenue Office, purchase a stamp paper, the sequence of procedures, time, and costs necessary to transfer a property title from taxes revenues. pay the stamp duty and capital value tax one business to another, when a company In 2009, it took 6 procedures and at the bank, hire a deed writer to draft the purchases land and a building from another 50 days to transfer a property title in sale deed and present the document to the company. All procedures are recorded until the buyer can sell the property to another Karachi, at a cost of 7.2% of the property registration office for final registration. company, or use the property as collateral to value. As a result, Pakistan—represen- One procedure differs from province to obtain a loan. It is assumed that the property ted by Karachi—ranked globally 119th province. Only in the province of Sindh, is registered and free of title dispute. out of 183 economies on the ease of must entrepreneurs publish the property Note: See the detailed description of the standard case in the Data notes section. registering property in Doing Business transaction in a newspaper to invite ob- REGISTERING PROPERT Y 23 FIGURE 4.1 ting local immunization campaigns.6 Some cities have more efficient property registration Range in Pakistan Archaic filing systems, low accountabi- BRAZIL SOUTH QUETTA 11.0 lity, and work overload combined can ASIA AVERAGE BANGLADESH give rise to rent-seeking behaviors and 13-city average 8.6 delays.7 Range in Pakistan EGYPT, INDIA Where land records have been ARAB REP. ISLAMABAD 7.0 Pakistan QUETTA SOUTH ASIA computerized, however, registrars and All13 cities AVERAGE EGYPT, ARAB REP. 13-city 52 patwaris find it easier to check the ow- 6 SOUTH ASIA AVERAGE, INDIA TURKEY average 42 BRAZIL nership, register the transaction, and INDIA transfer the property title. This is the case 30 TURKEY BRAZIL LAHORE in Lahore and Sialkot, which are reaping SAUDI ARABIA EGYPT, TURKEY ARAB REP. the benefits of their computerization 0 0 SAUDI ARABIA 0 SAUDI ARABIA efforts (table 4.2). Chosen as a pilot city Procedures Time Cost for the government of Punjab, Lahore (days) (% of the property value) Source: Doing Business database. had computerized the revenue records of 57,000 acres of land belonging to 60,000 71% of the total time needed to register cords remain under the custody of the land owners by 2003.8 This reform is property in Punjab (figure 4.2). In Sindh, patwari, who exercises complete control ongoing, and continuously improves the this procedure is included within the over them without much accountability. efficiency of Lahore’s registrars and pat- register the sale deed procedure. In most of Pakistan, patwaris are waris. As a result, from 2006 to 2009, So far, Pakistan’s land records are obliged to physically read through 17 the time to register a deed and transfer predominantly paper based. The current different files in order to check the ow- a property title in Lahore decreased, by system is a legacy of the reform-minded nership, transaction history, and owner’s 3 and 4 days respectively (figure 4.3). Emperor Akbar, who established the genealogy as well as any unusual events A pilot program to computerize deed country’s first land-registration mecha- —such as an outbreak of bird flu—recor- registration is also underway in Sialkot, nism in the 16th century. Maintained ded in the property’s “Lal Kitaab,” or “red which reduced registration time from 13 for 500 years with few modifications, it book.” In addition, patwaris are not only days in 2006 to 6 days in 2009. relies on a filing system in place since responsible for land issues, but also for But it is not the time that entrepre- the British Raj, and presently contains many other administrative and political neurs such as Youssef are mostly worried 190-million property titles, with details tasks, such as keeping weather records, about: it is the cost, substantially higher on 50-million landowners.5 These re- updating registered voters, and conduc- in Pakistan than South Asia’s average of FIGURE 4.2 TABLE 4.2 Transfering the property title at the Revenue Office is the most time-consuming procedure National and local reforms implemented in all cities benchmarked in 2006 Days 0 10 20 30 40 50 Provincial Lahore 30 or municipal Implementation of 34 reforms national reforms* Faisalabad Computerization Increase in Capital Sialkot 34 of land records Value Tax rate Islamabad 39 Faisalabad, Sheikhupura 39 Punjab  Gujranwala 40 Karachi,  Multan 41 Sindh Rawalpindi 41 Lahore,  Punjab  Peshawar 42 Sukkur 49 Peshawar, Khyber Pakh- Karachi 50 tunkhwa  Hyderabad 51 Quetta,  Quetta 52 Balochistan Other Sialkot, Registration Punjab   Transfer Non-encumbrance* of deed of title Local level National level  Negative reform * For Sindh cities, includes both “obtain Fard” and “publish the transaction in a newspaper.” Note: For Sindh cities, the procedure “Register sale deed” also includes the time needed to transfer the property title *Note: The reforms were implemented between April 2006 and (shown in dark blue in other cities). December 2009. Source: Doing Business database. Source: Doing Business database. 24 DOING BUSINESS IN PAKISTAN 2010 FIGURE 4.3 ces of revenue available, which include chistan have initiated two computeriza- Computerized land records cut the time property-related taxes.10 As a result, a tion projects, called Land Record Ma- to register property by 7 days in Lahore— the fastest in Pakistan 37 days Pakistani property buyer must pay four nagement Information System (LRMIS) cut to 30 types of fees, collected by different levels and Participatory Information System Time (days) 2006 Transfer of government: a provincial stamp duty (PIS) respectively in selected pilot lo- a propery title and registration fee, a municipal urban cations.11 As part of the project, the 23 days 30 cut to 19 immovable property tax (UIPT) levied selected Punjab districts abolished the 2009 by the Town Municipal Authority, and a old fard, allowing property buyers to federal capital value tax which, following obtain their fard online, submit their sale the Finance Law of July 2009, increased deed to the registrars electronically and 20 from 2% to 4% of the property value. see the property title transferred by the Register The capital value tax (4% of the pro- patwaris in no time. The project is now a deed perty value), the urban immovable pro- being expanded to other parts of the pro- 8 days cut to 5 perty tax (1%) and the registration fee vince, with the financial and technical 10 (1%) are constant across Pakistan. Local support of the World Bank. variations arise from the stamp duty Some local initiatives are begin- rates set at the provincial level: 2% of the ning to show results. Zubair Bhatti, a 0 property value in Punjab and Islamabad, district coordination officer in Punjab, 1 Procedures 6 3% in Sindh and Khyber Pakhtunkhwa recently started asking all his patwaris Note: The reforms were implemented between April 2006 and 5% in Balochistan. Islamabad is an to submit a daily list of transactions, and December 2009. Source: Doing Business database. outlier, as it does not enforce the UIPT. including the payments received and As a result, it is cheapest to register pro- the phone numbers of the buyers and 5.6%.9 Most economies impose one type perty in Islamabad (7% of the property the sellers. He then randomly called to of levy on transferring property titles, be value) and most expensive in Quetta ask if any of the parties had been asked it a stamp duty (Sri Lanka), a tax (Brazil) (11%) (figure 4.4). to pay an unofficial fee. One patwari was or an administrative fee (Turkey). In Provincial governments have re- soon convicted, following which buyers Pakistan, both central and local gover- cently embarked on a series of reforms. and sellers reported a sudden improve- nments are competing for the few sour- The governments of Punjab and Balo- ment in service.12 Impressed by these results, Punjab’s chief minister has or- FIGURE 4.4 Registering property in Pakistan involves many different taxes and fees dered the immediate implementation of Cost (% of the property value) this practice to all districts of Punjab in 0 2 4 6 8 10 order to reduce corruption and improve Egypt, Arab Rep. 0.9 service delivery. Brazil 2.9 Turkey 3.0 WHAT TO REFORM? South Asia 5.5 Islamabad 7.0 SIMPLIFY OR CONSOLIDATE India 7.4 PROCEDURES Faisalabad 8.0 Sialkot 8.0 All cities require the same five basic pro- Gujranwala 8.1 cedures to register property. Yet, entre- Lahore 8.1 preneurs in every province must undergo Multan 8.1 one additional procedure: either publish Rawalpindi 8.1 the transaction in a newspaper in Sindh, Sheikhupura 8.1 or—in all other provinces—submit an Peshawar 9.0 application for the transfer of property to Hyderabad 9.2 the Revenue Office. Sukkur 9.2 Other These two procedures could easily Karachi 9.3 be eliminated. Except for Sindh, all the Quetta 11.0 other provinces have successfully done Stamp duty Registration fee Capital value Urban immovable tax property tax away with newspaper publication, and Source: Doing Business database. REGISTERING PROPERT Y 25 rely instead on the fard to confirm that errors, and the number of interactions property tax (UIPT) have hardly grown the property is free of encumbrances and between the official and the applicant, in the last 5 years,16 and whatever reve- disputes. Doing so would immediately each of which is an opportunity for co- nue is collected must be shared between reduce property registration time by 14 rruption. The 14 economies that have multiple agencies. In Lahore, 5% of UIPT days in Hyderabad and Sukkur and 8 moved from paper to computer in the revenues go to the Excise and Taxation days in Karachi. As for the property past 5 years have cut the time needed Department, 15% to provincial coffers, transfer, the procedure should be de facto to transfer property in half. This year, 50% to water authorities, 25% to the automatic, since the registrar forwards Angola is the most striking example: Town Municipal Authority and the rest the sale deed directly to the patwari. It is a 5-year computerization effort at the to the Lahore Development Authority.17 only due to the Revenue Office’s lack of registry reduced the total time in Luanda efficiency that property buyers feel com- from 334 to 184 days.14 INTRODUCE A FLAT FEE FOR STAMP DUTY pelled to perform the procedure them- In the meantime, another way to selves. Computerizing land records and improve efficiency immediately is to High costs provide an incentive for entre- holding patwaris accountable would eli- hold patwaris accountable, as Zubair preneurs to undervalue their property or minate this procedure without the need Bhatti has done. His experience shows evade registration altogether. This is the for further regulation or legal reform. that keeping local officials accountable reason why 49 economies have reduced In addition, some of the core five and enforcing strict sanctions produces the cost of registering property since procedures could be streamlined. Across immediate results. Mauritius, the top 2005. And reducing fees does not neces- Pakistan, entrepreneurs still have to reformer for this indicator, is a case in sarily mean reducing revenues: Burkina purchase stamp paper separately, on point. It successfully decreased the time Faso, the Indian state of Maharashtra, which the deedwriter drafts the sale needed to register property from 210 to Mozambique, and the Arab Republic of deed. In India, 14 cities have successfu- 21 days in one year by simply imposing Egypt lowered their fees yet increased lly removed this requirement. Instead, and enforcing a time limit of 15 days to their revenues due to the increase in the sale agreement between the parties settle and obtain the final property title. transactions the reform triggered.18 is franked by the Subregistrar at the This reform alone has improved its glo- Replacing the current fee system— time of registration. bal ranking from 131st in Doing Business based on the property value—with a 2009 to 66th in Doing Business 2010. fixed fee would reduce the incentive for IMPROVE THE EFFICIENCY OF property owners to undervalue their THE REVENUE OFFICE THROUGH COMPUTERIZATION AND GREATER REDUCE THE NUMBER OF FEES plot or evade registration. In 2007, the ACCOUNTABILITY Currently, a property buyer must pay Arab Republic of Egypt replaced its 3% The two procedures that take place at the four different taxes and levies to three stamp duty with a low fixed fee. This tri- Revenue Office — obtaining the fard and different collecting entities, which are ggered a surge in property registration transferring the property title—account all competing for the same narrow tax that increased government revenues by on average for 75% of the total time re- base. To reduce the number of fees co- 39% within six months after the reform quired to register property in Pakistan. llected during property registration, Pa- was implemented. Improving the efficiency of the patwari kistan could consider deep structural In Pakistan, the benefits of a flat fee would speed up the process, and not reforms: broaden the tax base, enhance would go beyond cutting the cost of regis- only for property registration. A recent the revenue collection capacity of local tering property. With a flat fee, registrars study revealed that landholders must governments, and clearly identify which and patwaris would not need to spend as access their land records between 2 to authority is in charge of property-related much time verifying the property value. 10 times a year,13 for purposes as diverse taxes. Local governments could be en- This would speed up the registration as paying for a bail in court or applying trusted with that task, since they have a process and significantly reduce the time for a credit. comparative advantage in following land needed to register property. Patwaris could work faster with a transactions, new building activities, and fully computerized land-record system, property price variations.15 the most convenient way of registering The proposed reforms would be property anywhere. When entrepreneurs beneficial to entrepreneurs as well as 1. A recent study found landlessness to be positively correlated with poverty in can file their documents and local au- to local governments. The current tax- Pakistan: Anwae, Talat; Qureshi, Sarfraz thorities can verify them with the click collection system is inefficient. In Pun- K.; and Ali, Hammad. 2004. Landlessness of a mouse, it reduces compliance time, jab, revenues from the urban immovable and Rural Poverty in Pakistan. Islama- bad, Pakistan: Pakistan Institute of Deve- 26 DOING BUSINESS IN PAKISTAN 2010 lopment Economics. 2. De Soto, Hernando. 2000. The Mystery of Capital: Why Capitalism Triumphs in the West and fails Everywhere Else. New York: Basic Books. 3. World Bank. 2009. Doing Business 2010: Reforming Through Difficult Times. Was- hington, D.C.: World Bank Group. 4. This reform was implemented after the publication of the Doing Business 2010 data, and will be reflected in the upco- ming Doing Business 2011 report. 5. Usman Qazi, Muhammed. April 2006. Computerization of Land Records in Pa- kistan. UNDP Asia-Pacific Development Information Program, case study. 6. Ibid. 7. Ibid. 8. “Data of City Land Records Completed”. Daily Times. December 15, 2003. Avai- lable at http://www.dailytimes.com.pk/ default.asp?page=story_15-12-2003_ pg7_19 9. South Asia average includes Afghanistan, Bangladesh, Bhutan, India, Nepal, Pakis- tan and Sri Lanka. 10. For more details, see the chapter on Pa- ying Taxes. 11. None of the cities in this study are part of the pilot project. 12. “Eureka Moments: A Special Report on Telecoms in the Emerging market”. The Economist. September 24, 2009. 13. Usman Qazi, Muhammed. April 2006. Computerization of Land Records in Pa- kistan. UNDP Asia-Pacific Development Information Program, case study. 14. World Bank. 2009. Doing Business 2010: Reforming Through Difficult Times. Was- hington, D.C.: World Bank Group. 15. Bahl, Roy, and Cyan, Musharraf. August 2009. Local Government Taxation in Pakistan. Working Paper 09-09. Atlanta, GA: Andrew Young School of Policy Stu- dies, Georgia State University. 16. World Bank. 2006. Property Taxes in the Large Cities of Punjab Province, Pakistan. Sustainable Development Department, South Asia Region. Washington, D.C.: World Bank Group. 17. Ibid. 18. Haidar Jamal. 2008. “Egypt: How to Raise Revenues by Lowering Fees.” In World Bank, Celebrating Reform 2008. Was- hington, DC: World Bank Group and U.S. Agency for International Development. 27 Paying taxes TABLE 5.1 Where is it easier to pay taxes in Pakistan? 1 Islamabad, ICT (Easiest) 3 Sheikhpura, Punjab 2 Quetta, Balochistan 3 Sialkot, Punjab 3 Faisalabad, Punjab 10 Peshawar, Khyber Pakhtunkhwa 3 Gujranwala, Punjab 11 Hyderabad, Sindh 3 Lahore, Punjab 11 Karachi, Sindh 3 Multan, Punjab 11 Sukkur, Sindh 3 Rawalpindi, Punjab Note: Rankings are the average of the city rankings on the number of payments, time and total tax rate. See the Data notes section for details. Source: Doing Business database. In 2009, the government of Pakistan amount to 31.6% of commercial profits. level. Small entrepreneurs pay higher issued its second Poverty Reduction The country ranks 143rd of 183 econo- professional taxes in Sindh and Khyber Strategy Paper which laid out a com- mies on the ease of paying taxes indica- Pakhtunkhwa (PKR 10,000 / US$ 152) prehensive agenda to foster economic tor, ahead of India (169th) and Sri Lanka than in Punjab and Islamabad (PKR growth, invest in human capital and (166th), but behind Egypt (140th), China 5,000 / US$ 76) and Balochistan (PKR reduce income inequalities. To provide (125th), and Malaysia (24th). In the Mal- 1,000 / US$ 15). The vehicle tax is more the financial means to realize Pakistan’s dives, the best performer for the paying costly in Punjab, Sindh and Islamabad ambitions, the strategy set the objective taxes indicator, Aziz would spend less (PKR 5,000 / US$ 76) than in Khyber of raising the country’s tax-to-GDP ratio than 1 hour and 9.1% of his profits on 1 Pakhtunkhwa (PKR 2,500 / US$ 38) and from 10.4% of GDP in FY2007 to 13.9% single yearly tax (figure 5.1). Balochistan (PKR 900 / US$ 14). of GDP in FY2012.1 When it comes to paying taxes, there As Aziz rightly notes, taxes are rela- The task is daunting. Pakistan’s tax- are not many local variations within Pa- tively low in Pakistan. The 13 cities ave- to-GDP ratio is among the lowest in the kistan. As the bulk of tax revenues come rage total tax rate (31%) and profit taxes world,2 as revenues are collected from a from federal taxes and a few provincial (14.6%) stand below the global average very narrow tax base. Only a few sectors taxes (professional tax, vehicle tax…), (48.3% and 18.2% respectively).4 Based and businesses are taxed. In addition, tax entrepreneurs in all cities but Islamabad only on its total tax rate, Pakistan would evasion is endemic. In 2007, only 2.3 mi- spend the same amount of time on the llion taxpayers were registered in a coun- same number of payments, for a cost What is measured? try of 156.7 million people, the equiva- that varies little (figure 5.2). Islamabad, The paying taxes indicator records all taxes lent of 1.5% of the population.3 “This is which does not impose social security and mandatory contributions that a medium- not surprising”, sighs Aziz as he unrolls contributions, is an exception. It is easier size company must pay in a given year. It also a prayer carpet, the best selling item of to pay taxes in the capital than anywhere measures of the administrative burden of paying taxes and contributions. In doing so, his little manufacturing company. “Taxes else in Pakistan (table 5.1). Doing Business goes beyond the traditional are not very high, but they change all the Islamabad’s total tax rate is lowest definition of a tax because it mea¬sures time, and it is difficult to understand the in Pakistan, amounting to 26% of com- imposts that affect business accounts, not government accounts. The main differences payment process! I spend hundreds of mercial profits, compared to Balochistan are in labor contributions and value-added hours every year figuring out how much (31.2%), Punjab (31.5%), Khyber Pakh- tax. Doing Business measures government- I owe to which authority. Many of my tunkhwa (31.5%), and Sindh (31.6%) mandated contributions paid by the employer to a requited private pension fund friends don’t bother anymore.” provinces. One reason is social security or workers’ insurance fund. Doing Business Aziz’s plight is backed by numbers. contributions, which add 6.8% to the excludes value-added taxes from the total tax In Pakistan—as represented by Karachi total tax rate of the 12 cities that impose rate because they do not affect the account- ing profits of the business—that is, they are in the global Doing Business report—it it, outside of Islamabad. Other sources not reflected in the income statement. takes 560 hours and 47 payments to of local variations are the vehicle and Note: See the detailed description of the standard case in the comply with all tax requirements, which professional taxes, set at the provincial Data notes section. 28 DOING BUSINESS IN PAKISTAN 2010 FIGURE 5.1 to 50% in 2002.8 It is easier to pay taxes in certain countries and certain cities The Federal Bureau of Revenue also 2,600 BRAZIL BRAZIL INDIA implemented an Active Taxpayer List, INDIA Other 12 cities 560 which helps companies ensure that their ISLAMABAD 559 12-city average 47 suppliers and clients are listed with the EGYPT TURKEY Federal Bureau of Revenue, and laun- EGYPT SOUTH ASIA ISLAMABAD 35 SOUTH ASIA ched a new website in 2007. On this SINDH SOUTH ASIA AVERAGE AVERAGE AVERAGE new website, taxpayers can file and pay 31.6 EGYPT, INDIA ARAB REP. certain taxes online, such as income and 26.0 TURKEY sales tax. The impact on compliance was ISLAMABAD TURKEY BRAZIL immediate. The number of companies MALDIVES enrolled with the Federal Bureau of Re- 0 0 MALDIVES 0 MALDIVES venue for sales tax skyrocketed from Tax rate Time Payments 13,988 in 2007 to 83,031 in 2009.9 Cu- (% of profit) (hours per year) rrently, the e-filing system covers the pa- Source: Doing Business database. yment of sales tax, and is being extended rank 46th of 183 economies. These re- same combination of five federal and five to income tax payments and withholding sults reflect a decrease in the corporate provincial taxes. The country’s consti- taxes. So far, only a portion of small income tax from 55% in 1992 to 35% tution empowers local governments to companies resort to these online servi- by 2009.5 In addition, small companies levy and administer their own taxes. ces. But—with deeper penetration—this pay a discounted corporate income tax However, since subnational governments reform has the potential to simplify the rate, amounting to only 20% of taxable rely heavily on federal grants for their payment of taxes. profits. finances, they have little incentive to Despite recent changes, Pakistan’s However, the compliance cost of develop their tax base, and the tax-co- tax system still suffers from several struc- taxes weighs heavily on small entre- llection capacity needed to collect the tural weaknesses. First, even though the preneurs like Aziz. Even without social taxes devolved to them (such as the pro- country’s overall total tax rate is not security contributions, it still takes 558.5 perty tax, agricultural income tax, sales high in comparison with other countries, hours –70 working days– to comply with tax on services, etc…). While provincial the tax burden is unevenly distributed all tax requirements in Islamabad, al- governments account for 30% of natio- among taxpayers. The income-tax or- most as long as in the other 12 cities (560 nal expenses, provincial taxes yield only dinance of 2001 contains 70 pages of hours). The time Pakistani entrepreneurs 0.4% of GDP. 7 exemptions10 which shelter many acti- spend each year on taxes is double the Since 2002, Pakistan has embarked vities from taxation and lay the brunt global average (286 hours) and South on a comprehensive overhaul of the ad- of the fiscal burden on a few sectors, Asia’s average (285 hours). In all cities, ministration of the Federal Bureau of Re- notably manufacturing. most of that time is spent on prepa- venue in order to tackle tax evasion and Furthermore, most taxes are collec- ring, filing and paying the sales tax (480 facilitate tax filing and payments. The ted from a handful of large manufactu- hours), whose tax code is very complex. reform focused on strengthening tax- ring firms. The preferential corporate The Sales Tax Act is also a volatile docu- payer education, setting up three large income tax regime for small companies ment. The Federal Bureau of Revenue, taxpayer units and 16 regional tax offices is based on an abrupt threshold—PKR Pakistan’s central tax authority, can mo- in big cities, implementing an integrity 250 million (US$ 3,802,280) in turnover dify ad hoc several of its articles. 75 such strategy, conducting frequent taxpayer and 250 workers11—which may incite changes were made between 1990 and satisfaction surveys and introducing a Pakistani companies to remain small 2007.6 This shifting set of rules increases Universal Self Assessment Scheme aimed and informal. One worker or one rupee compliance cost, and undermines the at limiting interactions between taxpa- over the limit immediately translates trust of taxpayers in the fiscal system. yers and tax officials. These reforms have into tax increases. It takes fewer payments to comply yielded positive results on firms’ per- with tax requirements in Islamabad (35) ception of the tax system. Only a quar- than in the other cities (47). In addition ter of the companies recently surveyed to social security contributions, entre- considered tax administration a major preneurs across Pakistan must pay the impediment in their business, compared PAYING TAXES 29 FIGURE 5.2 forms succeed better when stakeholders Variations in tax burdens, time and number of payments by province who lose as a result of the change benefit Tax rate (% of profit) from the reform at the same time,13 when 0 10 20 30 PAYMENTS HOURS steps are properly sequenced and when ICT 26.1 35 559 reform is backed by a clever communi- Balochistan 31.2 47 560 cation strategy. Punjab 31.5 47 560 The government could develop Khyber 31.5 47 560 a reform agenda focused on bringing Pakhtunkhwa Sindh 31.6 47 560 in the gains early, namely increases in Social Pension Corporate Federal Provincial tax revenues, to offset the late losses.14 security contributions income tax other* taxes contributions Broadening the tax base of the sales tax *Pakistan’s sales tax is not included in the total tax rate, as it does not impact the company’s commercial profits. and income tax, for example, should take Source: Doing Business database. precedence over the rationalization of other taxes. WHAT TO REFORM? IMPROVE AUDIT CAPACITY To bolster public support, the gover- SIMPLIFY THE TAX SYSTEM AND Tax evasion cannot be properly tackled nment could also make communication BROADEN THE TAX BASE if companies are not audited regularly. an integral part of the reform effort, as in A complex tax administration is costly, The Federal Bureau of Revenue has re- Yemen. To win support for its tax-sim- both for entrepreneurs who spend va- cently established an audit plan setting plification program, the Yemeni govern- luable time filing their tax and for the the path towards a reliable risk-based ment reached out to businesses via local government who administers it. It is no audit system. As a first step, the tax chambers of commerce, held workshops wonder that 45 economies made it easier authorities selected a limited number to introduce the project to all stakehol- to pay taxes since June 2008, a 25% in- of corporations for audit in FY2009-10. ders, partnered with the press to engage crease compared to the previous year.12 After evaluation of the operation, the the public through simple messages in Pakistan could follow their exam- number will be increased, and audit will local languages, and avoided the sensi- ple by eliminating the many exemptions be conducted based on taxpayer risk. tive time of the re-election campaign.15 and preferential treatments that riddle Since no audit has been conducted in the the sales-tax and income-tax codes, and last 5 years, the Federal Bureau of Reve- PROVIDE INCENTIVES FOR LOCAL often lead to tax evasion that erode fiscal nue should strengthen its audit capacity GOVERNMENTS TO DEVELOP A LOCAL TAX BASE revenues. The reform should simplify by training new staff. the tax system and broaden the tax base, With risk-based audit systems, tax One of the fundamental principles of thus reducing compliance and adminis- authorities audit only companies whose taxation states that people should be tration costs, boosting revenue collection taxes returns reveal an anomaly or a taxed according to the benefit they re- and increasing accountability. significant risk of fraud. Coupled with ceive, and by the government that pro- The government of Pakistan is en- a strict enforcement, appeal and review vides the service financed by the tax rai- visaging replacing the existing sales tax, mechanism, a risk-based audit system sed.16 In Pakistan, that is hardly the case: which is subject to ad-hoc changes, with would increase the probability of fraud to subnational governments do not raise a broad-based value-added tax (VAT) be caught and punished, and discourage the revenues for the services they pro- on goods and services. The VAT would tax evasion. As the website of a large vide, relying instead on federal grants. allow for minimal exemptions and no Pakistani law firm claims: “In Allah we The central government could en- domestic zero ratings, which would fur- trust, others we audit.” courage provinces to find reliable re- ther clarify the country’s tax structure. venue sources. It could notably offer If implemented, it would be advisable to FOCUS ON THE SEQUENCING AND financial rewards—temporary higher fe- constrain the ability of the government COMMUNICATION OF REFORMS deral grants, for example—to subnatio- to change critical features of the law Change always faces opposition from nal governments who take the initiative (such as exemptions) without first going constituencies that benefit from the sta- to develop their local tax bases. Stronger through parliament. This would prevent tus quo. As such, the success of a reform local tax revenues would not only lighten the VAT from having the same volatility depends as much on its political eco- the burden on central finances, but also as the current sales-tax law. nomy as on its engineering. International increase tax revenues overall. experience has shown that deep fiscal re- Several alternatives are possible. To 30 DOING BUSINESS IN PAKISTAN 2010 limit administration costs, subnational 8. http://www.enterprisesurveys.org/ governments could focus on taxes that 9. Official statistics provided by the Federal 1. World Bank. July 2009. Pakistan Tax Bureau of Revenue in December 2009. are easy to administer, such as income Policy Report. Report No. 50078-PK. 10. Alm, James, and Khan, Mir Ahmad. tax and vehicle taxes. Income and pa- Washington, D.C.: World Bank Group. 2008. Assessing Enterprise Taxation and yroll taxes are the biggest source of local 2. In 2010, in the Heritage Foundation “Eco- the Investment Climate in Pakistan. Wor- revenues in 13 OECD countries.17 A low nomic Freedom” index. Pakistan ranked king Paper, Atlanta, GA : Andrew Young broad-based property tax could also ge- 155th out of 179 economies in terms of School of Policy studies, Georgia State the tax revenue collection as a percentage University. nerate large revenues, even if it is more of their respective Gross Domestic Pro- 11. Section 153 of the Income tax ordinance. costly to administer. ducts (GDP) or the Tax-to-GDP ratio. 12. World Bank. 2009. Doing Business 2010: 3. Martinez-Vazquez, Jorge. 2006. Pakis- Reforming Through Difficult Times. Was- KEEP EXPANDING THE ELECTRONIC tan—A Preliminary Assessment of the hington, D.C.: World Bank Group. FILING AND PAYMENT SYSTEM Federal Tax System. Working Paper 06- 13. Martinez-Vazquez, Jorge. 2006. Supra 24. Atlanta, GA: Andrew Young School of note 3. When filing and paying taxes is just a Policy Studies, Georgia State University. click away, both the private and the pu- 14. Ibid. 4. World Bank. 2009. Doing Business 2010: blic sector benefit. Electronic tax systems Reforming Through Difficult Times. Was- 15. Rahman, Shaela. 2009. Changing the hington, D.C.: World Bank Group. Minds of Skeptics: How Strategic Commu- lower taxpayers’ compliance costs, while nications Can Build Momentum for Tax 5. This reduction in CIT rate is one of the helping the government improve data co- Reform. IFC Smartlessons. Washington, factors that explain the country’s recent D.C.: World Bank Group. llection, reduce administrative costs, mi- increase in CIT revenues, from 1.2% nimize errors, and administer refunds. of GDP in FY2000 to 2.5% in FY2007, 16. World Bank. July 2009. Pakistan Tax according to the World Bank. July 2009. Policy Report. Report No. 50078-PK. This is why 18 economies introduced Washington, D.C.: World Bank Group. Pakistan Tax Policy Report. Report No. electronic filing and payment processes 50078-PK, Washington, D.C.: World 17. Slack, Enid. 2006. Fiscal Aspects of Al- between June 2008 and June 2009.18 Bank Group. ternative Methods of Governing Large The Federal Bureau of Revenue al- 6. Thirsk, Wayne. December 2008. Tax Po- Metropolitan Area. Bird, Richard and Vai- licy in Pakistan: An Assessment of Major llancourt, François (eds.). Perspectives ready allows for the corporate income on Fiscal Federalism. Washington, D.C.: Taxes and Options for Reform. Working tax and the sales tax to be filed and paid Paper 08-08. Atlanta, GA: Andrew Young World Bank Group, (pp. 101-122). on its website. In addition, it allows tax- School of Policy studies, Georgia State 18. PriceWaterHouseCoopers and the In- payers to set up automatic bank transfers University. ternational Finance Corporation (IFC). 7. World Bank. July 2009. Pakistan Tax 2009. Paying Taxes 2010: The Global with the National Bank of Pakistan. This Picture. Washington, D.C.: World Bank Policy Report. Report No. 50078-PK. is a positive step, yet there is still room Washington, D.C.: World Bank Group. Group. to expand the facilities offered to attract additional users. In order to encourage Pakistani taxpayers to use its online ser- vices, the Federal Bureau of Revenue is negotiating with the National Bank of Pakistan and private banks to set up automatic bank transfers and allow pa- yments to be made through more banks than just the National Bank of Pakistan. 31 Trading across TABLE 6.1 Where is it easier to trade in Pakistan? borders 1 2 Karachi, Sindh (Easiest) Hyderabad, Sindh 8 9 Peshawar, Khyber Pakhtunkhwa Quetta, Balochistan 3 Sukkur, Sindh 10 Gujranwala, Punjab 4 Faisalabad, Punjab 11 Islamabad, ICT 5 Multan, Punjab 12 Rawalpindi, Punjab 5 Sialkot, Punjab 13 Lahore, Punjab 7 Sheikhupura, Punjab Note: Rankings are the average of the city rankings on the number of documents, time and cost to trade across borders. See the Data notes section for details. Source: Doing Business database. Sana, a 35-year-old entrepreneur from An increasing number of Sana’s rates each city from Karachi, where the Quetta, has been designing traditional shawls are produced with the help of two ports of reference—Port Qasim and silk shawls for her friends and fam- machinery that is imported from China. Karachi Port—are located. Together, ily since high school. Her unique style In Quetta, importing a container of ma- they account for more than 90% of became very popular, and Sana eventu- chinery requires an average of 8 docu- Pakistan’s external trade. Although Port ally decided to start her own business. ments and 21 days, with an average cost Qasim is a newer port, there are no Her shawls’ popularity grew, with orders of US$ 693. In the rest of South Asia, it significant differences in terms of per- coming in from as far away as the United would take 9 documents, 32 days, and formance between the two ports. Kingdom and Japan. Sana is trying to US$ 1,509. In Malaysia, the same process Despite significant variations in the expand her business abroad, but is wor- requires 7 documents and takes 14 days distance of each city from the port of exit ried that the time and cost needed to to complete, at a cost of US$ 450. and entry, the time required to import export her goods will be too high. Her Reducing the time and cost spent and export a standard 20-foot container shawls must be transported by road to on paperwork, clearance procedures, does not vary significantly among the the seaport in Karachi (537 miles south port activities, and inland transporta- 13 cities measured. On average, the ex- of Quetta), where export may be delayed tion would encourage entrepreneurs like port process takes 22 days, while the because of paperwork, administrative Sana to sell their goods abroad. The more import procedures take 20 days. It is processes, and congestion, adding to the time-consuming the export or import easiest to import and export from Ka- cost and time required for export. process, the less likely that goods will rachi, where the country’s major ports Pakistan ranked 78th on the ease of be able to reach markets in a timely are located—22 days to export and 18 trading across borders of the 183 econo- fashion. This affects businesses’ ability to days to import—followed by Hyderabad mies measured by Doing Business 2010. expand and create jobs. A recent study of and Sukkur. Exporting and importing a In comparison to its neighbors, Pakistan 126 economies calculates the loss from performs relatively well, but much prog- export delays at around 1% of trade for What is measured? ress could still be made. each extra day. For perishable agricul- The trading across borders indicator measures Exporting a container of textiles tural products like Pakistan’s renowned all procedural requirements, including the necessary documents and the associated from Quetta through the port of Karachi mangos, the cost is nearly 3% of the vol- time and cost (excluding trade tariffs) for ex- requires 9 documents and takes 23 days. ume of trade for each day’s delay.1 porting and importing a standardized cargo The cost is US$ 619. In the rest of South Among the 13 cities measured, Ka- of goods by ocean transport. For exports, procedures range from packing the goods at Asia, the same process takes on average rachi is the best performer, followed by the warehouse to their departure from the 8 documents, 32 days, and costs US$ Hyderabad and Sukkur. Lahore, Rawal- port of exit. For imports, procedures range 1,364. In Singapore, the best performer, pindi and Islamabad are cities with from the vessel’s arrival at the port of entry to it would take Sana 4 documents, 5 days, lowest performance (table 6.1). What the cargo’s delivery at the factory warehouse. Payment is made by letter of credit. and US$ 456 to complete all export accounts for most of the disparities in Note: See the detailed description of the standard case in the requirements. time and cost is the distance that sepa- Data notes section. 32 DOING BUSINESS IN PAKISTAN 2010 FIGURE 6.1 successfully operating dry port is the How long does it take to import and export a container to/from Pakistan? Sialkot Port Trust, which was established Time to import Time to export in 1984 by local entrepreneurs. The facil- Sukkur ity operates under a strict time-manage- Hyderabad Karachi ment system and allows traders to clear Sheikhupura their goods at their doorstep, rather than Average in Karachi. Additional services include a Faisalabad fleet of custom-bonded vehicles as well Multan as an online tracking facility, which en- Peshawar Sialkot ables customers to access information on Gujranwala their cargo in transit. Islamabad Many of the less frequently used Lahore dry ports are operated by Pakistan Rail- Rawalpindi way. These dry ports are connected to Quetta the railway system, but are rarely used 18 19 20 21 22 23 Days because of the limited frequency and re- Source: Doing Business database. liability of cargo train services. Another container takes the longest from Quetta Pakistani cities. Although the trucking concern is poor management in some (figure 6.1). costs in Pakistan are relatively low in a of these dry ports, which can lead to When it comes to the cost of ex- global comparison, they are higher on delays. Traders using dry ports must use porting or importing, the distance to some domestic routes due to a lack of more expensive bonded carriers to ship and from the port is a determining fac- competition. Traders using dry ports their containers to the seaport. They are tor. There are substantial differences in (inland terminals that are connected to only willing to pay higher transporta- the cost of trading across the 13 cities. sea ports via road or rail) also face higher tion fees in return for efficient clear- It costs 57% more to import a container costs, as they must use bonded carri- ance and transportation services in the to Lahore (US$ 1,088) than to Quetta ers, who charge a higher fee for their dry ports. Since the services provided (US$ 693). Karachi is the cheapest city services. Some traders are willing to pay by most inland clearance facilities and in which to conduct trading activities higher fees if the services provided by transport companies do not meet their (figure 6.2). dry ports and transport companies are of expectations, many traders prefer to Inland transportation, an impor- high quality. clear their goods in Karachi instead. tant aspect of the trading process, is the There are many dry ports in Paki- Document preparation is by far the major source of variation in the total stan, but only a few of them are used most time-consuming part of the im- time and cost needed to trade among frequently by traders. An example of a port and export process. Paperwork con- sumes around half of the time required FIGURE 6.2 to export from all cities, regardless of How much does it cost to import and export a container to/from Pakistan? their ranking (figure 6.3) and is equally Cost to export Cost to import time-consuming during the import pro- Karachi Quetta cess. Entrepreneurs spend on average 6 Hyderabad days to obtain bank-related documents Faisalabad and 5 to assemble all other related docu- Sukkur ments to export a standard container. Peshawar Pakistan has made efforts to im- Sialkot prove the business environment for Average Multan traders for the past three decades. The Islamabad first initiative to computerize customs Gujranwala services began in 1979 and continued Rawalpindi with the introduction of the Pakistan Sheikhupura Revenue Automation Limited system Lahore in 1995 and an Express Lane Facility in 500 600 700 800 900 1,000 1,100 US$ per container 1998 to simplify the examination proce- Source: Doing Business database. TRADING ACROSS BORDERS 33 FIGURE 6.3 the ease of trading across borders, more Pakistani exporters spend most of their time on paperwork work remains to be done. An electronic Time (days) data interchange system has been pi- Hyderabad 11 2 3 4 20 loted in Karachi, but it has not been successfully rolled out in all customs Sheikhupura, 21 Sukkur 11 3 3 4 collectorates, and continues to offer limited functionalities. The full imple- Faisalabad, Islamabad, Karachi 22 Multan, Peshawar, Sialkot 11 4 3 4 mentation of a comprehensive, inter- Gujranwala, Lahore, connected, and user-friendly electronic Quetta, Rawalpindi 11 5 3 4 23 data interchange system throughout all Document preparation Inland Customs Ports and customs collectorates in Pakistan re- transportation clearance terminal and handling and technical handling mains to be completed. control Source: Doing Business database. WHAT TO REFORM? dure. In 2000, an Electronic Assessment ducing the cost and time of exporting and System was introduced, followed in 2002 importing goods. The program encom- REDUCE AND STREAMLINE DOCUMENTATION REQUIREMENTS by a Risk Indicated Selective Examina- passes services, infrastructure, reforms, tion to assess risk in the examination and investments in highways, trucking, Pakistani traders continue to spend too procedure. ports and maritime transport, air trans- much time complying with burdensome These efforts were continued in port, railways, and trade facilitation. paperwork. It currently takes 9 separate 2006, when the Pakistan Customs Com- The reforms launched since the documents to export, and 8 to import a puterized System was first piloted. The inception of the National Trade Cor- standard container. With an electronic system was designed as an integrated ridor Improvement Program have been customs declaration form already avail- platform aimed at streamlining the clear- felt by many traders, who have seen the able, Pakistan could simply consolidate ance process and was first rolled out time spent on documentation and cus- other information onto the form, in line at the Karachi International Container toms clearance reduced. The total time with integrated systems in France or Terminal. The new system enabled trad- needed to import a container in Karachi Hong Kong. ers to file documents before goods arrive has been reduced from an average of 39 at the port, and included a risk-manage- days in 2006 to 18 days in 2010 (figure STRENGTHEN INLAND CLEARANCE ment system, which has helped reduce 6.4). This reduction in time affected FACILITIES the physical inspection of goods. trading procedures equally in all bench- Well-functioning inland clearance facili- These reforms have been part of a marked cities that operate through the ties can improve the import and export larger National Trade Corridor Improve- Karachi ports. process, as entrepreneurs can clear and ment Program, an ongoing, comprehen- While the reforms undertaken to ship their goods in their respective cit- sive government program aimed at re- date have had a significant impact on ies. There are already a number of in- land container depots in Pakistan, but FIGURE 6.4 Time needed to import was reduced in Karachi few of them are frequently used. Longer Time (days) clearance times, insufficient capacity, 40 2 2006 and higher costs are the most common 5 reasons leading traders to clear their 30 Time cut from containers at the seaport rather than 39 days to 18 14 in inland container depots. Reducing these delays and costs could lead to a 20 2 3 2010 higher volume of trade, and examples 18 2 of well-functioning dry ports, like that 10 in Sialkot, could be replicated in other 11 facilities within Pakistan. 0 Document Customs Ports and Inland preparation clearance and terminal transportation technical control handling and handling Note: The reforms were implemented between April 2006 and December 2009. Source: Doing Business database. 34 DOING BUSINESS IN PAKISTAN 2010 IMPROVE ELECTRONIC DATA INTERCHANGE SYSTEM While the Pakistan Customs Computer- ized System has been piloted in Karachi, it has not been successfully rolled out throughout the country’s customs posts, and continues to suffer from limited functionality. The nationwide implemen- tation of a comprehensive, user-friendly, and interconnected electronic data in- terchange system would greatly facilitate the daily operations of importers and exporters in Pakistan. IMPROVE INLAND TRANSPORTATION While Pakistan continues to invest in the expansion and maintenance of its highway network, less attention has been paid to its existing railway network. An increasingly aging infrastructure and Pakistan Railways’ reduced cargo ser- vices have contributed to a shrinking share of cargo transported by rail, fall- ing to 4% of the overall freight mar- ket. Pakistani traders appreciate railway transport as a reliable means of shipment that connects Pakistan’s main ports to many inland clearance centers, but they are often forced to use trucks instead, because of limited cargo services. Invest- ments in infrastructure and equipment must go along with a stronger focus of management on freight operations in order to meet the large potential demand for dedicated freight services on Paki- stan’s tracks. The Pakistani government has taken a first step in this direction by acknowledging the potential for a com- petitive railway sector and has declared its intention to promote its development through the National Trade Corridor Im- provement Program. 1. Djankov, Simeon; Freund Caroline; and Pham, Cong. February 2010. “Trading on Time.” Review of Economics and Statistics 92 (1): 166–73. 35 Enforcing TABLE 7.1 Where is it easier to enforce a contract in Pakistan? contracts 1 2 Sukkur, Sindh (Easiest) Faisalabad, Punjab 8 8 Lahore, Punjab Peshawar, Khyber Pakhtunkhwa 3 Karachi, Sindh 10 Islamabad, ICT 4 Gujranwala, Punjab 10 Rawalpindi, Punjab 4 Multan, Punjab 10 Sialkot, Punjab 6 Sheikhupura, Punjab 13 Quetta, Balochistan 7 Hyderabad, Sindh Note: Rankings are the average of the city rankings on the procedures, time and cost to resolve a commercial dispute through the courts. See the Data notes section for details. Source: Doing Business database. An effective contract-enforcement re- the Pakistani government implemented in court.” Umar’s thoughts are probably gime and a well-functioning judiciary a judicial reform to provide judges with shared by his colleagues across the 13 are essential pillars of a transparent, more training. As a result, judges dis- cities benchmarked, where it requires 47 efficient, and globally integrated bu- posed of 25% more cases and the entry procedural steps and takes on average siness environment. In the absence of rate of new firms increased by 50%. The 3.5 years (1,261 days) to enforce a simple efficient courts firms undertake fewer study suggests that this translates into commercial contract at a cost of 29.7% investments and business transactions. an increase of Pakistan gross domestic of the claim value. This performance is Weak judicial systems undermine com- product (GDP) by 0.5%.3 Recent research somewhat longer and more costly than mercial trust because firms and people shows that a country’s ability to enforce in the South Asia region, where it takes will prefer to interact only with those contracts is an important determinant of on average 1,052.9 days, costs 27.2% whose trust they have gained through its comparative advantage in the global of the claim value, and requires 43.5 past interactions, inevitably reducing the economy—among comparable econo- procedural steps to enforce an identical scope of commercial activity. Problems mies, those with good contract enforce- contractual dispute. Resolving commer- associated with contract enforcement ment tend to produce and export more cial disputes through the courts is more not only inhibit investments, they also customized, advanced products than time-consuming in South Asia than any work as disincentives against scaling up. those with poor contract enforcement.4 other region. It takes 679.9 days in the Firms prefer to remain small, fearing In June 2009, the National Judicial Middle East and North Africa and only that by growing in size they might invite Policy came into effect across Pakistani 450.9 days in Eastern Europe and Central more legal problems. provinces and cities to focus on justice Asia (figure 7.1). In many countries only the rich can at the grass-roots level. The new policy Resolving commercial disputes afford to go to court. For the rest, justice aims to ensure the judiciary’s indepen- through the Pakistani courts is regulated is out of reach. In many developing parts dence, clear the backlog of cases in the mainly by a single federal law, the Civil of the world, a common obstacle to doing superior and subordinate courts, fix the business is the absence of strong courts. time frame for disposal of civil and cri- What is measured? As a result, 80% of the people turn to minal cases and eradicate corruption. It The enforcing contracts indicator measures informal institutions to seek justice.1 Ac- is still too early to measure the degree the efficiency of the judicial system in cording to the World Bank’s Enterprise of implementation and its effect across resolving a commercial dispute, following Surveys, Pakistani firms identified courts the cities. the step-by-step evolution of a commercial sale dispute before local courts. It studies as one of the top 10 constraints to firm Umar, who runs a stationary busi- the time, cost, and number of procedures investment, as important as political ins- ness in Pakistan, summarizes his expe- involved from the moment the plaintiff files tability and access to finance in 2007.2 rience with the courts: “I prefer dealing a lawsuit, through trial and then judgment, until the actual payment through a public A recent study reports that judicial with buyers I know from previous dea- sale of the defendant’s movable goods. reform can have a big effect on court lings, instead of new ones, in case so- Note: See the detailed description of the standard case in the efficiency and entrepreneurship. In 2002, mething comes up and I have to end up Data notes section. 36 DOING BUSINESS IN PAKISTAN 2010 FIGURE 7.1 judgment satisfied, which is similar to Enforcing contracts in Pakistani cities compared globally the time it takes in the Arab Republic of 47 2,190 SSA Egypt (1,010 days). EAP Pakistan Pakistan In measuring the time it takes to en- All13 cities SOUTH ASIA most time AVERAGE 42.8 force a contract, Doing Business analyses Pakistan LAC highest cost the entire commercial litigation process SSA 13-city average 1,261 for a standardized case study, from fi- EAP, EECA SOUTH ASIA 13-city LAC ling and serving court papers; through AVERAGE average 29.6 SOUTH ASIA the pretrial and trial process, including 730 LAC AVERAGE SSA EECA judgment; up to the satisfaction of the OECD Pakistan EAP least time OECD judgment through a public sale of the 20.6 EECA Pakistan OECD defendant’s movable goods. Through this lowest cost 25 0 15 analysis, the bottlenecks in the dispute Procedures Time Cost resolution process are identified. (days) (% of claim) The filing and service period in Note: EAP = East Asia & Pacific region , EECA = Eastern Europe & Central Asia region, LAC = Latin America and Caribbean region, most cities takes on average 42 days. SSA = Sub-Saharan Africa region. Filing and service of initial court docu- Source: Doing Business database. ments in Gujranwala and Rawalpindi Procedure Code 1908 (C.P.C). As a result, Despite the identical laws and re- takes 40 to 45 days. The process takes procedural steps are the same—it takes gulations of the court system at the na- longest in Peshawar and Karachi—90 47 procedural steps to enforce a contract tional level, the time and cost needed and 96 days respectively—3 times longer irrespective of the court’s location within to enforce a contract vary among the than in Islamabad and Faisalabad. Liti- Pakistan. Based on the Doing Business different cities. This is because enforcing gants in Peshawar explain that provision case study, Pakistan’s performance on the a contract depends on a combination of of documents is time-consuming. number of procedures is relatively weak various elements: the governing rules In all the cities measured, the time compared with global best practices. In and implementation of directives; court needed to go through a trial and obtain Singapore it takes only 21 steps, 24 in performances and budgets, depending judgment is the most burdensome. On Hong Kong, China—the top ranking eco- on location; and the provision of legal average, the trial and judgment phase nomy for enforcing contracts—and 31 in services. An entrepreneur would have to for a contractual dispute takes about 840 the OECD economies. Some would argue wait for 6 years to enforce a contract in days or 66% of the total time to enforce that more formal procedures in dispute Peshawar. This is the longest time among the contract. This is not unique to Pa- resolution ensure that due process is fo- the cities measured—2 years more than kistani cities and is similar to neighbo- llowed and justice is done. The evidence in Quetta and almost 3 times longer than ring Indian cities and many developing suggests otherwise. The more complex in Nepal (735 days). In Sukkur, where economies across the world. The distri- the procedures to resolve disputes, the contract enforcement is easiest (table bution of the time and cost involved in less likely firms are to report that judges 7.1), she would have to wait for 2.9 years enforcing a contract across 183 econo- are impartial and court decisions fair.5 (a total of 1,060 days) before getting the mies shows that the trial and judgment period accounts for 63% of the total time FIGURE 7.2 Trial and judgment take about two-thirds of the time to enforce a contract (figure 7.2).6 In Islamabad, the trial and Distribution of time and cost to enforce a contract across 183 economies judgment takes 1,000 days of the total Time Cost time of 1,395 days needed to enforce a contract, similar to Dhaka (1,047 days) Enforcement Filing and service Enforcement and Mumbai (1,095 days). In Hyderabad of judgment 7% of judgment 17% it takes about 830 days of the total time 30% of 1,460 days, twice as long as in Riyadh Court costs (365 days) (figure 7.3). The trial and and expert 18% 65% 63% fees judgment are followed by enforcement Attorney fees proceedings through a public auction. The time needed to enforce judgment Trial and judgment is on average 378 days. In Faisalabad it Source: Doing Business database. ENFORCING CONTRAC TS 37 FIGURE 7.3 cantly across the cities benchmarked. It Wide variation in time to enforce a contract is cheapest in Sukkur (20.6% of the claim Faisalabad value) and most expensive in Lahore Lahore (42.8% of the value of the claim)—one of Filing Judgment Enforcement Gujranwala the largest cities, where attorney fees are Karachi among the highest (figure 7.4). The cost Sukkur Sheikhupura in Sukkur is similar to the cost in Canada Average and New Zealand (22% of the value of Sialkot the claim), while Lahore is comparable to Islamabad Kenya (47% of the value of the claim). Hyderabad Court fees include case filing fees, Multan expert fees, and other court costs. Filing Quetta Rawalpindi fees are set by the Court Fees Act in the Peshawar respective provinces and cities, and are 0 365 730 1,195 1,460 1,825 2,190 the second highest cost after attorney Time to enforce a contract fees. Expert fees are also set by the court. Source: Doing Business database. (days) Court fees are cheaper across the cities in the Sindh, Balochistan, and Khyber takes 100 days, whereas in Peshawar it are set within reasonable time periods, Pakhtunkhwa provinces, but are more can take up to 900 days. This is due to and that her case is at the top of the expensive in Punjab. An entrepreneur a combination of factors: in Peshawar judge’s case list. Add to this the number spends only 5.4% of the value of the claim judges are frequently transferred, there of adjournments and delays, which can on court costs in Peshawar and 5.6% in is not enough court capacity compared substantially slow down the trial. “It is Sukkur and Hyderabad but almost twice to other cities, and there is a more li- easy to get an adjournment and to extend as much in Faisalabad (11.0% of the value mited market for the public sale of the the case with one pretext or another,” says of the claim), Sheikhupura, and Multan defendant’s movable goods. Sohail, a lawyer in Punjab. The law does (11.4% of the value of the claim). Practitioners point out that if the not limit the number of adjournments Enforcement fees include registe- entrepreneur regularly follows her suit that a party may be given or provide for ring the judgment, organizing the public she can get a judgment sooner than if she a mandatory period during which judg- sale of the goods, and other enforcement files her case and just waits, which could ments must be delivered. costs. It is cheaper to go through enforce- take 5 years or even longer. Following the The costs of a commercial dispute ment proceedings in Karachi at a cost of case implies that she attends all hearings, include attorney fees, court fees and 1.2% of the claim value and most expen- makes sure that any court or other dates enforcement fees. Costs vary signifi- sive in Islamabad at 4.6%. This is explai- ned by the higher costs associated with FIGURE 7.4 Cost to enforce a contract publication in the newspaper and public sale of the defendant’s movable goods. Sukkur Running an efficient court system Peshawar Attorney Court Enforcement is by no means an easy task; it poses a Multan fees fees fees continuous challenge even to more in- Karachi Hyderabad dustrialized countries. Economies that Faisalabad score well on the ease of enforcing con- Rawalpindi tracts keep courts efficient by streamli- Sheikhupura ning case-processing from filing through Average appeals. They make enforcement of Quetta Gujranwala judgments faster and cheaper by intro- Islamabad ducing early-settlement options, case- Sialkot management systems, strict procedural Lahore time limits, and specialized commercial 0 10 20 30 40 courts. Pakistan can learn from some of Cost these reforms. Source: Doing Business database. (% of claim) 38 DOING BUSINESS IN PAKISTAN 2010 WHAT TO REFORM? pment of improved policies and recom- days to conduct roll calls on old cases mendations for judicial reform. Impro- and dismissed the unresponsive ones.7 SET UP SPECIALIZED COURTS OR ved statistical capacity will also allow for The reform is too recent for progress to COMMERCIAL DIVISIONS IN EXISTING careful analysis of the actual impact of be measured. In Macedonia, FYR, the COURTS the ongoing reforms such as the National number of cases pending for more than Pakistani courts hear both civil and cri- Judicial Policy. This effort can also assist 3 years was reduced by 46%. Litigants in minal matters, thereby slowing down in optimal case assignment and promo- longstanding disputes were summoned the process for specialized commercial tion criteria for judges. to appear in court on set days and if nei- matters. Setting up separate commer- ther appeared, the case was dismissed. cial courts or establishing specialized INTRODUCE TIME LIMITS As a result of this reform the time to commercial chambers in existing courts, Pakistan can introduce reforms that enforce a contract in court dropped from can reduce the time and cost involved have been adopted by other countries. In 509 days to 385 days.8 in commercial contract enforcement. 2002 the Russian Federation revised its Similarly, Doing Business in Colom- Where a limited number of commercial commercial procedural code. The most bia 2008 reported that one of the main cases need to be handled, specialized significant innovation was to set strict causes of backlogs was the high percen- commercial sections provide a less ex- mandatory time limits: 2 months for a tage of inactive cases due to inactivity pensive alternative to specialized com- full hearing and 1 month for accelerated by either party. To address this problem, mercial courts. For example, in Cairo a procedures. Most Central Asian countries Congress issued a law in May 2008 that one-step filing procedure was introduced introduced similar deadlines. Judges are sets forth mechanisms for judges to dis- in the busiest first-instance court to in- held accountable for respecting the dea- miss cases whenever there is no activity crease efficiency and reduce opportu- dlines, with those who do best standing on behalf of the parties. Doing Business nities for bribes. The whole initiative, better chances for promotion. Not sur- in Colombia 2010 reports that as a result including relocation and training of staff, prisingly, of the 10 economies with the of the application of this law, judges in the creation of new forms and some fastest times to enforce a contract, half 150 municipal courts in Colombia have building renovations, cost less than US$ are in Eastern Europe and Central Asia. dismissed almost 32,283 cases. Further- 1,000,000. In the 7 African countries Other examples include Algeria, which more, in civil courts—at the municipal that introduced commercial courts or amended its procedural rules to rein- and circuit level—a total of 43,948 cases sections in the past 5 years—Burkina force procedural time limits. Norway is have been dismissed as of June 2009, Faso, the Democratic Republic of Congo, also enforcing its procedural deadlines that is, 12.2% of the total inventory of Ghana, Mauritania, Mozambique, Ni- more strictly, with judges required to inactive cases.9 geria, and Rwanda—the average time justify delays if cases are not resolved wi- needed to resolve a commercial dispute thin 6 months. Finally, Portugal reviewed STRENGTHEN THE ALTERNATIVE dropped by about 19%. Mozambique, the its law on the execution of judgments, DISPUTE RESOLUTION (ADR) SYSTEM top reformer in enforcing contracts in allocating more power to bailiffs allow The use of ADR affects court perfor- Doing Business 2009, reduced the average judges to concentrate on sentencing. mance to the extent that it reduces court time to resolve a commercial dispute caseload. In 2007, the International Fi- from 1,010 days to 730. REDUCE CASE BACKLOG nance Corporation in collaboration with The backlog of cases in the Pakistani the Ministry of Law and Justice, the IMPROVE CASE MANAGEMENT AND judicial system and the long trial and government of Pakistan, and the Sindh MONITOR IMPACT OF REFORMS judgment periods have also been affected High Court established the Karachi Cen- Pakistani courts are missing detailed by the lawyers’ movement in the past tre for Dispute Resolution (KCDR)10 as a tracking of the number of commercial 2 years. Many cases are awaiting trial venue for settling disputes through ADR cases being handled and disposed of, the and dormant cases are taking up space and mediation mechanisms. KCDR ser- clearance rate on how long cases take in the court registries. Macedonia, FYR, ves as the only organization in Pakistan to be resolved, and the time it takes for and Botswana, both active reformers in with expertise in mediation and training different types of commercial cases to Doing Business 2009 and Doing Busi- services and offers its facilities for arbi- move through the court process. Sta- ness 2010, are examples of countries that trations. To date, KCDR has helped re- tistical information helps assess court faced case backlogs and introduced bold solve 905 disputes and assets worth US$ performance. Such statistics will inform measures to tackle them. In Botswana, 27,000,000 have been released.11 This is management decisions and the develo- judicial officers set aside a number of an example of an ADR set-up that has ENFORCING CONTRAC TS 39 worked well and something the rest of the cities in Pakistan can learn from. Strengthening ADR mechanisms in Pakistan can reduce court burdens and create cheaper and speedier options for resolving disputes. The National Judicial Policy encourages courts to make use of section 89A of the Civil Procedure Code to resolve disputes through ADR including conciliation, mediation, or arbitration. 1. Wojkowska, Ewa. 2006. “Doing Justice: How Informal Justice Systems Can Con- tribute.” Oslo, Norway: Oslo Governance Centre, United Nations Development Program. 2. World Bank. Enterprise Surveys. Pakistan Country Profile. Available at http://www. enterprisesurveys.org/ 3. Chemin, Matthieu. 2009. “The Impact of the Judiciary on Entrepreneurship: Evaluation of Pakistan’s Access to Justice Programme.” Journal of Public Economics 93: 114–15. 4. Nunn, Nathan. 2007. “Relationship- Specificity, Incomplete Contracts, and the Pattern of Trade.” Quarterly Journal of Economics 122 (2): 569–600. 5. Based on the analysis of the Doing Busi- ness 2005 indicators, with indicators of judicial impartiality from the Economic Freedom of the World; Batra, Geeta; Kau- fmann, Daniel; and Stone, Andrew. 2003. Investment Climate Around the World: Voices of the Firms from the World Bu- siness Environment Survey. Washington, D.C.: World Bank Group. 6. World Bank. 2009. Doing Business 2010: Reforming through Difficult Times. Was- hington, D.C.: World Bank Group. 7. Case Management System introduced in Botswana on February 1, 2008. 8. World Bank. 2006. Doing Business 2007: How to Reform. Washington, D.C.: World Bank Group. 9. Statistics provided by the Superior Coun- cil of the Judicature; World Bank. 2010. Doing Business in Colombia 2010. Was- hington, D.C.: World Bank Group. 10. http://www.kcdr.org/aboutus.htm 11. Statistics provided by the Karachi Centre for Dispute Resolution (KCDR). Data notes ECONOMY CHARACTERISTICS GROSS NATIONAL INCOME (GNI) PER CAPITA Doing Business in Pakistan 2010 reports 2008 income per capita and population as published in the World Bank’s World Development Indicators 2009. Income is calculated using the Atlas method (current US$). For cost indicators expressed as a percentage of income per capita, 2008 GNI in local currency units is used as the denominator. For cost indicators expressed as a percentage of income per capita, 2008 GNI in local currency units is used as the denominator. Pakistan’s GNI per capita in 2008 = US$ 981.3 EXCHANGE RATE The exchange rate used in this report is: 1 US$ = 65.75 PKR (Pakistani rupee). The exchange rate is the same as in Doing Business 2010: Reforming Through Difficult Times. REGION AND INCOME GROUP Doing Business uses the World Bank regional and income group classifications available at http://www. worldbank.org/data/countryclass. Throughout the report the term rich economies refers to the high in- come group, middle income economies refers to the upper middle income group and poor economies refers to the lower middle and low income groups. The indicators presented and analyzed in officials and other professionals routinely ad- LIMITS TO WHAT IS MEASURED Doing Business in Pakistan 2010 measure ministering or advising on legal and regula- government regulation and the protection tory requirements. These experts have several The Doing Business methodology applied to of property rights—and their effect on busi- rounds of interaction with the Doing Business Doing Business in Pakistan 2010 has 4 limita- nesses, especially small and medium-sized team, through conference calls, written cor- tions that should be considered when inter- domestic firms. First, the indicators document respondence and country visits. For Doing preting the data. First, the data often focus on the degree of regulation, such as the number Business in Pakistan 2010 the team members a specific business form—generally a limited of procedures to start a business, to construct conducted visits to Pakistan to meet with liability company (or its legal equivalent) of a warehouse or to register commercial prop- senior members of the local and national gov- a specified size—and may not be representa- erty. Second, they gauge regulatory outcomes, ernments and introduce the project, its com- tive of the regulation on other businesses, such as the time and cost to enforce a contract ponents, and expected outputs, and to provide for example, sole proprietorships. Second, and to trade across borders. They also docu- the necessary training to local experts on the transactions described in a standardized case ment the tax burden on business. For details Doing Business methodology and question- scenario refer to a specific set of issues and on how the rankings on these indicators are naires. The team also invited local government may not represent the full set of issues a busi- constructed, see “Ease of Doing Business” at officials to review the preliminary results and ness encounters. Third, the measures of time the end of this section. offered them a right of reply period. The data involve an element of judgment by the expert In this project, Doing Business indicators from surveys are subjected to numerous tests respondents. When sources indicate different benchmarked 13 Pakistani cities—the com- for robustness, which lead to revisions or ex- estimates, the time indicators reported in plete list is available in the content page. The pansions of the information collected. Doing Business represent the median values data for all sets of indicators in Doing Business The Doing Business methodology offers of several responses given under the assump- in Pakistan 2010 are for December 2009. The several advantages. It is transparent, using tions of the standardized case. data presented in this report for Karachi and factual information about what laws and regu- Finally, the methodology assumes that other countries is based on the global report lations say and allowing multiple interactions a business has full information on what is Doing Business in 2010: Reforming through with local respondents to clarify potential required and does not waste time when com- Difficult Times. misinterpretations of questions. Having rep- pleting procedures. In practice, completing resentative samples of respondents is not an a procedure may take longer if the busi- METHODOLOGY issue, as the texts of the relevant laws and reg- ness lacks information or is unable to follow The Doing Business in Pakistan 2010 data are ulations are collected and answers checked for up promptly. Alternatively, the business may collected in a standardized way. To start, the accuracy. The methodology is inexpensive and choose to disregard some burdensome pro- Doing Business team, with academic advisers, easily replicable, so data can be collected in a cedures. For both reasons the time delays designs a survey. The survey uses a simple large sample of economies. Because standard reported in Doing Business in Pakistan 2010 business case to ensure comparability across assumptions are used in the data collection, could differ from the perceptions of entrepre- countries and over time—with assumptions comparisons and benchmarks are valid across neurs reported in the World Bank Enterprise about the legal form of the business, its size, economies. Finally, the data not only highlight Surveys or other perception surveys. its location and the nature of its operations. the extent of specific regulatory obstacles to Most laws and regulations underlying the Then the survey is customized to the particu- doing business but also identify their source Doing Business data are available on the Doing lar case of Pakistan. Surveys are administered and point to what might be reformed. Business website at http://www.doingbusiness. through more than 350 local experts, includ- org. All the sample surveys and the details ing lawyers, business consultants, architects, underlying the indicators are also published accountants, freight forwarders, government on the website. Questions on the methodol- ogy and challenges to data can be submitted through the site’s “Ask a Question” function. DATA NOTES 41 STARTING A BUSINESS operations, all of them nationals. a procedure with minimum follow-up with t Has a turnover of at least 100 times government agencies and no extra payments. It Doing Business in Pakistan 2010 records all income per capita. is assumed that the minimum time required for procedures that are officially required for an t Has a company deed 10 pages long. each procedure is 1 day. Although procedures entrepreneur to start up and formally operate may take place simultaneously, they cannot start an industrial or commercial business. These PROCEDURES on the same day (that is, simultaneous proce- include obtaining all necessary licenses and A procedure is defined as any interaction of the dures start on consecutive days). A procedure permits and completing any required notifica- company founder with external parties (for ex- is considered completed once the company has tions, verifications or inscriptions for the com- ample, government agencies, lawyers, auditors received the final document, such as the com- pany and employees with relevant authorities. or notaries). Interactions between company pany registration certificate or tax number. If a After a study of laws, regulations and founders or company officers and employees procedure can be accelerated for an additional publicly available information on business are not counted as procedures. Procedures that cost, the fastest procedure is chosen. It is as- entry, a detailed list of procedures is de- must be completed in the same building but in sumed that the entrepreneur does not waste veloped, along with the time and cost of different offices are counted as separate proce- time and commits to completing each remain- complying with each procedure under nor- dures. If founders have to visit the same office ing procedure without delay. The time that the mal circumstances and the paid-in minimum several times for different sequential proce- entrepreneur spends on gathering information capital requirements. Subsequently, local in- dures, each is counted separately. The found- is ignored. It is assumed that the entrepreneur is corporation lawyers and government officials ers are assumed to complete all procedures aware of all entry regulations and their sequence complete and verify the data. themselves, without middlemen, facilitators, from the beginning but has had no prior contact Information is also collected on the se- accountants or lawyers, unless the use of such with any of the officials. quence in which procedures are to be com- a third party is mandated by law. If the ser- pleted and whether procedures may be carried vices of professionals are required, procedures COST out simultaneously. It is assumed that any conducted by such professionals on behalf Cost is recorded as a percentage of the coun- required information is readily available and of the company are counted separately. Each try’s income per capita. It includes all official that all agencies involved in the start-up pro- electronic procedure is counted separately. If fees and fees for legal or professional services cess function without corruption. If answers 2 procedures can be completed through the if such services are required by law. Fees for by local experts differ, inquiries continue until same website but require separate filings, they purchasing and legalizing company books are the data are reconciled. are counted as 2 procedures. included if these transactions are required by To make the data comparable across Both pre- and post-incorporation pro- law. The company law, the commercial code countries, several assumptions about the busi- cedures that are officially required for an and specific regulations and fee schedules are ness and the procedures are used. entrepreneur to formally operate a business used as sources for calculating costs. In the are recorded. absence of fee schedules, a government of- ASSUMPTIONS ABOUT THE BUSINESS Procedures required for official corre- ficer’s estimate is taken as an official source. In The business: spondence or transactions with public agen- the absence of a government officer’s estimate, t Is a limited liability company. If there is cies are also included. For example, if a com- estimates of incorporation lawyers are used. more than one type of limited liability pany seal or stamp is required on official If several incorporation lawyers provide dif- company in the country, the limited liabil- documents, such as tax declarations, obtain- ferent estimates, the median reported value is ity form most popular among domestic ing the seal or stamp is counted. Similarly, if applied. In all cases the cost excludes bribes. firms is chosen. Information on the most a company must open a bank account before popular form is obtained from incorpora- registering for sales tax or value added tax, PAID-IN MINIMUM CAPITAL tion lawyers or the statistics’ office. this transaction is included as a procedure. The paid-in minimum capital requirement re- t Operates in the country’s selected cities. Shortcuts are counted only if they fulfill 4 flects the amount that the entrepreneur needs t Is 100% domestically owned and has 5 criteria: they are legal, they are available to the to deposit in a bank or with a notary before owners, none of whom is a legal entity. general public, they are used by the major- registration and up to 3 months following in- t Has a start-up capital of 10 times ity of companies, and avoiding them causes corporation and is recorded as a percentage of income per capita paid in cash. substantial delays. the country’s income per capita. The amount is t Performs general industrial or commer- Only procedures required of all busi- typically specified in the commercial code or the cial activities, such as the production nesses are covered. Industry-specific proce- company law. Many countries have a minimum or sale of products or services to the dures are excluded. For example, procedures capital requirement but allow businesses to pay public. The business does not perform foreign trade activities and does not to comply with environmental regulations are only a part of it before registration, with the rest handle products subject to a special tax included only when they apply to all businesses to be paid after the first year of operation. regime, for example, liquor or tobacco. conducting general commercial or industrial It is not using heavily polluting produc- activities. Procedures that the company under- The data details on starting a business can be tion processes. goes to connect to electricity, water, gas and found for each economy at http://www.doing- t Leases the commercial plant and offices waste disposal services are not included. business.org. This methodology was developed and is not a proprietor of real estate. in Simeon Djankov, Rafael La Porta, Florencio TIME López-de-Silanes and Andrei Shleifer. 2002. t Does not qualify for investment incen- tives or any special benefits. Time is recorded in calendar days. The measure “The Regulation of Entry.” Quarterly Journal of t Has at least 10 and up to 50 employees captures the median duration that incorpora- Economics 117 (1): 1–37; and is adopted here 1 month after the commencement of tion lawyers indicate is necessary to complete with minor changes. 42 DOING BUSINESS IN PAKISTAN 2010 DEALING WITH CONSTRUCTION ASSUMPTIONS ABOUT THE WARE- (dry system) will be used instead. If a PERMITS HOUSE wet fire protection system is required The warehouse: by law, it is assumed that the water Doing Business in Pakistan 2010 records all demand specified below also covers the t Will be used for general storage water needed for fire protection. procedures required for a business in the activities, such as storage of books or construction industry to build a standardized stationery. t Has an average water use of 175 gallons (662 liters) a day and an average waste- warehouse. These procedures include submit- t The warehouse will not be used for any water flow of 150 gallons (568 liters) a ting all relevant project-specific documents goods requiring special conditions, day. (for example, building plans and site maps) to such as food, chemicals or pharmaceu- ticals. t Has a peak water use of 350 gallons the authorities; obtaining all necessary clear- (1,325 liters) a day and a peak wastewa- ances, licenses, permits and certificates; com- t Has 2 stories, both above ground, with ter flow of 300 gallons (1,136 liters) a pleting all required notifications; and receiv- a total surface of approximately 14,000 day. ing all necessary inspections. Doing Business square feet (1,300.6 square meters). Each floor is 9 feet, 10 inches (3 meters) t Will have a constant level of water de- in Pakistan 2010 also records procedures for mand and wastewater flow throughout high. obtaining connections for electricity, water, the year. t Has road access and is located in the sewerage and a fixed land line. Procedures peri-urban area of the economy’s se- necessary to register the property so that it lected city (that is, on the fringes of the The telephone connection: can be used as collateral or transferred to city but still within its official limits). t BuildCo must obtain a fixed land line. another entity are also counted. The survey t Is not located in a special economic or divides the process of building a warehouse PROCEDURES industrial zone. The zoning require- into distinct procedures and calculates the ments for warehouses are met by build- A procedure is any interaction of the compa- time and cost of completing each procedure in ing in an area where similar warehouses ny’s employees or managers with external par- practice under normal circumstances. can be found. ties, including government agencies, notaries, Information is collected from experts in t Is located on a land plot of 10,000 the land registry, the cadastre, utility compa- construction licensing, including architects, square feet (929 square meters) that nies, public and private inspectors and tech- construction lawyers, construction firms, is 100% owned by BuildCo and is ac- nical experts apart from in-house architects utility service providers and public officials curately registered in the cadastre and and engineers. Interactions between company who deal with building regulations, includ- land registry. employees, such as development of the ware- ing approvals and inspections. To make the t Is a new construction (there was no house plans and inspections conducted by data comparable across economies, several as- previous construction on the land). employees, are not counted as procedures. sumptions about the business, the warehouse t Has complete architectural and Procedures that the company undergoes to project and the utility connections are used. technical plans prepared by a licensed connect to electricity, water, sewerage and architect. telephone services are included. All proce- ASSUMPTIONS ABOUT THE CON- dures that are legally or in practice required STRUCTION COMPANY ASSUMPTIONS ABOUT THE UTILITY CONNECTIONS for building a warehouse are counted, even if The business (BuildCo): they may be avoided in exceptional cases. t Is a limited liability company. The electricity connection: TIME t Operates in the economy’s selected cities. t Even in peri-urban areas, unless service t Is 100% domestically and privately is underground, it is assumed that the Time is recorded in calendar days. The mea- owned. service is overhead. sure captures the median duration that local t Has 5 owners, none of whom is a legal t Connection is 32 feet, 10 inches (10 experts indicate is necessary to complete a entity. meters) long. procedure in practice. It is assumed that the t Is fully licensed and insured to carry t Is a medium-tension, 3-phase, 4-wire minimum time required for each procedure out construction projects, such as Y, 140-kW connection. Three-phase is 1 day. Although procedures may take place building warehouses. service is available in the construction simultaneously, they cannot start on the same area. day (that is, simultaneous procedures start t Has 20 builders and other employees, all of them nationals with the technical t Unless installation of a private substa- on consecutive days). If a procedure can be expertise and professional experi- tion (transformer) or extension of accelerated legally for an additional cost, the ence necessary to obtain construction network is required, connection to the fastest procedure is chosen. It is assumed that permits and approvals. electricity network is a simple hook-up. BuildCo does not waste time and commits to t Has at least 1 employee who is a li- t Connection involves installation of only completing each remaining procedure without censed architect and registered with the one electricity meter. delay. The time that BuildCo spends on gather- local association of architects. t BuildCo is assumed to have a licensed ing information is ignored. It is assumed that t Has paid all taxes and taken out all nec- electrician on their team. BuildCo is aware of all building requirements essary insurance applicable to its general The water and sewerage connection: and their sequence from the beginning. business activity (for example, accidental t Is 32 feet, 10 inches (10 meters) away insurance for construction workers and COST from the existing water source and third-person liability insurance). sewer tap. Cost is recorded as a percentage of the econo- t Owns the land on which the warehouse t Does not require water for fire protec- my’s income per capita. Only official costs are is built. tion reasons; a fire extinguishing system recorded. All the fees associated with complet- DATA NOTES 43 ing the procedures to legally build a warehouse ASSUMPTIONS ABOUT THE PROPERTY cate is necessary to complete a procedure. It is are recorded, including those associated with The property: assumed that the minimum time required for obtaining land use approvals and preconstruc- t Has a value of 50 times income per each procedure is 1 day. Although procedures tion design clearances; receiving inspections capita. The sale price equals the value. may take place simultaneously, they cannot before, during and after construction; getting t Is fully owned by the seller. start on the same day. It is assumed that the utility connections; and registering the ware- t Has no mortgages attached and has buyer does not waste time and commits to house property. Nonrecurring taxes required been under the same ownership for the completing each remaining procedure with- for the completion of the warehouse project past 10 years. out delay. If a procedure can be accelerated for also are recorded. The building code, informa- t Is registered in the land registry or an additional cost, the fastest legal procedure tion from local experts and specific regulations cadastre, or both, and is free of title available and used by the majority of property and fee schedules are used as sources for costs. disputes. owners is chosen. If procedures can be under- If several local partners provide different esti- t Is located in a peri-urban commercial taken simultaneously, it is assumed that they mates, the median reported value is used. zone, and no rezoning is required. are. It is assumed that the parties involved are t Consists of land and a building. The aware of all regulations and their sequence The data details on dealing with construction land area is 6,000 square feet (557.4 from the beginning. Time spent on gathering permits can be found for each economy at square meters). A 2-story warehouse of information is not considered. http://www.doingbusiness.org by selecting the 10,000 square feet (929 square meters) economy in the drop-down list. is located on the land. The warehouse COST is 10 years old, is in good condition Cost is recorded as a percentage of the prop- and complies with all safety standards, REGISTERING PROPERTY building codes and other legal require- erty value, assumed to be equivalent to 50 ments. The property of land and build- times income per capita. Only official costs Doing Business in Pakistan 2010 records the ing will be transferred in its entirety. required by law are recorded, including fees, full sequence of procedures necessary for a t Will not be subject to renovations transfer taxes, stamp duties and any other business (buyer) to purchase a property from or additional building following the payment to the property registry, notaries, another business (seller) and to transfer the purchase. public agencies or lawyers. Other taxes, such property title to the buyer’s name so that the t Has no trees, natural water sources, as capital gains tax or value added tax, are buyer can use the property for expanding its natural reserves or historical monu- excluded from the cost measure. Both costs business, use the property as collateral in tak- ments of any kind. borne by the buyer and those borne by the ing new loans or, if necessary, sell the property t Will not be used for special purposes, seller are included. If cost estimates differ to another business. The process starts with and no special permits, such as for among sources, the median reported value obtaining the necessary documents, such as residential use, industrial plants, waste is used. a copy of the seller’s title if necessary, and storage or certain types of agricultural conducting due diligence if required. The activities, are required. The data details on registering property can transaction is considered complete when it is t Has no occupants (legal or illegal), and be found for each economy at http://www. opposable to third parties and when the buyer no other party holds a legal interest in it. doingbusiness.org by selecting the economy in can use the property, use it as collateral for a PROCEDURES the drop-down list. bank loan or resell it. Every procedure required by law or nec- A procedure is defined as any interaction PAYING TAXES essary in practice is included, whether it is the of the buyer or the seller, their agents (if an responsibility of the seller or the buyer or must agent is legally or in practice required) or Doing Business in Pakistan 2010 records the be completed by a third party on their behalf. the property with external parties, includ- taxes and mandatory contributions that a Local property lawyers, notaries and property ing government agencies, inspectors, notaries medium-sized company must pay in a given registries provide information on procedures and lawyers. Interactions between company year, as well as measures the administrative as well as the time and cost to complete each officers and employees are not considered. burden of paying taxes and contributions. of them. All procedures that are legally or in practice Taxes and contributions measured include To make the data comparable across required for registering property are recorded, the profit or corporate income tax, social economies, several assumptions about the even if they may be avoided in exceptional contributions and labor taxes paid by the parties to the transaction, the property and cases. It is assumed that the buyer follows the employer, property taxes, property transfer the procedures are used. fastest legal option available and used by the taxes, dividend tax, capital gains tax, financial majority of property owners. Although the transactions tax, waste collection taxes and ASSUMPTIONS ABOUT THE PARTIES buyer may use lawyers or other professionals vehicle and road taxes. The parties (buyer and seller): where necessary in the registration process, it Doing Business in Pakistan 2010 mea- t Are limited liability companies. is assumed that it does not employ an outside sures all taxes and contributions that are gov- t Are located in the peri-urban area of facilitator in the registration process unless ernment mandated (at any level—national, the country’s selected cities. legally or in practice required to do so. department or city), apply to the standardized t Are 100% domestically and privately business and have an impact in its income TIME statements. In doing so, Doing Business goes owned. t Have 50 employees each, all of whom Time is recorded in calendar days. The mea- beyond the traditional definition of a tax: are nationals. sure captures the median duration that prop- as defined for the purposes of government t Perform general commercial activities. erty lawyers, notaries or registry officials indi- national accounts, taxes include only compul- 44 DOING BUSINESS IN PAKISTAN 2010 sory, unrequited payments to general govern- t Does not qualify for investment value added tax. These taxes are traditionally ment. Doing Business departs from this defini- incentives or any benefits apart from collected from the consumer on behalf of the tion because it measures imposed charges those related to the age or size of the tax agencies. Although they do not affect the that affect business accounts, not government company. income statements of the company, they add accounts. The main differences relate to labor t Has 60 employees—4 managers, 8 as- to the administrative burden of complying contributions and value added tax. The Doing sistants and 48 workers. All are nation- with the tax system and so are included in the als, and 1 manager is also an owner. Business measure includes government-man- tax payments measure. dated contributions paid by the employer to t Has a turnover of 1,050 times income The number of payments takes into ac- per capita. a requited private pension fund or workers’ count electronic filing. Where full electronic insurance fund. The indicator includes, for ex- t Makes a loss in the first year of opera- filing and payment is allowed and it is used tion. ample, Australia’s compulsory superannuation by the majority of medium-sized businesses, guarantee and workers’ compensation insur- t Has a gross margin (pre-tax) of 20% the tax is counted as paid once a year even if (that is, sales are 120% of the cost of ance. It excludes value added taxes from the payments are more frequent. goods sold). total tax rate because they do not affect the ac- Where 2 or more taxes or contributions t Distributes 50% of its net profits as counting profits of the business—that is, they are filed for and paid jointly using the same dividends to the owners at the end of are not reflected in the income statement. the second year. form, each of these joint payments is counted Doing Business has prepared a case sce- once. For example, if mandatory health insur- t Sells one of its plots of land at a profit nario to measure the taxes and contributions during the second year. ance contributions and mandatory pension paid by a standardized business and the com- contributions are filed for and paid together, t Has annual fuel costs for its trucks plexity of an economy’s tax compliance sys- equal to twice income per capita. only one of these contributions would be in- tem. This case scenario uses a set of financial cluded in the number of payments. t Is subject to a series of detailed as- statements and assumptions about transac- sumptions on expenses and transac- tions made over the year. Tax experts in each TIME tions to further standardize the case. economy compute the taxes and contribu- All financial statement variables are Time is recorded in hours per year. The in- tions due in their jurisdiction based on the proportional to 2006 income per capita. dicator measures the time taken to prepare, standardized case facts. Information is also For example, the owner who is also a file and pay 3 major types of taxes and con- compiled on the frequency of filing, tax audits manager spends 10% of income per tributions: the corporate income tax, value and other costs of compliance. The project was capita on traveling for the company added or sales tax and labor taxes, includ- developed and implemented in cooperation (20% of this owner’s expenses are ing payroll taxes and social contributions. with PricewaterhouseCoopers. purely private, 20% are for entertaining Preparation time includes the time to collect customers and 60% for business travel). To make the data comparable across all information necessary to compute the tax economies, several assumptions about the ASSUMPTIONS ABOUT THE TAXES payable. If separate accounting books must business and the taxes and contributions are AND CONTRIBUTIONS be kept for tax purposes—or separate cal- used. t All the taxes and contributions paid culations made—the time associated with in the second year of operation (fiscal these processes is included. This extra time is ASSUMPTIONS ABOUT THE BUSINESS 2008) are recorded. A tax or contribu- included only if the regular accounting work The business: tion is considered distinct if it has a is not enough to fulfill the tax accounting t Is a limited liability, taxable company. different name or is collected by a dif- requirements. Filing time includes the time to ferent agency. Taxes and contributions complete all necessary tax return forms and t Started operations on January 1, 2007. with the same name and agency, but At that time the company purchased make all necessary calculations. Payment time charged at different rates depending on all the assets shown in its balance sheet the business, are counted as the same considers the hours needed to make the pay- and hired all its workers. tax or contribution. ment online or at the tax authorities. Where t Operates in the country’s selected cities. t The number of times the company pays taxes and contributions are paid in person, the t Is 100% domestically owned and has taxes and contributions in a year is the time includes delays while waiting. 5 owners, all of whom are natural number of different taxes or contribu- persons. TOTAL TAX RATE tions multiplied by the frequency of t Has a start-up capital of 102 times payment (or withholding) for each one. The total tax rate measures the amount of income per capita at the end of 2007. The frequency of payment includes taxes and mandatory contributions borne by t Performs general industrial or commer- advance payments (or withholding) as the business in the second year of operation, cial activities. Specifically, it produces well as regular payments (or withhold- expressed as a share of commercial profit. ceramic flowerpots and sells them at ing). Doing Business in Pakistan 2010 and Doing retail. It does not participate in foreign Business 2010 report the total tax rate for trade (no import or export) and does TAX PAYMENTS fiscal 2008. The total amount of taxes borne not handle products subject to a special The tax payments indicator reflects the total is the sum of all the different taxes and con- tax regime, for example, liquor or tobacco. number of taxes and contributions paid, the tributions payable after accounting for allow- method of payment, the frequency of pay- able deductions and exemptions. The taxes t At the beginning of 2007, owns 2 plots of land, 1 building, machinery, office ment and the number of agencies involved withheld (such as personal income tax) or equipment, computers and 1 truck and for this standardized case during the second collected by the company and remitted to the leases 1 truck. year of operation. It includes consumption tax authorities (such as value added tax, sales taxes paid by the company, such as sales tax or tax or goods and service tax) but not borne by DATA NOTES 45 the company are excluded. The taxes included TRADING ACROSS BORDERS DOCUMENTS can be divided into 5 categories: profit or cor- All documents required per shipment to porate income tax, social contributions and Doing Business in Pakistan 2010 compiles export and import the goods are recorded. labor taxes paid by the employer (in respect procedural requirements for exporting and It is assumed that the contract has already of which all mandatory contributions are in- importing a standardized cargo of goods by been agreed upon and signed by both parties. cluded, even if paid to a private entity such ocean transport. Every official procedure for Documents required for clearance by govern- as a requited pension fund), property taxes, exporting and importing the goods is record- ment ministries, customs authorities, port turnover taxes and other small taxes (such as ed—from the contractual agreement between and container terminal authorities, health department fees and vehicle and fuel taxes). the 2 parties to the delivery of goods—along and technical control agencies and banks are The total tax rate is designed to provide with the time and cost necessary for comple- taken into account. Since payment is by letter a comprehensive measure of the cost of all tion. All documents needed by the trader for of credit, all documents required by banks for the taxes a business bears. It differs from the clearance of the goods across the border are the issuance or securing of a letter of credit statutory tax rate, which merely provides the also recorded. For exporting goods, proce- are also taken into account. Documents that factor to be applied to the tax base. In comput- dures range from packing the goods at the are renewed at least annually and that do not ing the total tax rate, the actual tax payable is factory to their departure from the port of require renewal per shipment (for example, divided by commercial profit. exit. For importing goods, procedures range an annual tax clearance certificate) are not Commercial profit is essentially net from the vessel’s arrival at the port of entry to included. profit before all taxes borne. It differs from the cargo’s delivery at the factory warehouse. the conventional profit before tax, reported in The time and cost for ocean transport are not TIME financial statements. In computing profit be- included. Payment is made by letter of credit, The time for exporting and importing is re- fore tax, many of the taxes borne by a firm are and the time, cost and documents required corded in calendar days. The time calculation deductible. In computing commercial profit, for the issuance of a letter of credit are taken for a procedure starts from the moment it is these taxes are not deductible. Commercial into account. initiated and runs until it is completed. If a profit therefore presents a clear picture of the Local freight forwarders, shipping lines, procedure can be accelerated for an additional actual profit of a business before any of the customs brokers, port officials and banks pro- cost and is available to all trading companies, taxes it bears in the course of the fiscal year. vide information on required documents and the fastest legal procedure is chosen. Fast- Commercial profit is computed as sales cost as well as the time to complete each pro- track procedures applying to firms located in minus cost of goods sold, minus gross sala- cedure. To make the data comparable across an export processing zone are not taken into ries, minus administrative expenses, minus economies, several assumptions about the account because they are not available to all other expenses, minus provisions, plus capital business and the traded goods are used. trading companies. Ocean transport time is gains (from the property sale) minus interest not included. It is assumed that neither the ex- expense, plus interest income and minus com- ASSUMPTIONS ABOUT THE BUSINESS porter nor the importer wastes time and that mercial depreciation. To compute the com- The business: each commits to completing each remain- mercial depreciation, a straight-line depre- t Has 60 employees. ing procedure without delay. Procedures that ciation method is applied, with the following t Is located in the economy’s selected can be completed in parallel are measured rates: 0% for the land, 5% for the building, cities. as simultaneous. The waiting time between 10% for the machinery, 33% for the comput- t Is a private, limited liability company. It procedures—for example, during unloading ers, 20% for the office equipment, 20% for does not operate in an export process- of the cargo—is included in the measure. the truck and 10% for business development ing zone or an industrial estate with expenses. Commercial profit amounts to 59.4 special export or import privileges. COST times income per capita. t Is domestically owned with no foreign Cost measures the fees levied on a 20-foot con- This methodology is consistent with the ownership. tainer in U.S. dollars. All the fees associated Total Tax Contribution framework developed t Exports more than 10% of its sales. with completing the procedures to export or by PricewaterhouseCoopers. This framework import the goods are included. These include measures taxes that are borne by compa- costs for documents, administrative fees for nies and affect their income statements, as ASSUMPTIONS ABOUT THE TRADED customs clearance and technical control, ter- GOODS does Doing Business. But while Pricewater- minal handling charges and inland transport. t The traded product travels in a dry- houseCoopers bases its calculation on data The cost measure does not include customs cargo, 20-foot, full container load. from the largest companies in the economy, It weighs 10 tons and is valued at tariffs and duties or costs related to ocean Doing Business focuses on a standardized US$20,000. transport. Only official costs are recorded. medium-sized company. t The product: The data details on trading across borders can t Is not hazardous nor does it include The data details on paying taxes can be found military items. be found for each economy at http://www.do- for each economy at http://www.doingbusiness. ingbusiness.org. This methodology was devel- t Does not require refrigeration or any org. This methodology was developed in Djankov other special environment. oped in Simeon Djankov, Caroline Freund, and Simeon, Gansler Tim, McLiesh Caralee, Ramalho Cong Pham. Forthcoming. "Trading on Time." t Does not require any special phytosani- Rita and Shleifer Andrei. 2008. The Effect of Cor- tary or environmental safety standards Review of Economics and Statistics; and is porate Taxes on Investment and Entrepreneur- other than accepted international adopted here with minor changes. ship. NBER Working Paper 13756. Cambridge, standards. MA: National Bureau of Economic Research. 46 DOING BUSINESS IN PAKISTAN 2010 ENFORCING CONTRACTS PROCEDURES The data details on enforcing contracts can be The list of procedural steps compiled for each found for each economy at http://www.doing- Indicators on enforcing contracts measure the economy traces the chronology of a commer- business.org. This methodology was developed efficiency of the judicial system in resolving cial dispute before the relevant court. A pro- in Simeon Djankov, Rafael La Porta, Florencio a commercial dispute. The data are built by cedure is defined as any interaction between López-de-Silanes and Andrei Shleifer. 2003. following the step-by-step evolution of a com- the parties, or between them and the judge "Courts."Quarterly Journal of Economics 118 mercial sale dispute before local courts. The or court officer. This includes steps to file the (2): 453-517; and is adopted here with minor data are collected through study of the codes case, steps for trial and judgment and steps changes. of civil procedure and other court regulations necessary to enforce the judgment. as well as surveys completed by local litigation The survey allows respondents to record lawyers as well as by judges. procedures that exist in civil law but not com- EASE OF DOING BUSINESS mon law jurisdictions, and vice versa. For ASSUMPTIONS ABOUT THE CASE example, in civil law countries the judge can The ease of doing business index ranks loca- t The value of the claim equals 200% of appoint an independent expert, while in com- tions from 1 to 13. It is calculated as the rank- the country’s income per capita. mon law countries each party submits a list ing on the simple average of city percentile t The dispute concerns a lawful transac- of expert witnesses to the court. To indicate rankings on each of the 6 topics covered in tion between 2 businesses (Seller and the overall efficiency of court procedures, 1 Doing Business in Pakistan 2010 for which Buyer), located in the economy’s selected procedure is now subtracted for economies data is available for 13 cities. The ranking on cities. Seller sells goods worth 200% of the economy’s income per capita to that have specialized commercial courts and 1 each topic is the simple average of the percen- Buyer. After Seller delivers the goods to procedure for economies that allow electronic tile rankings on its component indicators. Buyer, Buyer refuses to pay for the goods filing of court cases. Some procedural steps The ease of Doing Business index is lim- on the grounds that the delivered goods that take place simultaneously with or are ited in scope. It does not account for a coun- were not of adequate quality. included in other procedural steps are not try's proximity to large markets, the quality of t Seller (the plaintiff) sues Buyer (the de- counted in the total number of procedures. its infrastructure services (other than services fendant) to recover the amount under related to trading across orders or construc- the sales agreement (that is, 200% of TIME tion permits), the security of property from the country’s income per capita). Buyer Time is recorded in calendar days, counted theft and looting, macroeconomic conditions opposes Seller’s claim, saying that the from the moment Seller files the lawsuit in or the strength of underlying institutions. quality of the goods is not adequate. court until payment. This includes both the There remains a large unfinished agenda for The claim is disputed on the merits. days when actions take place and the waiting research into what regulation constitutes t A court in the country’s selected cities periods between. The average duration of dif- binding constraints, what package of reforms with jurisdiction over commercial ferent stages of dispute resolution is recorded: is most effective and how these issues are cases worth 200% of income per capita decides the dispute. the completion of filing and service of process shaped by the context of a country. The Doing and of pretrial attachment (time to file the Business indicators provide a new empirical t Seller attaches Buyer’s goods prior to obtaining a judgment because Seller case), the issuance of judgment (time for the data set that may improve understanding of fears that Buyer may become insolvent trial and obtaining the judgment) and the these issues. during the lawsuit. moment of payment (time for enforcement t Expert opinions are given on the quality of judgment). of the delivered goods. If it is standard COST practice in the economy for parties to call witnesses or expert witnesses to give Cost is recorded as a percentage of the claim, an opinion on the quality of the goods, assumed to be equivalent to 200% of income the parties each call one witness or per capita. No bribes are recorded. Three types expert witness. If it is standard practice of costs are recorded: court costs, enforcement for the judge to appoint an independent costs and average attorney fees. expert to give an expert opinion on the Court costs include all costs Seller must quality of the goods, the judge does so. In this case the judge does not allow advance to the court or to the expert regard- opposing expert testimony. less of the final cost to Seller (plaintiff). Expert t The judgment is 100% in favor of Seller: fees, if required by law or necessary in prac- the judge decides that the goods are of tice, are included in court costs. Enforcement adequate quality and that Buyer must costs are all costs Seller must advance to pay the agreed price (200% of income enforce the judgment through a public sale of per capita). Buyer’s movable assets, regardless of the final t Buyer does not appeal the judgment. cost to Seller (plaintiff). Average attorney fees The judgment becomes final. are the fees Seller (plaintiff) must advance t Seller takes all required steps for prompt to a local attorney to represent Seller in the enforcement of the judgment. The standardized case. money is successfully collected through a public sale of Buyer’s movable assets (for example, office equipment). Doing Business Indicators 48 DOING BUSINESS IN PAKISTAN 2010 Starting a business Dealing with construction permits Paid-in Ease of minimum Ease of dealing with Cost capital starting a Cost construction Procedures Time (% of GNI (% of GNI business Procedures Time (% of GNI permits (number) (days) per capita) per capita) (rank) (number) (days) per capita) (rank) Faisalabad Punjab 10 18 13.2 0 2 11 160 473.2 6 Gujranwala Punjab 10 24 24.5 0 13 12 150 435.0 2 Hyderabad Sindh 10 23 25.9 0 11 14 192 766.5 13 Islamabad ICT 10 16 13.2 0 1 12 150 797.9 8 Karachi Sindh 10 21 13.2 0 3 12 223 711.1 10 Lahore Punjab 10 21 13.2 0 3 11 146 478.6 3 Multan Punjab 10 21 24.0 0 6 11 150 422.0 1 Peshawar Khyber Pakhtunkhwa 10 21 13.2 0 3 14 124 471.2 6 Quetta Balochistan 10 21 24.0 0 6 14 196 492.9 12 Rawalpindi Punjab 10 19 24.3 0 8 12 152 473.1 5 Sheikhupura Punjab 10 21 24.4 0 9 13 179 380.3 8 Sialkot Punjab 10 22 26.2 0 12 15 164 491.3 11 Sukkur Sindh 10 23 24.0 0 10 12 157 466.2 4 INDICATORS 49 Registering property Trading across borders Cost Ease of Cost to Cost to (% of the registering Documents Time for export Documents Time for import Ease of Procedures Time property property for export export (US$ per for import import (US$ per trading (number) (days) value) (rank) (number) (days) container) (number) (days) container) (rank) Faisalabad Punjab 6 34 8.0 1 9 22 639 8 20 739 4 Gujranwala Punjab 6 40 8.1 6 9 23 677 8 20 936 10 Hyderabad Sindh 6 51 9.2 11 9 20 616 8 20 708 2 Islamabad ICT 6 39 7.0 3 9 22 670 8 21 936 11 Karachi Sindh 6 50 9.3 11 9 22 611 8 18 680 1 Lahore Punjab 6 30 8.1 4 9 23 791 8 20 1,088 13 Multan Punjab 6 41 8.1 7 9 22 624 8 20 936 5 Peshawar Khyber Pakhtunkhwa 6 42 9.0 9 9 22 715 8 20 784 8 Quetta Balochistan 6 52 11.0 13 9 23 619 8 21 693 9 Rawalpindi Punjab 6 41 8.1 7 9 23 685 8 20 1,012 12 Sheikhupura Punjab 6 39 8.1 5 9 21 639 8 20 1,088 7 Sialkot Punjab 6 34 8.0 1 9 22 639 8 20 860 5 Sukkur Sindh 6 49 9.2 10 9 21 639 8 18 784 3 50 DOING BUSINESS IN PAKISTAN 2010 Paying taxes Enforcing contracts Ease of Ease of Total tax paying enforcing Payments Time rate taxes Procedures Time Cost contracts (number) (hours) (% profit) (rank) (number) (days) (% of claim) (rank) Faisalabad Punjab 47 560 31.5 3 47 730 27.5 2 Gujranwala Punjab 47 560 31.5 3 47 940 32.8 4 Hyderabad Sindh 47 560 31.6 11 47 1,460 27.5 7 Islamabad ICT 35 558.5 26.0 1 47 1,395 35.8 10 Karachi Sindh 47 560 31.6 11 47 976 23.8 3 Lahore Punjab 47 560 31.5 3 47 768 42.8 8 Multan Punjab 47 560 31.5 3 47 1,473 23.6 4 Peshawar Khyber Pakhtunkhwa 47 560 31.6 10 47 2,190 22.3 8 Quetta Balochistan 47 560 31.2 2 47 1,498 32.4 13 Rawalpindi Punjab 47 560 31.5 3 47 1,505 29.2 10 Sheikhupura Punjab 47 560 31.5 3 47 1,125 29.4 6 Sialkot Punjab 47 560 31.5 3 47 1,270 38.3 10 Sukkur Sindh 47 560 31.6 11 47 1,060 20.6 1 City tables 52 DOING BUSINESS IN PAKISTAN 2010 Faisalabad, Punjab Ease of doing business (rank) 1 Starting a business (rank) 2 Registering property (rank) 1 Trading across borders (rank) 4 Procedures (number) 10 Procedures (number) 6 Documents to export (number) 9 Time (days) 18 Time (days) 34 Time to export (days) 22 Cost (% of income per capita) 13.2 Cost (% of the property value) 8 Cost to export (US$ per container) 639 Minimum capital (% of income per capita) 0 Documents to import (number) 8 Paying taxes (rank) 3 Time to import (days) 20 Dealing with construction permits (rank) 6 Payments (number per year) 47 Cost to import (US$ per container) 739 Procedures (number) 11 Time (hours per year) 560 Time (days) 160 Total tax rate (% of profit) 31.5 Enforcing contracts (rank) 2 Cost (% of income per capita) 473.2 Procedures (number) 47 Time (days) 730 Cost (% of claim) 27.5 Gujranwala, Punjab Ease of doing business (rank) 6 Starting a business (rank) 13 Registering property (rank) 6 Trading across borders (rank) 10 Procedures (number) 10 Procedures (number) 6 Documents to export (number) 9 Time (days) 24 Time (days) 40 Time to export (days) 23 Cost (% of income per capita) 24.5 Cost (% of the property value) 8.1 Cost to export (US$ per container) 677 Minimum capital (% of income per capita) 0 Documents to import (number) 8 Paying taxes (rank) 3 Time to import (days) 20 Dealing with construction permits (rank) 2 Payments (number per year) 47 Cost to import (US$ per container) 936 Procedures (number) 12 Time (hours per year) 560 Time (days) 150 Total tax rate (% of profit) 31.5 Enforcing contracts (rank) 4 Cost (% of income per capita) 435 Procedures (number) 47 Time (days) 940 Cost (% of claim) 32.8 Hyderabad, Sindh Ease of doing business (rank) 13 Starting a business (rank) 11 Registering property (rank) 11 Trading across borders (rank) 2 Procedures (number) 10 Procedures (number) 6 Documents to export (number) 9 Time (days) 23 Time (days) 51 Time to export (days) 20 Cost (% of income per capita) 25.9 Cost (% of the property value) 9.2 Cost to export (US$ per container) 616 Minimum capital (% of income per capita) 0 Documents to import (number) 8 Paying taxes (rank) 11 Time to import (days) 20 Dealing with construction permits (rank) 13 Payments (number per year) 47 Cost to import (US$ per container) 708 Procedures (number) 14 Time (hours per year) 560 Time (days) 192 Total tax rate (% of profit) 31.6 Enforcing contracts (rank) 7 Cost (% of income per capita) 766.5 Procedures (number) 47 Time (days) 1,460 Cost (% of claim) 27.5 Islamabad, ICT Ease of doing business (rank) 4 Starting a business (rank) 1 Registering property (rank) 3 Trading across borders (rank) 11 Procedures (number) 10 Procedures (number) 6 Documents to export (number) 9 Time (days) 16 Time (days) 39 Time to export (days) 22 Cost (% of income per capita) 13.2 Cost (% of the property value) 7 Cost to export (US$ per container) 670 Minimum capital (% of income per capita) 0 Documents to import (number) 8 Paying taxes (rank) 1 Time to import (days) 21 Dealing with construction permits (rank) 8 Payments (number per year) 35 Cost to import (US$ per container) 936 Procedures (number) 12 Time (hours per year) 558.5 Time (days) 150 Total tax rate (% of profit) 26 Enforcing contracts (rank) 10 Cost (% of income per capita) 797.9 Procedures (number) 47 Time (days) 1,395 Cost (% of claim) 35.8 Karachi, Sindh Ease of doing business (rank) 9 Starting a business (rank) 3 Registering property (rank) 11 Trading across borders (rank) 1 Procedures (number) 10 Procedures (number) 6 Documents to export (number) 9 Time (days) 21 Time (days) 50 Time to export (days) 22 Cost (% of income per capita) 13.2 Cost (% of the property value) 9.3 Cost to export (US$ per container) 611 Minimum capital (% of income per capita) 0 Documents to import (number) 8 Paying taxes (rank) 11 Time to import (days) 18 Dealing with construction permits (rank) 10 Payments (number per year) 47 Cost to import (US$ per container) 680 Procedures (number) 12 Time (hours per year) 560 Time (days) 223 Total tax rate (% of profit) 31.6 Enforcing contracts (rank) 3 Cost (% of income per capita) 711.1 Procedures (number) 47 Time (days) 976 Cost (% of claim) 23.8 CIT Y TABLES 53 Lahore, Punjab Ease of doing business (rank) 3 Starting a business (rank) 3 Registering property (rank) 4 Trading across borders (rank) 13 Procedures (number) 10 Procedures (number) 6 Documents to export (number) 9 Time (days) 21 Time (days) 30 Time to export (days) 23 Cost (% of income per capita) 13.2 Cost (% of the property value) 8.1 Cost to export (US$ per container) 791 Minimum capital (% of income per capita) 0 Documents to import (number) 8 Paying taxes (rank) 3 Time to import (days) 20 Dealing with construction permits (rank) 3 Payments (number per year) 47 Cost to import (US$ per container) 1,088 Procedures (number) 11 Time (hours per year) 560 Time (days) 146 Total tax rate (% of profit) 31.5 Enforcing contracts (rank) 8 Cost (% of income per capita) 478.6 Procedures (number) 47 Time (days) 768 Cost (% of claim) 42.8 Multan, Punjab Ease of doing business (rank) 2 Starting a business (rank) 6 Registering property (rank) 7 Trading across borders (rank) 5 Procedures (number) 10 Procedures (number) 6 Documents to export (number) 9 Time (days) 21 Time (days) 41 Time to export (days) 22 Cost (% of income per capita) 24.0 Cost (% of the property value) 8.1 Cost to export (US$ per container) 624 Minimum capital (% of income per capita) 0 Documents to import (number) 8 Paying taxes (rank) 3 Time to import (days) 20 Dealing with construction permits (rank) 1 Payments (number per year) 47 Cost to import (US$ per container) 936 Procedures (number) 11 Time (hours per year) 560 Time (days) 150 Total tax rate (% of profit) 31.5 Enforcing contracts (rank) 4 Cost (% of income per capita) 422 Procedures (number) 47 Time (days) 1,473 Cost (% of claim) 23.6 Peshawar, Khyber Pakhtunkhwa Ease of doing business (rank) 8 Starting a business (rank) 3 Registering property (rank) 9 Trading across borders (rank) 8 Procedures (number) 10 Procedures (number) 6 Documents to export (number) 9 Time (days) 21 Time (days) 42 Time to export (days) 22 Cost (% of income per capita) 13.2 Cost (% of the property value) 9 Cost to export (US$ per container) 715 Minimum capital (% of income per capita) 0 Documents to import (number) 8 Paying taxes (rank) 10 Time to import (days) 20 Dealing with construction permits (rank) 6 Payments (number per year) 47 Cost to import (US$ per container) 784 Procedures (number) 14 Time (hours per year) 560 Time (days) 124 Total tax rate (% of profit) 31.6 Enforcing contracts (rank) 8 Cost (% of income per capita) 471.2 Procedures (number) 47 Time (days) 2,190 Cost (% of claim) 22.3 Quetta, Balochistan Ease of doing business (rank) 12 Starting a business (rank) 6 Registering property (rank) 13 Trading across borders (rank) 9 Procedures (number) 10 Procedures (number) 6 Documents to export (number) 9 Time (days) 21 Time (days) 52 Time to export (days) 23 Cost (% of income per capita) 24.0 Cost (% of the property value) 11 Cost to export (US$ per container) 619 Minimum capital (% of income per capita) 0 Documents to import (number) 8 Paying taxes (rank) 2 Time to import (days) 21 Dealing with construction permits (rank) 12 Payments (number per year) 47 Cost to import (US$ per container) 693 Procedures (number) 14 Time (hours per year) 560 Time (days) 196 Total tax rate (% of profit) 31.2 Enforcing contracts (rank) 13 Cost (% of income per capita) 492.9 Procedures (number) 47 Time (days) 1,498 Cost (% of claim) 32.4 Rawalpindi, Punjab Ease of doing business (rank) 10 Starting a business (rank) 8 Registering property (rank) 7 Trading across borders (rank) 12 Procedures (number) 10 Procedures (number) 6 Documents to export (number) 9 Time (days) 19 Time (days) 41 Time to export (days) 23 Cost (% of income per capita) 24.3 Cost (% of the property value) 8.1 Cost to export (US$ per container) 685 Minimum capital (% of income per capita) 0 Documents to import (number) 8 Paying taxes (rank) 3 Time to import (days) 20 Dealing with construction permits (rank) 5 Payments (number per year) 47 Cost to import (US$ per container) 1,012 Procedures (number) 12 Time (hours per year) 560 Time (days) 152 Total tax rate (% of profit) 31.5 Enforcing contracts (rank) 10 Cost (% of income per capita) 473.1 Procedures (number) 47 Time (days) 1,505 Cost (% of claim) 29.2 54 DOING BUSINESS IN PAKISTAN 2010 Sheikhupura, Punjab Ease of doing business (rank) 5 Starting a business (rank) 9 Registering property (rank) 5 Trading across borders (rank) 7 Procedures (number) 10 Procedures (number) 6 Documents to export (number) 9 Time (days) 21 Time (days) 39 Time to export (days) 21 Cost (% of income per capita) 24.4 Cost (% of the property value) 8.1 Cost to export (US$ per container) 639 Minimum capital (% of income per capita) 0 Documents to import (number) 8 Paying taxes (rank) 3 Time to import (days) 20 Dealing with construction permits (rank) 8 Payments (number per year) 47 Cost to import (US$ per container) 1,088 Procedures (number) 13 Time (hours per year) 560 Time (days) 179 Total tax rate (% of profit) 31.5 Enforcing contracts (rank) 6 Cost (% of income per capita) 380.3 Procedures (number) 47 Time (days) 1,125 Cost (% of claim) 29.4 Sialkot, Punjab Ease of doing business (rank) 11 Starting a business (rank) 12 Registering property (rank) 1 Trading across borders (rank) 5 Procedures (number) 10 Procedures (number) 6 Documents to export (number) 9 Time (days) 22 Time (days) 34 Time to export (days) 22 Cost (% of income per capita) 26.2 Cost (% of the property value) 8 Cost to export (US$ per container) 639 Minimum capital (% of income per capita) 0 Documents to import (number) 8 Paying taxes (rank) 3 Time to import (days) 20 Dealing with construction permits (rank) 11 Payments (number per year) 47 Cost to import (US$ per container) 860 Procedures (number) 15 Time (hours per year) 560 Time (days) 164 Total tax rate (% of profit) 31.5 Enforcing contracts (rank) 10 Cost (% of income per capita) 491.3 Procedures (number) 47 Time (days) 1,270 Cost (% of claim) 38.3 Sukkur, Sindh Ease of doing business (rank) 7 Starting a business (rank) 10 Registering property (rank) 10 Trading across borders (rank) 3 Procedures (number) 10 Procedures (number) 6 Documents to export (number) 9 Time (days) 23 Time (days) 49 Time to export (days) 21 Cost (% of income per capita) 24.0 Cost (% of the property value) 9.2 Cost to export (US$ per container) 639 Minimum capital (% of income per capita) 0 Documents to import (number) 8 Paying taxes (rank) 11 Time to import (days) 18 Dealing with construction permits (rank) 4 Payments (number per year) 47 Cost to import (US$ per container) 784 Procedures (number) 12 Time (hours per year) 560 Time (days) 157 Total tax rate (% of profit) 31.6 Enforcing contracts (rank) 1 Cost (% of income per capita) 466.2 Procedures (number) 47 Time (days) 1,060 Cost (% of claim) 20.6 LIST OF PROCEDURES List of Starting a business procedures Faisalabad, Punjab Standard company legal form: Private Limited Liability Company Starting a business Paid-in minimum capital requirement: none Data as of: December 2009 Dealing with Procedure 1. Obtain approval of company name through the construction permits Securities and Exchange Commission of Pakistan (SECP)'s e-Service website Time: 1 day Registering property Cost: PKR 200 (e-Services online name reservation fee) Comments: According to the Companies Ordinance, 1984, and its amendments in 2002 and update in February 2009, the company proposes one or more names in or- der of preference and submits them for approval via e-Services or in person (offline) to the Securities and Exchange Commission of Pakistan (SECP). The availability of the suggested names can first be checked online by searching existing company names. The official confirmation (or denial) of the chosen name and its availability is received by email or via courier upon payment of the name search fee of PKR 200 (online name reservation) or PKR 500 (offline name reservation) at the bank desig- nated by the SECP. A timely disposal of cases within 24 working hours is mandated by Regulation 9 of the CRO Regulation Act, 2003. The approved name is reserved for 90 days, by which time the company must be incorporated. The e-Services were successfully launched in August 2008 to improve the efficiency and effectiveness of the SECP’s business processes. The use of online submissions is growing, but in some cities a majority of entrepreneurs still prefer to apply in person. Procedure 2. Pay the fees for name registration and company incorporation using bank challans at the designated Muslim Commercial Bank (MCB) Time: 1 day Cost: No cost Comments: The company must pay the fees for name search availability and incorporation according to the Sixth Schedule of the Companies Ordinance, 1984. The challans must be deposited with the Muslim Commercial Bank, Ltd. They can be downloaded from the SECP website or obtained at the SECP offices or at the bank. Procedure 3. Register the company for incorporation with the Securities and Exchange Commission of Pakistan (SECP) through online e-Services Time: 2 days Cost: PKR 7,000 (online registration fee PKR 5,000 + filing fee PKR 2,000) Comments: The company can complete the registration online through e-Services or in person at the SECP. It must submit the following company incorporation docu- ments online or in person: a. Form 1: declaration of compliance; b. Form 21: identification of the office’s location; c. Form 29: particulars of directors, secretary, chief accountant, auditors, and others; d. Four copies of the memorandum and articles of association with each member’s signature (in the presence of a witness). According to the Sixth Schedule of Fees, effective June 2009, the fees for incorpora- tion of a company with authorized capital of up to PKR 600,000 are the following: 1. Online submission: registration fee PKR 5,000 and filing fee PKR 2,000; 2. Physical (offline) submission: registration fee PKR 10,000 and filing fee PKR 4,000. Confirmation of either the online or in-person submission is received instantly and the actual certificate a few days later via email and courier. The company can register with any Company Registration Office, irrespective of the jurisdiction. All regional SECP offices are computerized. Procedure 4. Obtain digital signatures from the National Institutional Facilitation Technologies (NIFT) through SECP e-Services Time: 2 days Cost: PKR 1,277 (certificate charges PKR 650 + federal excise duty PKR 126.75 (at 19.5%) + validation charges PKR 500) 56 DOING BUSINESS IN PAKISTAN 2010 Comments: The digital signature is obtained from the National Institutional Facilita- Procedure 9*. Register with the Employees Old Age Benefits tion Technologies (NIFT) through e-Services or at SECP offices. NIFT serves as the witness of all digitally signed documentation. To apply, the company must submit Institution (EOBI) the Digital Signature Certificate Request Form along with scanned copies of the Time: 7 days directors’ identity cards, Name Availability Certificate, and proof of payment. Cost: No cost Comments: According to the amendment to EOBI Act, 1976, effective July 2008, Procedure 5. Register for income tax by applying for a National every industry or commercial establishment with 5 or more employees must be Tax Number (NTN) at the tax facilitation center of the Regional registered with the federal EOBI. Under the EOBI, insured employees are entitled to a Tax Office (RTO) of the Federal Board of Revenue (FBR) pension (upon retirement), disability (if permanently disabled), old-age grant (upon Time: 2 days retirement if they do not have the minimum threshold for a pension), and survivor’s pension. A contribution equal to 5% of minimum wages is paid by the employer and Cost: No cost 1% by the employee. Comments: According to the Income Tax Ordinance, 2001, every company must For initial registration, the company must submit a simple form that is uploaded register for income tax and obtain the National Tax Number (NTN) that is generally into the database. The allotment requests are sent to a center in Karachi that issues required by other registering authorities such as Chambers of Commerce, the the registration numbers along with certificates and cards and sends them to the Import-Export Regulatory Authority, utility authorities, etc. Since 2002, after the company. Computerization of records is underway. introduction of the Income Tax Ordinance, 2001, an NTN is issued with a continuous valid term (without the need to renew the number). Procedure 10*. Register under the West Pakistan Shops and To apply, the company must submit a simple one-page form (the NTN Form) as well Establishment Ordinance 1969 with the Labor Department of the as proof of registration, the memorandum and articles of association, bank account number, copies of the national identity cards of its directors, and an attestation of District the registered business address at the nearest tax facilitation counter of the Regional Time: 7 days Tax Office in Pakistan. All applications are forwarded to the Central Registration Cost: PKR 10 (registration fee) Office (CRO) in Islamabad, which allots a uniform NTN to each company. The center Comments: Pakistan Shops and Establishment Ordinance, 1969, requires every processes the application and issues the NTN at no cost. The certificate is sent to the establishment other than a one-man shop to be registered with the Deputy Chief registered address of the applicant. The company can track the application online or Inspector of the Labor Department in each district. This is to safeguard the labor through the RTO helpline. If undelivered, the NTN certification can be collected from standards of the workers. the specified office at the Central Board of Revenue. The income tax is paid on filing the return, which is due within 6 months of the end of the company’s financial year To register, the employer must submit an application using Form A, accompanied (usually on June 30). Reform has been introduced to make the tax registration fully by a bank challan. The application for a new establishment must be made within 2 electronic. months of setting it up. Registration fees are the following: 1–5 workers: PKR 2; 6–10 workers: PKR 3; 11–20 workers: PKR 5; more than 20 workers: PKR 10. Once the fee has been paid, the Deputy Chief Inspector registers the establishment in the Register Procedure 6*. Register for sales tax by applying for a Sales Tax of Establishments using Form B and issues a registration certificate using Form C. The Number (STN) at the tax facilitation center of the Regional Tax certificate must be prominently displayed at the establishment. Office (RTO) of the Federal Board of Revenue (FBR) Time: 6 days * This procedure can be completed simultaneously with previous procedures. Cost: No cost Comments: According to Sections 14, 15, and 16 of the Sales Tax Act, 1990, and STARTING A BUSINESS Sales Tax Rules, 2006, the company must register for sales tax by submitting an appli- Gujranwala, Punjab cation using Form STR-1 at any tax facilitation counter at the nearest Regional Tax Of- fice (RTO). The local RTO forwards all applications to the Central Registration Office. Standard company legal form: Private Limited Liability Company After verification, the CRO issues a Registration Certificate bearing the registration Paid-in minimum capital requirement: none number and mails the same to the registered company, on prescribed Form STR-5. Data as of: December 2009 Procedure 7*. Register for professional tax with the Excise and Procedure 1. Obtain approval of company name through the Taxation Department of the District Companies Registration Office (CRO) of the Securities and Time: 7 days Exchange Commission of Pakistan (SECP) Cost: No cost Time: 2 days Comments: Following the Devolution Plan, 2001, a professional tax is enforced at Cost: PKR 660 (PKR 500 offline name application fee + PKR 160 transport cost the district level by the Excise and Taxation Department of the relevant provincial between Gujranwala and Lahore) district. According to the Punjab Finance Act, 1977, the tax is levied upon businesses, Comments: According to the Companies Ordinance, 1984, and its amendments in professionals, trades, callings, or companies employing such professionals. The 2002 and update in February 2009, the company proposes one or more names in or- district Excise and Taxation Officer (ET officer) is empowered to enroll in a survey der of preference and submits them for approval via e-Services or in person (offline) register every person engaged in any such business or profession and thereafter, to the Securities and Exchange Commission of Pakistan (SECP). The availability of the give notice to said enrolled person. In the case of a new business, the company is suggested names can first be checked online by searching existing company names. required to ask the ET officer to enroll it by submitting a simple assessment form. The The official confirmation (or denial) of the chosen name and its availability is ET officer issues a demand number (registration number) that acts as the reference received by email or via courier upon payment of the name search fee of PKR 200 number for the registered company and is noted down on every bank challan when (online name reservation) or PKR 500 (offline name reservation) at the bank desig- assessments are paid into the bank. nated by the SECP. A timely disposal of cases within 24 working hours is mandated by Regulation 9 of the CRO Regulation Act, 2003. The approved name is reserved Procedure 8*. Register with the Punjab Employees Social Security for 90 days, by which time the company must be incorporated. The e-Services were Institution (PESSI) successfully launched in August 2008 to improve the efficiency and effectiveness of Time: 7 days the SECP’s business processes. The use of online submissions is growing, but in some cities a majority of entrepreneurs still prefer to apply in person. Cost: No cost Comments: According to the Punjab Industrial Policy, 2003, registration with Procedure 2. Pay the fees for name registration and company the Employees Social Security Institution is governed at the provincial level by an incorporation using bank challans at the designated Muslim independent self-generating institution called the Punjab ESSI. Employers covered Commercial Bank (MCB) under the scheme contribute 6% of the wages they pay to insurable workers. The wage ceiling should not exceed PKR 10,000 per month or PKR 400 per day. Registra- Time: 1 day tion is compulsory. The company must submit a simple form in order to be allotted a Cost: No cost registration number and to receive an employee card. Comments: The company must pay the fees for name search availability and incorporation according to the Sixth Schedule of the Companies Ordinance, 1984. The challans must be deposited with the Muslim Commercial Bank, Ltd. They can be downloaded from the SECP website or obtained at the SECP offices or at the bank. LIST OF PROCE %63&4t STARTING A BUSINESS 57 Procedure 3. Register the company with the Companies Procedure 7*. Register for professional tax with the Excise and Registration Office of the Securities and Exchange Commission of Taxation Department of the District Pakistan (SECP) Time: 5 days Time: 4 days Cost: No cost Cost: PKR 14,160 (offline registration fee PKR 10,000 + filing fee PKR 4,000 + PKR Comments: Following the Devolution Plan, 2001, a professional tax is enforced at 160 transport cost between Gujranwala and Lahore) the district level by the Excise and Taxation Department of the relevant provincial Comments: The company can complete the registration online through e-Services district. According to the Punjab Finance Act, 1977, the tax is levied upon businesses, or in person at the SECP. It must submit the following company incorporation docu- professionals, trades, callings, or companies employing such professionals. The ments online or in person: district Excise and Taxation Officer (ET officer) is empowered to enroll in a survey a. Form 1: declaration of compliance; register every person engaged in any such business or profession and thereafter, give notice to said enrolled person. In the case of a new business, the company is b. Form 21: identification of the office’s location; required to ask the ET officer to enroll it by submitting a simple assessment form. The c. Form 29: particulars of directors, secretary, chief accountant, auditors, and others; ET officer issues a demand number (registration number) that acts as the reference d. Four copies of the memorandum and articles of association with each member’s number for the registered company and is noted down on every bank challan when signature (in the presence of a witness). assessments are paid into the bank. According to the Sixth Schedule of Fees, effective June 2009, the fees for incorpora- tion of a company with authorized capital of up to PKR 600,000 are the following: Procedure 8*. Register with the Punjab Employees Social Security 1. Online submission: registration fee PKR 5,000 and filing fee PKR 2,000; Institution (PESSI) 2. Physical (offline) submission: registration fee PKR 10,000 and filing fee PKR 4,000. Time: 7 days Confirmation of either the online or in-person submission is received instantly and Cost: No cost the actual certificate a few days later via email and courier. The company can register Comments: According to the Punjab Industrial Policy, 2003, registration with with any Company Registration Office, irrespective of the jurisdiction. All regional the Employees Social Security Institution is governed at the provincial level by an SECP offices are computerized. independent self-generating institution called the Punjab ESSI. Employers covered under the scheme contribute 6% of the wages they pay to insurable workers. The Procedure 4. Make a company seal wage ceiling should not exceed PKR 10,000 per month or PKR 400 per day. Registra- Time: 2 days tion is compulsory. The company must submit a simple form in order to be allotted a registration number and to receive an employee card. Cost: PKR 1,000 (private sector fee) Comments: The company seal is prepared after the certificate of incorporation is Procedure 9*. Register with the Employees Old Age Benefits obtained. It is affixed on significant documents according to the provisions of the Institution (EOBI) articles of association. For example, the company seal has to be affixed to the resolu- tions passed by directors in their board meetings. Entrepreneurs can get the seal Time: 11 days made by private companies in a shop or in the market. Cost: No cost Comments: According to the amendment to EOBI Act, 1976, effective July 2008, Procedure 5. Register for income tax by applying for a National every industry or commercial establishment with 5 or more employees must be Tax Number (NTN) at the tax facilitation center of the Regional registered with the federal EOBI. Under the EOBI, insured employees are entitled to a Tax Office (RTO) of the Federal Board of Revenue (FBR) pension (upon retirement), disability (if permanently disabled), old-age grant (upon retirement if they do not have the minimum threshold for a pension), and survivor’s Time: 5 days pension. A contribution equal to 5% of minimum wages is paid by the employer and Cost: No cost 1% by the employee. Comments: According to the Income Tax Ordinance, 2001, every company must For initial registration, the company must submit a simple form that is uploaded register for income tax and obtain the National Tax Number (NTN) that is generally into the database. The allotment requests are sent to a center in Karachi that issues required by other registering authorities such as Chambers of Commerce, the the registration numbers along with certificates and cards and sends them to the Import-Export Regulatory Authority, utility authorities, etc. Since 2002, after the company. Computerization of records is underway. introduction of the Income Tax Ordinance, 2001, an NTN is issued with a continuous valid term (without the need to renew the number). Procedure 10*. Register under the West Pakistan Shops and To apply, the company must submit a simple one-page form (the NTN Form) as well Establishment Ordinance 1969 with the Labor Department of the as proof of registration, the memorandum and articles of association, bank account District number, copies of the national identity cards of its directors, and an attestation of the registered business address at the nearest tax facilitation counter of the Regional Time: 7 days Tax Office in Pakistan. Cost: PKR 10 (registration fee) All applications are forwarded to the Central Registration Office (CRO) in Islamabad, Comments: Pakistan Shops and Establishment Ordinance, 1969, requires every which allots a uniform NTN to each company. The center processes the application establishment other than a one-man shop to be registered with the Deputy Chief and issues the NTN at no cost. The certificate is sent to the registered address of the Inspector of the Labor Department in each district. This is to safeguard the labor applicant. The company can track the application online or through the RTO helpline. standards of the workers. If undelivered, the NTN certification can be collected from the specified office at the To register, the employer must submit an application using Form A, accompanied Central Board of Revenue. The income tax is paid on filing the return, which is due by a bank challan. The application for a new establishment must be made within 2 within 6 months of the end of the company’s financial year (usually on June 30). months of setting it up. Registration fees are the following: 1–5 workers: PKR 2; 6–10 Reform has been introduced to make the tax registration fully electronic. workers: PKR 3; 11–20 workers: PKR 5; more than 20 workers: PKR 10. Once the fee has been paid, the Deputy Chief Inspector registers the establishment in the Register Procedure 6*. Register for sales tax by applying for a Sales Tax of Establishments using Form B and issues a registration certificate using Form C. The Number (STN) at the tax facilitation center of the Regional Tax certificate must be prominently displayed at the establishment. Office (RTO) of the Federal Board of Revenue (FBR) Time: 8 days * This procedure can be completed simultaneously with previous procedures. Cost: No cost Comments: According to Sections 14, 15, and 16 of the Sales Tax Act, 1990, and Sales Tax Rules, 2006, the company must register for sales tax by submitting an appli- cation using Form STR-1 at any tax facilitation counter at the nearest Regional Tax Of- fice (RTO). The local RTO forwards all applications to the Central Registration Office. After verification, the CRO issues a Registration Certificate bearing the registration number and mails the same to the registered company, on prescribed Form STR-5. 58 DOING BUSINESS IN PAKISTAN 2010 STARTING A BUSINESS Procedure 5. Register for income tax by applying for a National Hyderabad, Sindh Tax Number (NTN) at the tax facilitation center of the Regional Standard company legal form: Private Limited Liability Company Tax Office (RTO) of the Federal Board of Revenue (FBR) Paid-in minimum capital requirement: none Time: 5 days Data as of: December 2009 Cost: No cost Procedure 1. Obtain approval of company name through the Comments: According to the Income Tax Ordinance, 2001, every company must register for income tax and obtain the National Tax Number (NTN) that is generally Companies Registration Office (CRO) of the Securities and required by other registering authorities such as Chambers of Commerce, the Exchange Commission of Pakistan (SECP) Import-Export Regulatory Authority, utility authorities, etc. Since 2002, after the Time: 2 days introduction of the Income Tax Ordinance, 2001, an NTN is issued with a continuous Cost: PKR 1,100 (PKR 500 offline application fee + PKR 600 transport cost between valid term (without the need to renew the number). Hyderabad and Karachi) To apply, the company must submit a simple one-page form (the NTN Form) as well Comments: According to the Companies Ordinance, 1984, and its amendments in as proof of registration, the memorandum and articles of association, bank account 2002 and update in February 2009, the company proposes one or more names in or- number, copies of the national identity cards of its directors, and an attestation of der of preference and submits them for approval via e-Services or in person (offline) the registered business address at the nearest tax facilitation counter of the Regional to the Securities and Exchange Commission of Pakistan (SECP). The availability of the Tax Office in Pakistan. suggested names can first be checked online by searching existing company names. All applications are forwarded to the Central Registration Office (CRO) in Islamabad, The official confirmation (or denial) of the chosen name and its availability is which allots a uniform NTN to each company. The center processes the application received by email or via courier upon payment of the name search fee of PKR 200 and issues the NTN at no cost. The certificate is sent to the registered address of the (online name reservation) or PKR 500 (offline name reservation) at the bank desig- applicant. The company can track the application online or through the RTO helpline. nated by the SECP. A timely disposal of cases within 24 working hours is mandated If undelivered, the NTN certification can be collected from the specified office at the by Regulation 9 of the CRO Regulation Act, 2003. The approved name is reserved Central Board of Revenue. The income tax is paid on filing the return, which is due for 90 days, by which time the company must be incorporated. The e-Services were within 6 months of the end of the company’s financial year (usually on June 30). successfully launched in August 2008 to improve the efficiency and effectiveness of Reform has been introduced to make the tax registration fully electronic. the SECP’s business processes. The use of online submissions is growing, but in some cities a majority of entrepreneurs still prefer to apply in person. Procedure 6*. Register for sales tax by applying for a Sales Tax Number (STN) at the tax facilitation center of the Regional Tax Procedure 2. Pay the fees for name registration and company Office (RTO) of the Federal Board of Revenue (FBR) incorporation using bank challans at the designated Muslim Time: 6 days Commercial Bank (MCB) Cost: No cost Time: 1 day Comments: According to Sections 14, 15, and 16 of the Sales Tax Act, 1990, and Cost: No cost Sales Tax Rules, 2006, the company must register for sales tax by submitting an appli- Comments: The company must pay the fees for name search availability and cation using Form STR-1 at any tax facilitation counter at the nearest Regional Tax Of- incorporation according to the Sixth Schedule of the Companies Ordinance, 1984. fice (RTO). The local RTO forwards all applications to the Central Registration Office. The challans must be deposited with the Muslim Commercial Bank, Ltd. They can be After verification, the CRO issues a Registration Certificate bearing the registration downloaded from the SECP website or obtained at the SECP offices or at the bank. number and mails the same to the registered company, on prescribed Form STR-5. Procedure 3. Register the company with the Companies Procedure 7*. Register for professional tax with the Excise and Registration Office of the Securities and Exchange Commission of Taxation Department of the District Pakistan (SECP) Time: 5 days Time: 4 days Cost: No cost Cost: PKR 14,600 (PKR 14,000 offline registration fee + PKR 600 transport cost Comments: Following the Devolution Plan, 2001, a professional tax is enforced at between Hyderabad and Karachi) the district level by the Excise and Taxation Department of the relevant provincial Comments: The company can complete the registration online through e-Services district. According to the Sindh Professions, Trade, Callings and Employment Tax or in person at the SECP. It must submit the following company incorporation docu- Rules, 1976, the tax is levied upon businesses, professionals, trades, callings, or ments on line or in person: companies employing such professionals. The district Excise and Taxation Officer (ET officer) is empowered to enroll in a survey register every person engaged in any a. Form 1: declaration of compliance; such business or profession and thereafter, give notice to said enrolled person. In the b. Form 21: identification of the office’s location; case of a new business, the company is required to ask the ET officer to enroll it by c. Form 29: particulars of directors, secretary, chief accountant, auditors, and others; submitting a simple assessment form. The ET officer issues a demand number (regis- d. Four copies of the memorandum and articles of association with each member’s tration number) that acts as the reference number for the registered company and is signature (in the presence of a witness). noted down on every bank challan when assessments are paid into the bank. According to the Sixth Schedule of Fees, effective June 2009, the fees for incorpora- tion of a company with authorized capital of up to PKR 600,000 are the following: Procedure 8*. Register with the Sindh Employees Social Security Institution (SESSI) 1. Online submission: registration fee PKR 5,000 and filing fee PKR 2,000; Time: 11 days 2. Physical (offline) submission: registration fee PKR 10,000 and filing fee PKR 4,000. Cost: No cost Confirmation of either the online or in-person submission is received instantly and the actual certificate a few days later via email and courier. The company can register Comments: According to the Provincial Employees Social Security Ordinance, with any Company Registration Office, irrespective of the jurisdiction. All regional 1965, registration with the Employees Social Security Institution is governed at SECP offices are computerized. the provincial level by an independent self-generating institution called the Sindh ESSI. Employers covered under the scheme contribute 6% of the wages they pay to Procedure 4. Make a company seal insurable workers. The wage ceiling should not exceed PKR 10,000 per month or PKR 400 per day. Registration is compulsory. The company must submit a simple form in Time: 2 days order to be allotted a registration number and to receive an employee card. Cost: PKR 1,000 (private sector fee) Comments: The company seal is prepared after the certificate of incorporation is obtained. It is affixed on significant documents according to the provisions of the articles of association. For example, the company seal has to be affixed to the resolu- tions passed by directors in their board meetings. Entrepreneurs can get the seal made by private companies in a shop or in the market. LIST OF PROCE %63&4t STARTING A BUSINESS 59 Procedure 9*. Register with the Employees Old Age Benefits Procedure 3. Register the company for incorporation with the Institution (EOBI) Securities and Exchange Commission of Pakistan (SECP) through Time: 7 days online e-Services Cost: No cost Time: 2 days Comments: According to the amendment to EOBI Act, 1976, effective July 2008, Cost: PKR 7,000 (online registration fee PKR 5,000 + filing fee PKR 2,000) every industry or commercial establishment with 5 or more employees must be Comments: The company can complete the registration online through e-Services registered with the federal EOBI. Under the EOBI, insured employees are entitled to a or in person at the SECP. It must submit the following company incorporation docu- pension (upon retirement), disability (if permanently disabled), old-age grant (upon ments online or in person: retirement if they do not have the minimum threshold for a pension), and survivor’s a. Form 1: declaration of compliance; pension. A contribution equal to 5% of minimum wages is paid by the employer and 1% by the employee. b. Form 21: identification of the office’s location; For initial registration, the company must submit a simple form that is uploaded c. Form 29: particulars of directors, secretary, chief accountant, auditors, and others; into the database. The allotment requests are sent to a center in Karachi that issues d. Four copies of the memorandum and articles of association with each member’s the registration numbers along with certificates and cards and sends them to the signature (in the presence of a witness). company. Computerization of records is underway. According to the Sixth Schedule of Fees, effective June 2009, the fees for incorpora- tion of a company with authorized capital of up to PKR 600,000 are the following: Procedure 10*. Register under the West Pakistan Shops and 1. Online submission: registration fee PKR 5,000 and filing fee PKR 2,000; Establishment Ordinance 1969 with the Labor Department of the 2. Physical (offline) submission: registration fee PKR 10,000 and filing fee PKR 4,000. District Confirmation of either the online or in-person submission is received instantly and Time: 5 days the actual certificate a few days later via email and courier. The company can register Cost: PKR 10 (registration fee) with any Company Registration Office, irrespective of the jurisdiction. All regional Comments: Pakistan Shops and Establishment Ordinance, 1969, requires every SECP offices are computerized. establishment other than a one-man shop to be registered with the Deputy Chief Inspector of the Labor Department in each district. This is to safeguard the labor Procedure 4. Obtain digital signatures from the National standards of the workers. Institutional Facilitation Technologies (NIFT) through the SECP To register, the employer must submit an application using Form A, accompanied e-Services by a bank challan. The application for a new establishment must be made within 2 Time: 2 days months of setting it up. Registration fees are the following: 1–5 workers: PKR 2; 6–10 Cost: PKR 1,277 (certificate charges PKR 650 + federal excise duty PKR 126.75 (at workers: PKR 3; 11–20 workers: PKR 5; more than 20 workers: PKR 10. Once the fee 19.5%) + validation charges PKR 500) has been paid, the Deputy Chief Inspector registers the establishment in the Register Comments: The digital signature is obtained from National Institutional Facilitation of Establishments using Form B and issues a registration certificate using Form C. The Technologies (NIFT) through e-Services or at SECP offices. NIFT serves as the witness certificate must be prominently displayed at the establishment. of all digitally signed documentation. To apply, the company must submit the Digital Signature Certificate Request Form along with scanned copies of the directors’ * This procedure can be completed simultaneously with previous procedures. identity cards, Name Availability Certificate, and proof of payment. STARTING A BUSINESS Procedure 5. Register for income tax by applying for a National Islamabad, ICT Tax Number (NTN) at the tax facilitation center of the Regional Standard company legal form: Private Limited Liability Company Tax Office (RTO) of the Federal Board of Revenue (FBR) Paid-in minimum capital requirement: none Time: 3 days Data as of: December 2009 Cost: No cost Comments: According to the Income Tax Ordinance, 2001, every company must Procedure 1. Obtain approval of company name through the register for income tax and obtain the National Tax Number (NTN) that is generally Securities and Exchange Commission of Pakistan (SECP)'s required by other registering authorities such as Chambers of Commerce, the e-Service website Import-Export Regulatory Authority, utility authorities, etc. Since 2002, after the Time: 1 day introduction of the Income Tax Ordinance, 2001, an NTN is issued with a continuous valid term (without the need to renew the number). Cost: PKR 200 (e-Services online name reservation fee) To apply, the company must submit a simple one-page form (the NTN Form) as well Comments: According to the Companies Ordinance, 1984, and its amendments in as proof of registration, the memorandum and articles of association, bank account 2002 and update in February 2009, the company proposes one or more names in or- number, copies of the national identity cards of its directors, and an attestation of der of preference and submits them for approval via e-Services or in person (offline) the registered business address at the nearest tax facilitation counter of the Regional to the Securities and Exchange Commission of Pakistan (SECP). The availability of the Tax Office in Pakistan. suggested names can first be checked online by searching existing company names. All applications are forwarded to the Central Registration Office (CRO) in Islamabad, The official confirmation (or denial) of the chosen name and its availability is which allots a uniform NTN to each company. The center processes the application received by email or via courier upon payment of the name search fee of PKR 200 and issues the NTN at no cost. The certificate is sent to the registered address of the (online name reservation) or PKR 500 (offline name reservation) at the bank desig- applicant. The company can track the application online or through the RTO helpline. nated by the SECP. A timely disposal of cases within 24 working hours is mandated If undelivered, the NTN certification can be collected from the specified office at the by Regulation 9 of the CRO Regulation Act, 2003. The approved name is reserved Central Board of Revenue. The income tax is paid on filing the return, which is due for 90 days, by which time the company must be incorporated. The e-Services were within 6 months of the end of the company’s financial year (usually on June 30). successfully launched in August 2008 to improve the efficiency and effectiveness of Reform has been introduced to make the tax registration fully electronic. the SECP’s business processes. The use of online submissions is growing, but in some cities a majority of entrepreneurs still prefer to apply in person. Procedure 6*. Register for sales tax by applying for a Sales Tax Procedure 2. Pay the fees for name registration and company Number (STN) at the tax facilitation center of the Regional Tax incorporation using bank challans at the designated Muslim Office (RTO) of the Federal Board of Revenue (FBR) Commercial Bank (MCB) Time: 4 days Time: 1 day Cost: No cost Cost: No cost Comments: According to Sections 14, 15, and 16 of the Sales Tax Act, 1990, and Sales Tax Rules, 2006, the company must register for sales tax by submitting an appli- Comments: The company must pay the fees for name search availability and cation using Form STR-1 at any tax facilitation counter at the nearest Regional Tax Of- incorporation according to the Sixth Schedule of the Companies Ordinance, 1984. fice (RTO). The local RTO forwards all applications to the Central Registration Office. The challans must be deposited with the Muslim Commercial Bank, Ltd. They can be After verification, the CRO issues a Registration Certificate bearing the registration downloaded from the SECP website or obtained at the SECP offices or at the bank. number and mails the same to the registered company, on prescribed Form STR-5. 60 DOING BUSINESS IN PAKISTAN 2010 STARTING A BUSINESS Procedure 7*. Register for professional tax with the Excise and Taxation Department of the District Karachi, Sindh Time: 5 days Standard company legal form: Private Limited Liability Company Cost: No cost Paid-in minimum capital requirement: none Comments: Following the Devolution Plan, 2001, a professional tax is enforced at Data as of: December 2009 the district level by the Excise and Taxation Department. This tax is levied upon busi- nesses, professionals, trades, callings, or companies employing such professionals. Procedure 1. Obtain approval of company name through the The district Excise and Taxation Officer (ET officer) is empowered to enroll in a survey Securities and Exchange Commission of Pakistan (SECP)'s register every person engaged in any such business or profession and thereafter, e-Service website give notice to said enrolled person. In the case of a new business, the company is Time: 1 day required to ask the ET officer to enroll it by submitting a simple assessment form. The Cost: PKR 200 (e-Services online name reservation fee) ET officer issues a demand number (registration number) that acts as the reference Comments: According to the Companies Ordinance, 1984, and its amendments in number for the registered company and is noted down on every bank challan when 2002 and update in February 2009, the company proposes one or more names in or- assessments are paid into the bank. der of preference and submits them for approval via e-Services or in person (offline) to the Securities and Exchange Commission of Pakistan (SECP). The availability of the Procedure 8*. Register with the Employees Social Security suggested names can first be checked online by searching existing company names. Institution (ESSI) The official confirmation (or denial) of the chosen name and its availability is Time: 5 days received by email or via courier upon payment of the name search fee of PKR 200 Cost: No cost (online name reservation) or PKR 500 (offline name reservation) at the bank desig- Comments: Islamabad is a Federal area where this procedure has become nated by the SECP. A timely disposal of cases within 24 working hours is mandated enforceable in the city through an independent Directorate and is governed by the by Regulation 9 of the CRO Regulation Act, 2003. The approved name is reserved Islamabad Capital Territory ESSI. Employers covered under the scheme contribute 6% for 90 days, by which time the company must be incorporated. The e-Services were of the wages they pay to insurable workers. The wage ceiling should not exceed PKR successfully launched in August 2008 to improve the efficiency and effectiveness of 10,000 per month or PKR 400 per day. Registration is compulsory. The company must the SECP’s business processes. The use of online submissions is growing, but in some submit a simple form in order to be allotted a registration number and to receive an cities a majority of entrepreneurs still prefer to apply in person. employee card. Procedure 2. Pay the fees for name registration and company Procedure 9*. Register with the Employees Old Age Benefits incorporation using bank challans at the designated Muslim Institution (EOBI) Commercial Bank (MCB) Time: 5 days Time: 1 day Cost: No cost Cost: No cost Comments: According to the amendment to EOBI Act, 1976, effective July 2008, Comments: The company must pay the fees for name search availability and every industry or commercial establishment with 5 or more employees must be incorporation according to the Sixth Schedule of the Companies Ordinance, 1984. registered with the federal EOBI. Under the EOBI, insured employees are entitled to a The challans must be deposited with the Muslim Commercial Bank, Ltd. They can be pension (upon retirement), disability (if permanently disabled), old-age grant (upon downloaded from the SECP website or obtained at the SECP offices or at the bank. retirement if they do not have the minimum threshold for a pension), and survivor’s pension. A contribution equal to 5% of minimum wages is paid by the employer and Procedure 3. Register the company for incorporation with the 1% by the employee. Securities and Exchange Commission of Pakistan (SECP) through For initial registration, the company must submit a simple form that is uploaded online e-Services into the database. The allotment requests are sent to a center in Karachi that issues Time: 2 days the registration numbers along with certificates and cards and sends them to the Cost: PKR 7,000 (online registration fee PKR 5,000 + filing fee PKR 2,000) company. Computerization of records is underway. Comments: The company can complete the registration online through e-Services Procedure 10*. Register under the West Pakistan Shops and or in person at the SECP. It must submit the following company incorporation docu- Establishment Ordinance 1969 with the Labor Department of the ments online or in person: District a. Form 1: declaration of compliance; Time: 5 days b. Form 21: identification of the office’s location; Cost: PKR 10 (registration fee) c. Form 29: particulars of directors, secretary, chief accountant, auditors, and others; Comments: Pakistan Shops and Establishment Ordinance, 1969, requires every d. Four copies of the memorandum and articles of association with each member’s establishment other than a one-man shop to be registered with the Deputy Chief signature (in the presence of a witness). Inspector of the Labor Department in each district. This is to safeguard the labor According to the Sixth Schedule of Fees, effective June 2009, the fees for incorpora- standards of the workers. tion of a company with authorized capital of up to PKR 600,000 are the following: To register, the employer must submit an application using Form A, accompanied 1. Online submission: registration fee PKR 5,000 and filing fee PKR 2,000; by a bank challan. The application for a new establishment must be made within 2 2. Physical (offline) submission: registration fee PKR 10,000 and filing fee PKR 4,000. months of setting it up. Registration fees are the following: 1–5 workers: PKR 2; 6–10 Confirmation of either the online or in-person submission is received instantly and workers: PKR 3; 11–20 workers: PKR 5; more than 20 workers: PKR 10. Once the fee the actual certificate a few days later via email and courier. The company can register has been paid, the Deputy Chief Inspector registers the establishment in the Register with any Company Registration Office, irrespective of the jurisdiction. All regional of Establishments using Form B and issues a registration certificate using Form C. The SECP offices are computerized. certificate must be prominently displayed at the establishment. Procedure 4. Obtain digital signatures from the National * This procedure can be completed simultaneously with previous procedures. Institutional Facilitation Technologies (NIFT) through the SECP e-Services Time: 2 days Cost: PKR 1,277 (certificate charges PKR 650 + federal excise duty PKR 126.75 (at 19.5%) + validation charges PKR 500) Comments: The digital signature is obtained from National Institutional Facilitation Technologies (NIFT) through e-Services or at SECP offices. NIFT serves as the witness of all digitally signed documentation. To apply, the company must submit the Digital Signature Certificate Request Form along with scanned copies of the directors’ identity cards, Name Availability Certificate, and proof of payment. LIST OF PROCE %63&4t STARTING A BUSINESS 61 Procedure 5. Register for income tax by applying for a National Procedure 9*. Register with the Employees Old Age Benefits Tax Number (NTN) at the tax facilitation center of the Regional Institution (EOBI) Tax Office (RTO) of the Federal Board of Revenue (FBR) Time: 11 days Time: 2 days Cost: No cost Cost: No cost Comments: According to the amendment to EOBI Act, 1976, effective July 2008, Comments: According to the Income Tax Ordinance, 2001, every company must every industry or commercial establishment with 5 or more employees must be register for income tax and obtain the National Tax Number (NTN) that is generally registered with the federal EOBI. Under the EOBI, insured employees are entitled to a required by other registering authorities such as Chambers of Commerce, the pension (upon retirement), disability (if permanently disabled), old-age grant (upon Import-Export Regulatory Authority, utility authorities, etc. Since 2002, after the retirement if they do not have the minimum threshold for a pension), and survivor’s introduction of the Income Tax Ordinance, 2001, an NTN is issued with a continuous pension. A contribution equal to 5% of minimum wages is paid by the employer and valid term (without the need to renew the number). 1% by the employee. To apply, the company must submit a simple one-page form (the NTN Form) as well For initial registration, the company must submit a simple form that is uploaded as proof of registration, the memorandum and articles of association, bank account into the database. The allotment requests are sent to a center in Karachi that issues number, copies of the national identity cards of its directors, and an attestation of the registration numbers along with certificates and cards and sends them to the the registered business address at the nearest tax facilitation counter of the Regional company. Computerization of records is underway. Tax Office in Pakistan. All applications are forwarded to the Central Registration Office (CRO) in Islamabad, Procedure 10*. Register under the West Pakistan Shops and which allots a uniform NTN to each company. The center processes the application Establishment Ordinance 1969 with the Labor Department of the and issues the NTN at no cost. The certificate is sent to the registered address of the District applicant. The company can track the application online or through the RTO helpline. Time: 7 days If undelivered, the NTN certification can be collected from the specified office at the Cost: PKR 10 (registration fee) Central Board of Revenue. The income tax is paid on filing the return, which is due within 6 months of the end of the company’s financial year (usually on June 30). Comments: Pakistan Shops and Establishment Ordinance, 1969, requires every Reform has been introduced to make the tax registration fully electronic. establishment other than a one-man shop to be registered with the Deputy Chief Inspector of the Labor Department in each district. This is to safeguard the labor Procedure 6*. Register for sales tax by applying for a Sales Tax standards of the workers. Number (STN) at the tax facilitation center of the Regional Tax To register, the employer must submit an application using Form A, accompanied Office (RTO) of the Federal Board of Revenue (FBR) by a bank challan. The application for a new establishment must be made within 2 months of setting it up. Registration fees are the following: 1–5 workers: PKR 2; 6–10 Time: 1 day workers: PKR 3; 11–20 workers: PKR 5; more than 20 workers: PKR 10. Once the fee Cost: No cost has been paid, the Deputy Chief Inspector registers the establishment in the Register Comments: According to Sections 14, 15, and 16 of the Sales Tax Act, 1990, and of Establishments using Form B and issues a registration certificate using Form C. The Sales Tax Rules, 2006, the company must register for sales tax by submitting an appli- certificate must be prominently displayed at the establishment. cation using Form STR-1 at any tax facilitation counter at the nearest Regional Tax Of- fice (RTO). The local RTO forwards all applications to the Central Registration Office. * This procedure can be completed simultaneously with previous procedures. After verification, the CRO issues a Registration Certificate bearing the registration number and mails the same to the registered company, on prescribed Form STR-5. STARTING A BUSINESS Procedure 7*. Register for Professional Tax with the Excise and Lahore, Punjab Taxation Department of the District Standard company legal form: Private Limited Liability Company Time: 7 days Paid-in minimum capital requirement: none Cost: No cost Data as of: December 2009 Comments: Following the Devolution Plan, 2001, a professional tax is enforced at Procedure 1. Obtain approval of company name through the the district level by the Excise and Taxation Department of the relevant provincial Securities and Exchange Commission of Pakistan (SECP)'s district. This tax is levied upon businesses, professionals, trades, callings, or compa- e-Service website nies employing such professionals. The district Excise and Taxation Officer (ET officer) is empowered to enroll in a survey register every person engaged in any such busi- Time: 1 day ness or profession and thereafter, give notice to said enrolled person. In the case of a Cost: PKR 200 (e-Services online name reservation fee) new business, the company is required to ask the ET officer to enroll it by submitting Comments: According to the Companies Ordinance, 1984, and its amendments in a simple assessment form. The ET officer issues a demand number (registration 2002 and update in February 2009, the company proposes one or more names in or- number) that acts as the reference number for the registered company and is noted der of preference and submits them for approval via e-Services or in person (offline) down on every bank challan when assessments are paid into the bank. to the Securities and Exchange Commission of Pakistan (SECP). The availability of the suggested names can first be checked online by searching existing company names. Procedure 8*. Register with the Sindh Employees Social Security The official confirmation (or denial) of the chosen name and its availability is Institution (SESSI) received by email or via courier upon payment of the name search fee of PKR 200 Time: 11 days (online name reservation) or PKR 500 (offline name reservation) at the bank desig- Cost: No cost nated by the SECP. A timely disposal of cases within 24 working hours is mandated by Regulation 9 of the CRO Regulation Act, 2003. The approved name is reserved Comments: According to the Provincial Employees Social Security Ordinance, for 90 days, by which time the company must be incorporated. The e-Services were 1965, registration with the Employees Social Security Institution is governed at successfully launched in August 2008 to improve the efficiency and effectiveness of the provincial level by an independent self-generating institution called the Sindh the SECP’s business processes. The use of online submissions is growing, but in some ESSI. Employers covered under the scheme contribute 6% of the wages they pay to cities a majority of entrepreneurs still prefer to apply in person. insurable workers. The wage ceiling should not exceed PKR 10,000 per month or PKR 400 per day. Registration is compulsory. The company must submit a simple form in order to be allotted a registration number and to receive an employee card. Procedure 2. Pay the fees for name registration and company incorporation using bank challans at the designated Muslim Commercial Bank (MCB) Time: 1 day Cost: No cost Comments: The company must pay the fees for name search availability and incorporation according to the Sixth Schedule of the Companies Ordinance, 1984. The challans must be deposited with the Muslim Commercial Bank, Ltd. They can be downloaded from the SECP website or obtained at the SECP offices or at the bank. 62 DOING BUSINESS IN PAKISTAN 2010 Procedure 3. Register the company for incorporation with the Procedure 7*. Register for Professional Tax with the Excise and Securities and Exchange Commission of Pakistan (SECP) through Taxation Department of the District online e-Services Time: 7 days Time: 2 days Cost: No cost Cost: PKR 7,000 (online registration fee PKR 5,000 + filing fee PKR 2,000) Comments: Following the Devolution Plan, 2001, a professional tax is enforced at Comments: The company can complete the registration online through e-Services the district level by the Excise and Taxation Department of the relevant provincial or in person at the SECP. It must submit the following company incorporation docu- district. According to the Punjab Finance Act, 1977, the tax is levied upon businesses, ments on line or in person: professionals, trades, callings, or companies employing such professionals. The a. Form 1: declaration of compliance; district Excise and Taxation Officer (ET officer) is empowered to enroll in a survey register every person engaged in any such business or profession and thereafter, b. Form 21: identification of the office’s location; give notice to said enrolled person. In the case of a new business, the company is c. Form 29: particulars of directors, secretary, chief accountant, auditors, and others; required to ask the ET officer to enroll it by submitting a simple assessment form. The d. Four copies of the memorandum and articles of association with each member’s ET officer issues a demand number (registration number) that acts as the reference signature (in the presence of a witness). number for the registered company and is noted down on every bank challan when According to the Sixth Schedule of Fees, effective June 2009, the fees for incorpora- assessments are paid into the bank. tion of a company with authorized capital of up to PKR 600,000 are the following: 1. Online submission: registration fee PKR 5,000 and filing fee PKR 2,000; Procedure 8*. Register with the Punjab Employees Social Security Institution (PESSI) 2. Physical (offline) submission: registration fee PKR 10,000 and filing fee PKR 4,000. Time: 7 days Confirmation of either the online or in-person submission is received instantly and the actual certificate a few days later via email and courier. The company can register Cost: No cost with any Company Registration Office, irrespective of the jurisdiction. All regional Comments: According to the Punjab Industrial Policy, 2003, registration with SECP offices are computerized. the Employees Social Security Institution is governed at the provincial level by an independent self-generating institution called the Punjab ESSI. Employers covered Procedure 4. Obtain digital signatures from the National under the scheme contribute 6% of the wages they pay to insurable workers. The Institutional Facilitation Technologies (NIFT) through the SECP wage ceiling should not exceed PKR 10,000 per month or PKR 400 per day. Registra- e-Services tion is compulsory. The company must submit a simple form in order to be allotted a registration number and to receive an employee card. Time: 2 days Cost: PKR 1,277 (certificate charges PKR 650 + federal excise duty PKR 126.75 (at Procedure 9*. Register with the Employees Old Age Benefits 19.5%) + validation charges PKR 500) Institution (EOBI) Comments: The digital signature is obtained from National Institutional Facilitation Time: 11 days Technologies (NIFT) through e-Services or at SECP offices. NIFT serves as the witness of all digitally signed documentation. To apply, the company must submit the Digital Cost: No cost Signature Certificate Request Form along with scanned copies of the directors’ Comments: According to the amendment to EOBI Act, 1976, effective July 2008, identity cards, Name Availability Certificate, and proof of payment. every industry or commercial establishment with 5 or more employees must be registered with the federal EOBI. Under the EOBI, insured employees are entitled to a Procedure 5. Register for income tax by applying for a National pension (upon retirement), disability (if permanently disabled), old-age grant (upon Tax Number (NTN) at the tax facilitation center of the Regional retirement if they do not have the minimum threshold for a pension), and survivor’s pension. A contribution equal to 5% of minimum wages is paid by the employer and Tax Office (RTO) of the Federal Board of Revenue (FBR) 1% by the employee. Time: 2 days For initial registration, the company must submit a simple form that is uploaded Cost: No cost into the database. The allotment requests are sent to a center in Karachi that issues Comments: According to the Income Tax Ordinance, 2001, every company must the registration numbers along with certificates and cards and sends them to the register for income tax and obtain the National Tax Number (NTN) that is generally company. Computerization of records is underway. required by other registering authorities such as Chambers of Commerce, the Import-Export Regulatory Authority, utility authorities, etc. Since 2002, after the Procedure 10*. Register under the West Pakistan Shops and introduction of the Income Tax Ordinance, 2001, an NTN is issued with a continuous Establishment Ordinance 1969 with the Labor Department of the valid term (without the need to renew the number). District To apply, the company must submit a simple one-page form (the NTN Form) as well Time: 7 days as proof of registration, the memorandum and articles of association, bank account number, copies of the national identity cards of its directors, and an attestation of Cost: PKR 10 (registration fee) the registered business address at the nearest tax facilitation counter of the Regional Comments: Pakistan Shops and Establishment Ordinance, 1969, requires every Tax Office in Pakistan. establishment other than a one-man shop to be registered with the Deputy Chief All applications are forwarded to the Central Registration Office (CRO) in Islamabad, Inspector of the Labor Department in each district. This is to safeguard the labor which allots a uniform NTN to each company. The center processes the application standards of the workers. and issues the NTN at no cost. The certificate is sent to the registered address of the To register, the employer must submit an application using Form A, accompanied applicant. The company can track the application online or through the RTO helpline. by a bank challan. The application for a new establishment must be made within 2 If undelivered, the NTN certification can be collected from the specified office at the months of setting it up. Registration fees are the following: 1–5 workers: PKR 2; 6–10 Central Board of Revenue. The income tax is paid on filing the return, which is due workers: PKR 3; 11–20 workers: PKR 5; more than 20 workers: PKR 10. Once the fee within 6 months of the end of the company’s financial year (usually on June 30). has been paid, the Deputy Chief Inspector registers the establishment in the Register Reform has been introduced to make the tax registration fully electronic. of Establishments using Form B and issues a registration certificate using Form C. The certificate must be prominently displayed at the establishment. Procedure 6*. Register for sales tax by applying for a Sales Tax Number (STN) at the tax facilitation center of the Regional Tax * This procedure can be completed simultaneously with previous procedures Office (RTO) of the Federal Board of Revenue (FBR) Time: 6 days Cost: No cost Comments: According to Sections 14, 15, and 16 of the Sales Tax Act, 1990, and Sales Tax Rules, 2006, the company must register for sales tax by submitting an appli- cation using Form STR-1 at any tax facilitation counter at the nearest Regional Tax Of- fice (RTO). The local RTO forwards all applications to the Central Registration Office. After verification, the CRO issues a Registration Certificate bearing the registration number and mails the same to the registered company, on prescribed Form STR-5. LIST OF PROCE %63&4t STARTING A BUSINESS 63 STARTING A BUSINESS Procedure 5. Register for income tax by applying for a National Multan, Punjab Tax Number (NTN) at the tax facilitation center of the Regional Standard company legal form: Private Limited Liability Company Tax Office (RTO) of the Federal Board of Revenue (FBR) Paid-in minimum capital requirement: none Time: 3 days Data as of: December 2009 Cost: No cost Procedure 1. Obtain approval of company name through the Comments: According to the Income Tax Ordinance, 2001, every company must register for income tax and obtain the National Tax Number (NTN) that is generally Companies Registration Office (CRO) of the Securities and required by other registering authorities such as Chambers of Commerce, the Exchange Commission of Pakistan (SECP) Import-Export Regulatory Authority, utility authorities, etc. Since 2002, after the Time: 2 days introduction of the Income Tax Ordinance, 2001, an NTN is issued with a continuous Cost: PKR 500 (name reservation in person fee) valid term (without the need to renew the number). Comments: According to the Companies Ordinance, 1984, and its amendments in To apply, the company must submit a simple one-page form (the NTN Form) as well 2002 and update in February 2009, the company proposes one or more names in or- as proof of registration, the memorandum and articles of association, bank account der of preference and submits them for approval via e-Services or in person (offline) number, copies of the national identity cards of its directors, and an attestation of to the Securities and Exchange Commission of Pakistan (SECP). The availability of the the registered business address at the nearest tax facilitation counter of the Regional suggested names can first be checked online by searching existing company names. Tax Office in Pakistan. The official confirmation (or denial) of the chosen name and its availability is All applications are forwarded to the Central Registration Office (CRO) in Islamabad, received by email or via courier upon payment of the name search fee of PKR 200 which allots a uniform NTN to each company. The center processes the application (online name reservation) or PKR 500 (offline name reservation) at the bank desig- and issues the NTN at no cost. The certificate is sent to the registered address of the nated by the SECP. A timely disposal of cases within 24 working hours is mandated applicant. The company can track the application online or through the RTO helpline. by Regulation 9 of the CRO Regulation Act, 2003. The approved name is reserved If undelivered, the NTN certification can be collected from the specified office at the for 90 days, by which time the company must be incorporated. The e-Services were Central Board of Revenue. The income tax is paid on filing the return, which is due successfully launched in August 2008 to improve the efficiency and effectiveness of within 6 months of the end of the company’s financial year (usually on June 30). the SECP’s business processes. The use of online submissions is growing, but in some Reform has been introduced to make the tax registration fully electronic. cities a majority of entrepreneurs still prefer to apply in person. Procedure 6*. Register for sales tax by applying for a Sales Tax Procedure 2. Pay the fees for name registration and company Number (STN) at the tax facilitation center of the Regional Tax incorporation using bank challans at the designated Muslim Office (RTO) of the Federal Board of Revenue (FBR) Commercial Bank (MCB) Time: 6 days Time: 1 day Cost: No cost Cost: No cost Comments: According to Sections 14, 15, and 16 of the Sales Tax Act, 1990, and Comments: The company must pay the fees for name search availability and Sales Tax Rules, 2006, the company must register for sales tax by submitting an appli- incorporation according to the Sixth Schedule of the Companies Ordinance, 1984. cation using Form STR-1 at any tax facilitation counter at the nearest Regional Tax Of- The challans must be deposited with the Muslim Commercial Bank, Ltd. They can be fice (RTO). The local RTO forwards all applications to the Central Registration Office. downloaded from the SECP website or obtained at the SECP offices or at the bank. After verification, the CRO issues a Registration Certificate bearing the registration number and mails the same to the registered company, on prescribed Form STR-5. Procedure 3. Register the company with the Companies Registration Office of the Securities and Exchange Commission of Procedure 7*. Register for Professional Tax with the Excise and Pakistan (SECP) Taxation Department of the District Time: 5 days Time: 5 days Cost: PKR 14,000 (offline registration fee PKR 10,000 + filing fee PKR 4,000) Cost: No cost Comments: The company can complete the registration online through e-Services Comments: Following the Devolution Plan, 2001, a professional tax is enforced at or in person at the SECP. It must submit the following company incorporation docu- the district level by the Excise and Taxation Department of the relevant provincial ments on line or in person: district. According to the Punjab Finance Act, 1977, the tax is levied upon businesses, professionals, trades, callings, or companies employing such professionals. The a. Form 1: declaration of compliance; district Excise and Taxation Officer (ET officer) is empowered to enroll in a survey b. Form 21: identification of the office’s location; register every person engaged in any such business or profession and thereafter, c. Form 29: particulars of directors, secretary, chief accountant, auditors, and others; give notice to said enrolled person. In the case of a new business, the company is d. Four copies of the memorandum and articles of association with each member’s required to ask the ET officer to enroll it by submitting a simple assessment form. The signature (in the presence of a witness). ET officer issues a demand number (registration number) that acts as the reference number for the registered company and is noted down on every bank challan when According to the Sixth Schedule of Fees, effective June 2009, the fees for incorpora- assessments are paid into the bank. tion of a company with authorized capital of up to PKR 600,000 are the following: 1. Online submission: registration fee PKR 5,000 and filing fee PKR 2,000; Procedure 8*. Register with the Punjab Employees Social Security 2. Physical (offline) submission: registration fee PKR 10,000 and filing fee PKR 4,000. Institution (PESSI) Confirmation of either the online or in-person submission is received instantly and Time: 5 days the actual certificate a few days later via email and courier. The company can register Cost: No cost with any Company Registration Office, irrespective of the jurisdiction. All regional SECP offices are computerized. Comments: According to the Punjab Industrial Policy, 2003, registration with the Employees Social Security Institution is governed at the provincial level by an Procedure 4. Make a company seal independent self-generating institution called the Punjab ESSI. Employers covered under the scheme contribute 6% of the wages they pay to insurable workers. The Time: 2 days wage ceiling should not exceed PKR 10,000 per month or PKR 400 per day. Registra- Cost: PKR 1,000 (private sector fee) tion is compulsory. The company must submit a simple form in order to be allotted a Comments: The company seal is prepared after the certificate of incorporation is registration number and to receive an employee card. obtained. It is affixed on significant documents according to the provisions of the articles of association. For example, the company seal has to be affixed to the resolu- tions passed by directors in their board meetings. Entrepreneurs can get the seal made by private companies in a shop or in the market. 64 DOING BUSINESS IN PAKISTAN 2010 Procedure 9*. Register with the Employees Old Age Benefits Procedure 3. Register the company for incorporation with the Institution (EOBI) Securities and Exchange Commission of Pakistan (SECP) through Time: 7 days online e-Services Cost: No cost Time: 2 days Comments: According to the amendment to EOBI Act, 1976, effective July 2008, Cost: PKR 7,000 (online registration fee PKR 5,000 + filing fee PKR 2,000) every industry or commercial establishment with 5 or more employees must be Comments: The company can complete the registration online through e-Services registered with the federal EOBI. Under the EOBI, insured employees are entitled to a or in person at the SECP. It must submit the following company incorporation docu- pension (upon retirement), disability (if permanently disabled), old-age grant (upon ments on line or in person: retirement if they do not have the minimum threshold for a pension), and survivor’s a. Form 1: declaration of compliance; pension. A contribution equal to 5% of minimum wages is paid by the employer and 1% by the employee. b. Form 21: identification of the office’s location; For initial registration, the company must submit a simple form that is uploaded c. Form 29: particulars of directors, secretary, chief accountant, auditors, and others; into the database. The allotment requests are sent to a center in Karachi that issues d. Four copies of the memorandum and articles of association with each member’s the registration numbers along with certificates and cards and sends them to the signature (in the presence of a witness). company. Computerization of records is underway. According to the Sixth Schedule of Fees, effective June 2009, the fees for incorpora- tion of a company with authorized capital of up to PKR 600,000 are the following: Procedure 10*. Register under the West Pakistan Shops and 1. Online submission: registration fee PKR 5,000 and filing fee PKR 2,000; Establishment Ordinance 1969 with the Labor Department of the 2. Physical (offline) submission: registration fee PKR 10,000 and filing fee PKR 4,000. District Confirmation of either the online or in-person submission is received instantly and Time: 5 days the actual certificate a few days later via email and courier. The company can register Cost: PKR 10 (registration fee) with any Company Registration Office, irrespective of the jurisdiction. All regional Comments: Pakistan Shops and Establishment Ordinance, 1969, requires every SECP offices are computerized. establishment other than a one-man shop to be registered with the Deputy Chief Inspector of the Labor Department in each district. This is to safeguard the labor Procedure 4. Obtain digital signatures from the National standards of the workers. Institutional Facilitation Technologies (NIFT) through the SECP To register, the employer must submit an application using Form A, accompanied e-Services by a bank challan. The application for a new establishment must be made within 2 Time: 2 days months of setting it up. Registration fees are the following: 1–5 workers: PKR 2; 6–10 Cost: PKR 1,277 (certificate charges PKR 650 + federal excise duty PKR 126.75 (at workers: PKR 3; 11–20 workers: PKR 5; more than 20 workers: PKR 10. Once the fee 19.5%) + validation charges PKR 500) has been paid, the Deputy Chief Inspector registers the establishment in the Register Comments: The digital signature is obtained from National Institutional Facilitation of Establishments using Form B and issues a registration certificate using Form C. The Technologies (NIFT) through e-Services or at SECP offices. NIFT serves as the witness certificate must be prominently displayed at the establishment. of all digitally signed documentation. To apply, the company must submit the Digital Signature Certificate Request Form along with scanned copies of the directors’ * This procedure can be completed simultaneously with previous procedures identity cards, Name Availability Certificate, and proof of payment. STARTING A BUSINESS Procedure 5. Register for income tax by applying for a National Peshawar, Khyber Pakhtunkhwa Tax Number (NTN) at the tax facilitation center of the Regional Standard company legal form: Private Limited Liability Company Tax Office (RTO) of the Federal Board of Revenue (FBR) Paid-in minimum capital requirement: none Time: 5 days Data as of: December 2009 Cost: No cost Comments: According to the Income Tax Ordinance, 2001, every company must Procedure 1. Obtain approval of company name through the register for income tax and obtain the National Tax Number (NTN) that is generally Securities and Exchange Commission of Pakistan (SECP)'s required by other registering authorities such as Chambers of Commerce, the e-Service website Import-Export Regulatory Authority, utility authorities, etc. Since 2002, after the Time: 1 day introduction of the Income Tax Ordinance, 2001, an NTN is issued with a continuous valid term (without the need to renew the number). Cost: PKR 200 (e-Services online name reservation fee) To apply, the company must submit a simple one-page form (the NTN Form) as well Comments: According to the Companies Ordinance, 1984, and its amendments in as proof of registration, the memorandum and articles of association, bank account 2002 and update in February 2009, the company proposes one or more names in or- number, copies of the national identity cards of its directors, and an attestation of der of preference and submits them for approval via e-Services or in person (offline) the registered business address at the nearest tax facilitation counter of the Regional to the Securities and Exchange Commission of Pakistan (SECP). The availability of the Tax Office in Pakistan. suggested names can first be checked online by searching existing company names. All applications are forwarded to the Central Registration Office (CRO) in Islamabad, The official confirmation (or denial) of the chosen name and its availability is which allots a uniform NTN to each company. The center processes the application received by email or via courier upon payment of the name search fee of PKR 200 and issues the NTN at no cost. The certificate is sent to the registered address of the (online name reservation) or PKR 500 (offline name reservation) at the bank desig- applicant. The company can track the application online or through the RTO helpline. nated by the SECP. A timely disposal of cases within 24 working hours is mandated If undelivered, the NTN certification can be collected from the specified office at the by Regulation 9 of the CRO Regulation Act, 2003. The approved name is reserved Central Board of Revenue. The income tax is paid on filing the return, which is due for 90 days, by which time the company must be incorporated. The e-Services were within 6 months of the end of the company’s financial year (usually on June 30). successfully launched in August 2008 to improve the efficiency and effectiveness of Reform has been introduced to make the tax registration fully electronic. the SECP’s business processes. The use of online submissions is growing, but in some cities a majority of entrepreneurs still prefer to apply in person. Procedure 6*. Register for sales tax by applying for a Sales Tax Procedure 2. Pay the fees for name registration and company Number (STN) at the tax facilitation center of the Regional Tax incorporation using bank challans at the designated Muslim Office (RTO) of the Federal Board of Revenue (FBR) Commercial Bank (MCB) Time: 7 days Time: 1 day Cost: No cost Cost: No cost Comments: According to Sections 14, 15, and 16 of the Sales Tax Act, 1990, and Sales Tax Rules, 2006, the company must register for sales tax by submitting an appli- Comments: The company must pay the fees for name search availability and cation using Form STR-1 at any tax facilitation counter at the nearest Regional Tax Of- incorporation according to the Sixth Schedule of the Companies Ordinance, 1984. fice (RTO). The local RTO forwards all applications to the Central Registration Office. The challans must be deposited with the Muslim Commercial Bank, Ltd. They can be After verification, the CRO issues a Registration Certificate bearing the registration downloaded from the SECP website or obtained at the SECP offices or at the bank. number and mails the same to the registered company, on prescribed Form STR-5. LIST OF PROCE %63&4t STARTING A BUSINESS 65 Procedure 7*. Register for Professional Tax with the Excise and STARTING A BUSINESS Taxation Department of the District Quetta, Balochistan Time: 7 days Standard company legal form: Private Limited Liability Company Cost: No cost Paid-in minimum capital requirement: none Comments: Following the Devolution Plan, 2001, a professional tax is enforced at Data as of: December 2009 the district level by the Excise and Taxation Department of the relevant provincial district. According to the Khyber Pakhtunkhwa Professions, Trades, Callings and Procedure 1. Obtain approval of company name through the Employment Tax Act 1979, the tax is levied upon businesses, professionals, trades, Companies Registration Office (CRO) of the Securities and callings, or companies employing such professionals. The district Excise and Taxation Exchange Commission of Pakistan (SECP) Officer (ET officer) is empowered to enroll in a survey register every person engaged Time: 1 day in any such business or profession and thereafter, give notice to said enrolled person. In the case of a new business, the company is required to ask the ET officer to enroll Cost: PKR 500 (name reservation in person fee) it by submitting a simple assessment form. The ET officer issues a demand number Comments: According to the Companies Ordinance, 1984, and its amendments in (registration number) that acts as the reference number for the registered company 2002 and update in February 2009, the company proposes one or more names in or- and is noted down on every bank challan when assessments are paid into the bank. der of preference and submits them for approval via e-Services or in person (offline) to the Securities and Exchange Commission of Pakistan (SECP). The availability of the Procedure 8*. Register with the Khyber Pakhtunkhwa Employees suggested names can first be checked online by searching existing company names. Social Security Institution (KPKESSI) The official confirmation (or denial) of the chosen name and its availability is Time: 11 days received by email or via courier upon payment of the name search fee of PKR 200 (online name reservation) or PKR 500 (offline name reservation) at the bank desig- Cost: No cost nated by the SECP. A timely disposal of cases within 24 working hours is mandated Comments: According to the Provincial Employees Social Security Ordinance by Regulation 9 of the CRO Regulation Act, 2003. The approved name is reserved 1965, registration with the Employees Social Security Institution is governed at the for 90 days, by which time the company must be incorporated. The e-Services were provincial level by an independent self-generating institution called the Khyber successfully launched in August 2008 to improve the efficiency and effectiveness of Pakhtunkhwa Employee's Social Security Institution. Employers covered under the the SECP’s business processes. The use of online submissions is growing, but in some scheme contribute 6% of the wages to insurable workers. The wage ceiling should cities a majority of entrepreneurs still prefer to apply in person. not exceed PKR 10,000 per month or PKR 400 per day. The registration is compulsory. The company has to fill up a simple form to be allotted a registration number and to Procedure 2. Pay the fees for name registration and company receive later an employee card. incorporation using bank challans at the designated Muslim Commercial Bank (MCB) Procedure 9*. Register with the Employees Old Age Benefits Institution (EOBI) Time: 1 day Cost: No cost Time: 11 days Comments: The company must pay the fees for name search availability and Cost: No cost incorporation according to the Sixth Schedule of the Companies Ordinance, 1984. Comments: According to the amendment to EOBI Act, 1976, effective July 2008, The challans must be deposited with the Muslim Commercial Bank, Ltd. They can be every industry or commercial establishment with 5 or more employees must be downloaded from the SECP website or obtained at the SECP offices or at the bank. registered with the federal EOBI. Under the EOBI, insured employees are entitled to a pension (upon retirement), disability (if permanently disabled), old-age grant (upon Procedure 3. Register the company with the Companies retirement if they do not have the minimum threshold for a pension), and survivor’s Registration Office of the Securities and Exchange Commission of pension. A contribution equal to 5% of minimum wages is paid by the employer and 1% by the employee. Pakistan (SECP) For initial registration, the company must submit a simple form that is uploaded Time: 5 days into the database. The allotment requests are sent to a center in Karachi that issues Cost: PKR 14,000 (offline registration fee PKR 10,000 + filing fee PKR 4,000) the registration numbers along with certificates and cards and sends them to the Comments: The company can complete the registration online through e-Services company. Computerization of records is underway. or in person at the SECP. It must submit the following company incorporation docu- ments online or in person: Procedure 10*. Register under the West Pakistan Shops and a. Form 1: declaration of compliance; Establishment Ordinance 1969 with the Labor Department of the b. Form 21: identification of the office’s location; District c. Form 29: particulars of directors, secretary, chief accountant, auditors, and others; Time: 7 days d. Four copies of the memorandum and articles of association with each member’s Cost: PKR 10 (registration fee) signature (in the presence of a witness). Comments: Pakistan Shops and Establishment Ordinance, 1969, requires every According to the Sixth Schedule of Fees, effective June 2009, the fees for incorpora- establishment other than a one-man shop to be registered with the Deputy Chief tion of a company with authorized capital of up to PKR 600,000 are the following: Inspector of the Labor Department in each district. This is to safeguard the labor 1. Online submission: registration fee PKR 5,000 and filing fee PKR 2,000; standards of the workers. 2. Physical (offline) submission: registration fee PKR 10,000 and filing fee PKR 4,000. To register, the employer must submit an application using Form A, accompanied by a bank challan. The application for a new establishment must be made within 2 Confirmation of either the online or in-person submission is received instantly and months of setting it up. Registration fees are the following: 1–5 workers: PKR 2; 6–10 the actual certificate a few days later via email and courier. The company can register workers: PKR 3; 11–20 workers: PKR 5; more than 20 workers: PKR 10. Once the fee with any Company Registration Office, irrespective of the jurisdiction. All regional has been paid, the Deputy Chief Inspector registers the establishment in the Register SECP offices are computerized. of Establishments using Form B and issues a registration certificate using Form C. The certificate must be prominently displayed at the establishment. Procedure 4. Make a company seal Time: 2 days * This procedure can be completed simultaneously with previous procedures Cost: PKR 1,000 (private sector fee) Comments: The company seal is prepared after the certificate of incorporation is obtained. It is affixed on significant documents according to the provisions of the articles of association. For example, the company seal has to be affixed to the resolu- tions passed by directors in their board meetings. Entrepreneurs can get the seal made by private companies in a shop or in the market. 66 DOING BUSINESS IN PAKISTAN 2010 Comments: According to the amendment to EOBI Act, 1976, effective July 2008, Procedure 5. Register for income tax by applying for a National every industry or commercial establishment with 5 or more employees must be Tax Number (NTN) at the tax facilitation center of the Regional registered with the federal EOBI. Under the EOBI, insured employees are entitled to a Tax Office (RTO) of the Federal Board of Revenue (FBR) pension (upon retirement), disability (if permanently disabled), old-age grant (upon Time: 5 days retirement if they do not have the minimum threshold for a pension), and survivor’s Cost: No cost pension. A contribution equal to 5% of minimum wages is paid by the employer and 1% by the employee. Comments: According to the Income Tax Ordinance, 2001, every company must register for income tax and obtain the National Tax Number (NTN) that is generally For initial registration, the company must submit a simple form that is uploaded required by other registering authorities such as Chambers of Commerce, the into the database. The allotment requests are sent to a center in Karachi that issues Import-Export Regulatory Authority, utility authorities, etc. Since 2002, after the the registration numbers along with certificates and cards and sends them to the introduction of the Income Tax Ordinance, 2001, an NTN is issued with a continuous company. Computerization of records is underway. valid term (without the need to renew the number). To apply, the company must submit a simple one-page form (the NTN Form) as well Procedure 10*. Register under the West Pakistan Shops and as proof of registration, the memorandum and articles of association, bank account Establishment Ordinance 1969 with the Labor Department of the number, copies of the national identity cards of its directors, and an attestation of District the registered business address at the nearest tax facilitation counter of the Regional Time: 7 days Tax Office in Pakistan. Cost: PKR 10 (registration fee) All applications are forwarded to the Central Registration Office (CRO) in Islamabad, Comments: Pakistan Shops and Establishment Ordinance, 1969, requires every which allots a uniform NTN to each company. The center processes the application establishment other than a one-man shop to be registered with the Deputy Chief and issues the NTN at no cost. The certificate is sent to the registered address of the Inspector of the Labor Department in each district. This is to safeguard the labor applicant. The company can track the application online or through the RTO helpline. standards of the workers. If undelivered, the NTN certification can be collected from the specified office at the Central Board of Revenue. The income tax is paid on filing the return, which is due To register, the employer must submit an application using Form A, accompanied within 6 months of the end of the company’s financial year (usually on June 30). by a bank challan. The application for a new establishment must be made within 2 Reform has been introduced to make the tax registration fully electronic. months of setting it up. Registration fees are the following: 1–5 workers: PKR 2; 6–10 workers: PKR 3; 11–20 workers: PKR 5; more than 20 workers: PKR 10. Once the fee has been paid, the Deputy Chief Inspector registers the establishment in the Register Procedure 6*. Register for sales tax by applying for a Sales Tax of Establishments using Form B and issues a registration certificate using Form C. The Number (STN) at the tax facilitation center of the Regional Tax certificate must be prominently displayed at the establishment. Office (RTO) of the Federal Board of Revenue (FBR) Time: 6 days * This procedure can be completed simultaneously with previous procedures. Cost: No cost Comments: According to Sections 14, 15, and 16 of the Sales Tax Act, 1990, and STARTING A BUSINESS Sales Tax Rules, 2006, the company must register for sales tax by submitting an appli- Rawalpindi, Punjab cation using Form STR-1 at any tax facilitation counter at the nearest Regional Tax Of- fice (RTO). The local RTO forwards all applications to the Central Registration Office. Standard company legal form: Private Limited Liability Company After verification, the CRO issues a Registration Certificate bearing the registration Paid-in minimum capital requirement: none number and mails the same to the registered company, on prescribed Form STR-5. Data as of: December 2009 Procedure 7*. Register for Professional Tax with the Excise and Procedure 1. Obtain approval of company name through the Taxation Department of the District Companies Registration Office (CRO) of the Securities and Time: 7 days Exchange Commission of Pakistan (SECP) Cost: No cost Time: 2 days Comments: Following the Devolution Plan, 2001, a professional tax is enforced at Cost: PKR 580 (name reservation in person fee PKR 500 + PKR 80 transport cost the district level by the Excise and Taxation Department of the relevant provincial between Rawalpindi and Islamabad) district. According to the Balochistan Finance Act, 1996, the tax is levied upon busi- Comments: According to the Companies Ordinance, 1984, and its amendments in nesses, professionals, trades, callings, or companies employing such professionals. 2002 and update in February 2009, the company proposes one or more names in or- The district Excise and Taxation Officer (ET officer) is empowered to enroll in a survey der of preference and submits them for approval via e-Services or in person (offline) register every person engaged in any such business or profession and thereafter, to the Securities and Exchange Commission of Pakistan (SECP). The availability of the give notice to said enrolled person. In the case of a new business, the company is suggested names can first be checked online by searching existing company names. required to ask the ET officer to enroll it by submitting a simple assessment form. The The official confirmation (or denial) of the chosen name and its availability is ET officer issues a demand number (registration number) that acts as the reference received by email or via courier upon payment of the name search fee of PKR 200 number for the registered company and is noted down on every bank challan when (online name reservation) or PKR 500 (offline name reservation) at the bank desig- assessments are paid into the bank. nated by the SECP. A timely disposal of cases within 24 working hours is mandated by Regulation 9 of the CRO Regulation Act, 2003. The approved name is reserved Procedure 8*. Register with the Balochistan Employees Social for 90 days, by which time the company must be incorporated. The e-Services were Security Institution (BESSI) successfully launched in August 2008 to improve the efficiency and effectiveness of Time: 7 days the SECP’s business processes. The use of online submissions is growing, but in some cities a majority of entrepreneurs still prefer to apply in person. Cost: No cost Comments: According to the Provincial Employees Social Security Ordinance, Procedure 2. Pay the fees for name registration and company 1965, registration with the Employees Social Security Institution is governed at the incorporation using bank challans at the designated Muslim provincial level by an independent self-generating institution called the Balochistan ESSI. Employers covered under the scheme contribute 6% of the wages they pay to Commercial Bank (MCB) insurable workers. The wage ceiling should not exceed PKR 10,000 per month or PKR Time: 1 day 400 per day. Registration is compulsory. The company must submit a simple form in Cost: No cost order to be allotted a registration number and to receive an employee card. Comments: The company must pay the fees for name search availability and incorporation according to the Sixth Schedule of the Companies Ordinance, 1984. Procedure 9*. Register with the Employees Old Age Benefits The challans must be deposited with the Muslim Commercial Bank, Ltd. They can be Institution (EOBI) downloaded from the SECP website or obtained at the SECP offices or at the bank. Time: 7 days Cost: No cost LIST OF PROCE %63&4t STARTING A BUSINESS 67 Procedure 3. Register the company with the Companies Procedure 7*. Register for Professional Tax with the Excise and Registration Office of the Securities and Exchange Commission of Taxation Department of the District Pakistan (SECP) Time: 5 days Time: 4 days Cost: No cost Cost: PKR 14,080 (offline registration fee PKR 10,000 + filing fee PKR 4,000 + PKR 80 Comments: Following the Devolution Plan, 2001, a professional tax is enforced at transport cost between Rawalpindi and Islamabad) the district level by the Excise and Taxation Department of the relevant provincial Comments: The company can complete the registration online through e-Services district. According to the Punjab Finance Act, 1977, the tax is levied upon businesses, or in person at the SECP. It must submit the following company incorporation docu- professionals, trades, callings, or companies employing such professionals. The ments online or in person: district Excise and Taxation Officer (ET officer) is empowered to enroll in a survey a. Form 1: declaration of compliance; register every person engaged in any such business or profession and thereafter, give notice to said enrolled person. In the case of a new business, the company is b. Form 21: identification of the office’s location; required to ask the ET officer to enroll it by submitting a simple assessment form. The c. Form 29: particulars of directors, secretary, chief accountant, auditors, and others; ET officer issues a demand number (registration number) that acts as the reference d. Four copies of the memorandum and articles of association with each member’s number for the registered company and is noted down on every bank challan when signature (in the presence of a witness). assessments are paid into the bank. According to the Sixth Schedule of Fees, effective June 2009, the fees for incorpora- tion of a company with authorized capital of up to PKR 600,000 are the following: Procedure 8*. Register with the Punjab Employees Social Security 1. Online submission: registration fee PKR 5,000 and filing fee PKR 2,000; Institution (PESSI) 2. Physical (offline) submission: registration fee PKR 10,000 and filing fee PKR 4,000. Time: 5 days Confirmation of either the online or in-person submission is received instantly and Cost: No cost the actual certificate a few days later via email and courier. The company can register Comments: According to the Punjab Industrial Policy, 2003, registration with with any Company Registration Office, irrespective of the jurisdiction. All regional the Employees Social Security Institution is governed at the provincial level by an SECP offices are computerized. independent self-generating institution called the Punjab ESSI. Employers covered under the scheme contribute 6% of the wages they pay to insurable workers. The Procedure 4. Make a company seal wage ceiling should not exceed PKR 10,000 per month or PKR 400 per day. Registra- Time: 2 days tion is compulsory. The company must submit a simple form in order to be allotted a registration number and to receive an employee card. Cost: PKR 1,000 (private sector fee) Comments: The company seal is prepared after the certificate of incorporation is Procedure 9*. Register with the Employees Old Age Benefits obtained. It is affixed on significant documents according to the provisions of the Institution (EOBI) articles of association. For example, the company seal has to be affixed to the resolu- tions passed by directors in their board meetings. Entrepreneurs can get the seal Time: 5 days made by private companies in a shop or in the market. Cost: No cost Comments: According to the amendment to EOBI Act, 1976, effective July 2008, Procedure 5. Register for income tax by applying for a National every industry or commercial establishment with 5 or more employees must be Tax Number (NTN) at the tax facilitation center of the Regional registered with the federal EOBI. Under the EOBI, insured employees are entitled to a Tax Office (RTO) of the Federal Board of Revenue (FBR) pension (upon retirement), disability (if permanently disabled), old-age grant (upon retirement if they do not have the minimum threshold for a pension), and survivor’s Time: 3 days pension. A contribution equal to 5% of minimum wages is paid by the employer and Cost: No cost 1% by the employee. Comments: According to the Income Tax Ordinance, 2001, every company must For initial registration, the company must submit a simple form that is uploaded register for income tax and obtain the National Tax Number (NTN) that is generally into the database. The allotment requests are sent to a center in Karachi that issues required by other registering authorities such as Chambers of Commerce, the the registration numbers along with certificates and cards and sends them to the Import-Export Regulatory Authority, utility authorities, etc. Since 2002, after the company. Computerization of records is underway. introduction of the Income Tax Ordinance, 2001, an NTN is issued with a continuous valid term (without the need to renew the number). Procedure 10*. Register under the West Pakistan Shops and To apply, the company must submit a simple one-page form (the NTN Form) as well Establishment Ordinance 1969 with the Labor Department of the as proof of registration, the memorandum and articles of association, bank account District number, copies of the national identity cards of its directors, and an attestation of the registered business address at the nearest tax facilitation counter of the Regional Time: 5 days Tax Office in Pakistan. Cost: PKR 10 (registration fee) All applications are forwarded to the Central Registration Office (CRO) in Islamabad, Comments: Pakistan Shops and Establishment Ordinance, 1969, requires every which allots a uniform NTN to each company. The center processes the application establishment other than a one-man shop to be registered with the Deputy Chief and issues the NTN at no cost. The certificate is sent to the registered address of the Inspector of the Labor Department in each district. This is to safeguard the labor applicant. The company can track the application online or through the RTO helpline. standards of the workers. If undelivered, the NTN certification can be collected from the specified office at the To register, the employer must submit an application using Form A, accompanied Central Board of Revenue. The income tax is paid on filing the return, which is due by a bank challan. The application for a new establishment must be made within 2 within 6 months of the end of the company’s financial year (usually on June 30). months of setting it up. Registration fees are the following: 1–5 workers: PKR 2; 6–10 Reform has been introduced to make the tax registration fully electronic. workers: PKR 3; 11–20 workers: PKR 5; more than 20 workers: PKR 10. Once the fee has been paid, the Deputy Chief Inspector registers the establishment in the Register Procedure 6*. Register for sales tax by applying for a Sales Tax of Establishments using Form B and issues a registration certificate using Form C. The Number (STN) at the tax facilitation center of the Regional Tax certificate must be prominently displayed at the establishment. Office (RTO) of the Federal Board of Revenue (FBR) Time: 4 days * This procedure can be completed simultaneously with previous procedures. Cost: No cost Comments: According to Sections 14, 15, and 16 of the Sales Tax Act, 1990, and Sales Tax Rules, 2006, the company must register for sales tax by submitting an appli- cation using Form STR-1 at any tax facilitation counter at the nearest Regional Tax Of- fice (RTO). The local RTO forwards all applications to the Central Registration Office. After verification, the CRO issues a Registration Certificate bearing the registration number and mails the same to the registered company, on prescribed Form STR-5. 68 DOING BUSINESS IN PAKISTAN 2010 STARTING A BUSINESS Procedure 5. Register for income tax by applying for a National Sheikhupura, Punjab Tax Number (NTN) at the tax facilitation center of the Regional Standard company legal form: Private Limited Liability Company Tax Office (RTO) of the Federal Board of Revenue (FBR) Paid-in minimum capital requirement: none Time: 7 days Data as of: December 2009 Cost: No cost Procedure 1. Obtain approval of company name through the Comments: According to the Income Tax Ordinance, 2001, every company must register for income tax and obtain the National Tax Number (NTN) that is generally Companies Registration Office (CRO) of the Securities and required by other registering authorities such as Chambers of Commerce, the Exchange Commission of Pakistan (SECP) Import-Export Regulatory Authority, utility authorities, etc. Since 2002, after the Time: 2 days introduction of the Income Tax Ordinance, 2001, an NTN is issued with a continuous Cost: PKR 620 (name reservation in person fee PKR 500 + PKR 120 transport cost valid term (without the need to renew the number). between Sheikhupura and Lahore) To apply, the company must submit a simple one-page form (the NTN Form) as well Comments: According to the Companies Ordinance, 1984, and its amendments in as proof of registration, the memorandum and articles of association, bank account 2002 and update in February 2009, the company proposes one or more names in or- number, copies of the national identity cards of its directors, and an attestation of der of preference and submits them for approval via e-Services or in person (offline) the registered business address at the nearest tax facilitation counter of the Regional to the Securities and Exchange Commission of Pakistan (SECP). The availability of the Tax Office in Pakistan. suggested names can first be checked online by searching existing company names. All applications are forwarded to the Central Registration Office (CRO) in Islamabad, The official confirmation (or denial) of the chosen name and its availability is which allots a uniform NTN to each company. The center processes the application received by email or via courier upon payment of the name search fee of PKR 200 and issues the NTN at no cost. The certificate is sent to the registered address of the (online name reservation) or PKR 500 (offline name reservation) at the bank desig- applicant. The company can track the application online or through the RTO helpline. nated by the SECP. A timely disposal of cases within 24 working hours is mandated If undelivered, the NTN certification can be collected from the specified office at the by Regulation 9 of the CRO Regulation Act, 2003. The approved name is reserved Central Board of Revenue. The income tax is paid on filing the return, which is due for 90 days, by which time the company must be incorporated. The e-Services were within 6 months of the end of the company’s financial year (usually on June 30). successfully launched in August 2008 to improve the efficiency and effectiveness of Reform has been introduced to make the tax registration fully electronic. the SECP’s business processes. The use of online submissions is growing, but in some cities a majority of entrepreneurs still prefer to apply in person. Procedure 6*. Register for sales tax by applying for a Sales Tax Number (STN) at the tax facilitation center of the Regional Tax Procedure 2. Pay the fees for name registration and company Office (RTO) of the Federal Board of Revenue (FBR) incorporation using bank challans at the designated Muslim Time: 10 days Commercial Bank (MCB) Cost: No cost Time: 1 day Comments: According to Sections 14, 15, and 16 of the Sales Tax Act, 1990, and Cost: No cost Sales Tax Rules, 2006, the company must register for sales tax by submitting an appli- Comments: The company must pay the fees for name search availability and cation using Form STR-1 at any tax facilitation counter at the nearest Regional Tax Of- incorporation according to the Sixth Schedule of the Companies Ordinance, 1984. fice (RTO). The local RTO forwards all applications to the Central Registration Office. The challans must be deposited with the Muslim Commercial Bank, Ltd. They can be After verification, the CRO issues a Registration Certificate bearing the registration downloaded from the SECP website or obtained at the SECP offices or at the bank. number and mails the same to the registered company, on prescribed Form STR-5. Procedure 3. Register the company with the Companies Procedure 7*. Register for Professional Tax with the Excise and Registration Office of the Securities and Exchange Commission of Taxation Department of the District Pakistan (SECP) Time: 5 days Time: 4 days Cost: No cost Cost: PKR 14,120 (offline registration fee PKR 10,000 + filing fee PKR 4,000 + PKR 120 Comments: Following the Devolution Plan, 2001, a professional tax is enforced at transport cost between Sheikhupura and Lahore) the district level by the Excise and Taxation Department of the relevant provincial Comments: The company can complete the registration online through e-Services district. According to the Punjab Finance Act, 1977, the tax is levied upon businesses, or in person at the SECP. It must submit the following company incorporation docu- professionals, trades, callings, or companies employing such professionals. The ments online or in person: district Excise and Taxation Officer (ET officer) is empowered to enroll in a survey register every person engaged in any such business or profession and thereafter, a. Form 1: declaration of compliance; give notice to said enrolled person. In the case of a new business, the company is b. Form 21: identification of the office’s location; required to ask the ET officer to enroll it by submitting a simple assessment form. The c. Form 29: particulars of directors, secretary, chief accountant, auditors, and others; ET officer issues a demand number (registration number) that acts as the reference d. Four copies of the memorandum and articles of association with each member’s number for the registered company and is noted down on every bank challan when signature (in the presence of a witness). assessments are paid into the bank. According to the Sixth Schedule of Fees, effective June 2009, the fees for incorpora- tion of a company with authorized capital of up to PKR 600,000 are the following: Procedure 8*. Register with the Punjab Employees Social Security Institution (PESSI) 1. Online submission: registration fee PKR 5,000 and filing fee PKR 2,000; Time: 7 days 2. Physical (offline) submission: registration fee PKR 10,000 and filing fee PKR 4,000. Cost: No cost Confirmation of either the online or in-person submission is received instantly and the actual certificate a few days later via email and courier. The company can register Comments: According to the Punjab Industrial Policy, 2003, registration with with any Company Registration Office, irrespective of the jurisdiction. All regional the Employees Social Security Institution is governed at the provincial level by an SECP offices are computerized. independent self-generating institution called the Punjab ESSI. Employers covered under the scheme contribute 6% of the wages they pay to insurable workers. The Procedure 4. Make a company seal wage ceiling should not exceed PKR 10,000 per month or PKR 400 per day. Registra- tion is compulsory. The company must submit a simple form in order to be allotted a Time: 2 days registration number and to receive an employee card. Cost: PKR 1,000 (private sector fee) Comments: The company seal is prepared after the certificate of incorporation is obtained. It is affixed on significant documents according to the provisions of the articles of association. For example, the company seal has to be affixed to the resolu- tions passed by directors in their board meetings. Entrepreneurs can get the seal made by private companies in a shop or in the market. LIST OF PROCE %63&4t STARTING A BUSINESS 69 Procedure 9*. Register with the Employees Old Age Benefits Procedure 3. Register the company with the Companies Institution (EOBI) Registration Office of the Securities and Exchange Commission of Time: 7 days Pakistan (SECP) Cost: No cost Time: 3 days Comments: According to the amendment to EOBI Act, 1976, effective July 2008, Cost: PKR 14,700 (offline registration fee PKR 10,000 + filing fee PKR 4,000 + PKR 700 every industry or commercial establishment with 5 or more employees must be return travel cost from Sialkot to Lahore) registered with the federal EOBI. Under the EOBI, insured employees are entitled to a Comments: The company can complete the registration online through e-Services pension (upon retirement), disability (if permanently disabled), old-age grant (upon or in person at the SECP. It must submit the following company incorporation docu- retirement if they do not have the minimum threshold for a pension), and survivor’s ments online or in person: pension. A contribution equal to 5% of minimum wages is paid by the employer and a. Form 1: declaration of compliance; 1% by the employee. b. Form 21: identification of the office’s location; For initial registration, the company must submit a simple form that is uploaded into the database. The allotment requests are sent to a center in Karachi that issues c. Form 29: particulars of directors, secretary, chief accountant, auditors, and others; the registration numbers along with certificates and cards and sends them to the d. Four copies of the memorandum and articles of association with each member’s company. Computerization of records is underway. signature (in the presence of a witness). According to the Sixth Schedule of Fees, effective June 2009, the fees for incorpora- Procedure 10*. Register under the West Pakistan Shops and tion of a company with authorized capital of up to PKR 600,000 are the following: Establishment Ordinance 1969 with the Labor Department of the 1. Online submission: registration fee PKR 5,000 and filing fee PKR 2,000; District 2. Physical (offline) submission: registration fee PKR 10,000 and filing fee PKR 4,000. Time: 7 days Confirmation of either the online or in-person submission is received instantly and Cost: PKR 10 (registration fee) the actual certificate a few days later via email and courier. The company can register Comments: Pakistan Shops and Establishment Ordinance, 1969, requires every with any Company Registration Office, irrespective of the jurisdiction. All regional establishment other than a one-man shop to be registered with the Deputy Chief SECP offices are computerized. Inspector of the Labor Department in each district. This is to safeguard the labor standards of the workers. Procedure 4. Make a company seal To register, the employer must submit an application using Form A, accompanied Time: 2 days by a bank challan. The application for a new establishment must be made within 2 Cost: PKR 1,000 (private sector fee) months of setting it up. Registration fees are the following: 1–5 workers: PKR 2; 6–10 Comments: The company seal is prepared after the certificate of incorporation is workers: PKR 3; 11–20 workers: PKR 5; more than 20 workers: PKR 10. Once the fee obtained. It is affixed on significant documents according to the provisions of the has been paid, the Deputy Chief Inspector registers the establishment in the Register articles of association. For example, the company seal has to be affixed to the resolu- of Establishments using Form B and issues a registration certificate using Form C. The tions passed by directors in their board meetings. Entrepreneurs can get the seal certificate must be prominently displayed at the establishment. made by private companies in a shop or in the market. * This procedure can be completed simultaneously with previous procedures. Procedure 5. Register for income tax by applying for a National Tax Number (NTN) at the tax facilitation center of the Regional STARTING A BUSINESS Tax Office (RTO) of the Federal Board of Revenue (FBR) Sialkot, Punjab Time: 2 days Standard company legal form: Private Limited Liability Company Cost: No cost Paid-in minimum capital requirement: none Comments: According to the Income Tax Ordinance, 2001, every company must Data as of: December 2009 register for income tax and obtain the National Tax Number (NTN) that is generally required by other registering authorities such as Chambers of Commerce, the Procedure 1. Obtain approval of company name through the Import-Export Regulatory Authority, utility authorities, etc. Since 2002, after the Companies Registration Office (CRO) of the Securities and introduction of the Income Tax Ordinance, 2001, an NTN is issued with a continuous Exchange Commission of Pakistan (SECP) valid term (without the need to renew the number). Time: 1 day To apply, the company must submit a simple one-page form (the NTN Form) as well as proof of registration, the memorandum and articles of association, bank account Cost: PKR 1,200 (name reservation in person fee PKR 500 + PKR 700 transport cost number, copies of the national identity cards of its directors, and an attestation of between Sialkot and Lahore) the registered business address at the nearest tax facilitation counter of the Regional Comments: According to the Companies Ordinance, 1984, and its amendments in Tax Office in Pakistan. 2002 and update in February 2009, the company proposes one or more names in or- All applications are forwarded to the Central Registration Office (CRO) in Islamabad, der of preference and submits them for approval via e-Services or in person (offline) which allots a uniform NTN to each company. The center processes the application to the Securities and Exchange Commission of Pakistan (SECP). The availability of the and issues the NTN at no cost. The certificate is sent to the registered address of the suggested names can first be checked online by searching existing company names. applicant. The company can track the application online or through the RTO helpline. The official confirmation (or denial) of the chosen name and its availability is If undelivered, the NTN certification can be collected from the specified office at the received by email or via courier upon payment of the name search fee of PKR 200 Central Board of Revenue. The income tax is paid on filing the return, which is due (online name reservation) or PKR 500 (offline name reservation) at the bank desig- within 6 months of the end of the company’s financial year (usually on June 30). nated by the SECP. A timely disposal of cases within 24 working hours is mandated Reform has been introduced to make the tax registration fully electronic. by Regulation 9 of the CRO Regulation Act, 2003. The approved name is reserved for 90 days, by which time the company must be incorporated. The e-Services were Procedure 6*. Register for sales tax by applying for a Sales Tax successfully launched in August 2008 to improve the efficiency and effectiveness of Number (STN) at the tax facilitation center of the Regional Tax the SECP’s business processes. The use of online submissions is growing, but in some cities a majority of entrepreneurs still prefer to apply in person. Office (RTO) of the Federal Board of Revenue (FBR) Time: 6 days Procedure 2. Pay the fees for name registration and company Cost: No cost incorporation using bank challans at the designated Muslim Comments: According to Sections 14, 15, and 16 of the Sales Tax Act, 1990, and Commercial Bank (MCB) Sales Tax Rules, 2006, the company must register for sales tax by submitting an appli- Time: 1 day cation using Form STR-1 at any tax facilitation counter at the nearest Regional Tax Of- fice (RTO). The local RTO forwards all applications to the Central Registration Office. Cost: No cost After verification, the CRO issues a Registration Certificate bearing the registration Comments: The company must pay the fees for name search availability and number and mails the same to the registered company, on prescribed Form STR-5. incorporation according to the Sixth Schedule of the Companies Ordinance, 1984. The challans must be deposited with the Muslim Commercial Bank, Ltd. They can be downloaded from the SECP website or obtained at the SECP offices or at the bank. 70 DOING BUSINESS IN PAKISTAN 2010 STARTING A BUSINESS Procedure 7*. Register for Professional Tax with the Excise and Taxation Department of the District Sukkur, Sindh Time: 7 days Standard company legal form: Private Limited Liability Company Cost: No cost Paid-in minimum capital requirement: none Comments: Following the Devolution Plan, 2001, a professional tax is enforced at Data as of: December 2009 the district level by the Excise and Taxation Department of the relevant provincial district. According to the Punjab Finance Act, 1977, the tax is levied upon businesses, Procedure 1. Obtain approval of company name through the professionals, trades, callings, or companies employing such professionals. The Companies Registration Office (CRO) of the Securities and district Excise and Taxation Officer (ET officer) is empowered to enroll in a survey Exchange Commission of Pakistan (SECP) register every person engaged in any such business or profession and thereafter, Time: 2 days give notice to said enrolled person. In the case of a new business, the company is Cost: PKR 500 (name reservation in person fee) required to ask the ET officer to enroll it by submitting a simple assessment form. The Comments: According to the Companies Ordinance, 1984, and its amendments in ET officer issues a demand number (registration number) that acts as the reference 2002 and update in February 2009, the company proposes one or more names in or- number for the registered company and is noted down on every bank challan when der of preference and submits them for approval via e-Services or in person (offline) assessments are paid into the bank. to the Securities and Exchange Commission of Pakistan (SECP). The availability of the suggested names can first be checked online by searching existing company names. Procedure 8*. Register with the Punjab Employees Social Security Institution (PESSI) The official confirmation (or denial) of the chosen name and its availability is received by email or via courier upon payment of the name search fee of PKR 200 Time: 11 days (online name reservation) or PKR 500 (offline name reservation) at the bank desig- Cost: No cost nated by the SECP. A timely disposal of cases within 24 working hours is mandated Comments: According to the Punjab Industrial Policy, 2003, registration with by Regulation 9 of the CRO Regulation Act, 2003. The approved name is reserved the Employees Social Security Institution is governed at the provincial level by an for 90 days, by which time the company must be incorporated. The e-Services were independent self-generating institution called the Punjab ESSI. Employers covered successfully launched in August 2008 to improve the efficiency and effectiveness of under the scheme contribute 6% of the wages they pay to insurable workers. The the SECP’s business processes. The use of online submissions is growing, but in some wage ceiling should not exceed PKR 10,000 per month or PKR 400 per day. Registra- cities a majority of entrepreneurs still prefer to apply in person. tion is compulsory. The company must submit a simple form in order to be allotted a registration number and to receive an employee card. Procedure 2. Pay the fees for name registration and company incorporation using bank challans at the designated Muslim Procedure 9*. Register with the Employees Old Age Benefits Commercial Bank (MCB) Institution (EOBI) Time: 1 day Time: 11 days Cost: No cost Cost: No cost Comments: The company must pay the fees for name search availability and Comments: According to the amendment to EOBI Act, 1976, effective July 2008, incorporation according to the Sixth Schedule of the Companies Ordinance, 1984. every industry or commercial establishment with 5 or more employees must be The challans must be deposited with the Muslim Commercial Bank, Ltd. They can be registered with the federal EOBI. Under the EOBI, insured employees are entitled to a downloaded from the SECP website or obtained at the SECP offices or at the bank. pension (upon retirement), disability (if permanently disabled), old-age grant (upon retirement if they do not have the minimum threshold for a pension), and survivor’s Procedure 3. Register the company with the Companies pension. A contribution equal to 5% of minimum wages is paid by the employer and Registration Office of the Securities and Exchange Commission of 1% by the employee. Pakistan (SECP) For initial registration, the company must submit a simple form that is uploaded Time: 3 days into the database. The allotment requests are sent to a center in Karachi that issues Cost: PKR 14,000 (offline registration fee PKR 10,000 + filing fee PKR 4,000) the registration numbers along with certificates and cards and sends them to the company. Computerization of records is underway. Comments: The company can complete the registration online through e-Services or in person at the SECP. It must submit the following company incorporation docu- Procedure 10*. Register under the West Pakistan Shops and ments online or in person: Establishment Ordinance 1969 with the Labor Department of the a. Form 1: declaration of compliance; District b. Form 21: identification of the office’s location; Time: 7 days c. Form 29: particulars of directors, secretary, chief accountant, auditors, and others; Cost: PKR 10 (registration fee) d. Four copies of the memorandum and articles of association with each member’s Comments: Pakistan Shops and Establishment Ordinance, 1969, requires every signature (in the presence of a witness). establishment other than a one-man shop to be registered with the Deputy Chief According to the Sixth Schedule of Fees, effective June 2009, the fees for incorpora- Inspector of the Labor Department in each district. This is to safeguard the labor tion of a company with authorized capital of up to PKR 600,000 are the following: standards of the workers. 1. Online submission: registration fee PKR 5,000 and filing fee PKR 2,000; To register, the employer must submit an application using Form A, accompanied 2. Physical (offline) submission: registration fee PKR 10,000 and filing fee PKR 4,000. by a bank challan. The application for a new establishment must be made within 2 Confirmation of either the online or in-person submission is received instantly and months of setting it up. Registration fees are the following: 1–5 workers: PKR 2; 6–10 the actual certificate a few days later via email and courier. The company can register workers: PKR 3; 11–20 workers: PKR 5; more than 20 workers: PKR 10. Once the fee with any Company Registration Office, irrespective of the jurisdiction. All regional has been paid, the Deputy Chief Inspector registers the establishment in the Register SECP offices are computerized. of Establishments using Form B and issues a registration certificate using Form C. The certificate must be prominently displayed at the establishment. Procedure 4. Make a company seal Time: 2 days * This procedure can be completed simultaneously with previous procedures. Cost: PKR 1,000 (private sector fee) Comments: The company seal is prepared after the certificate of incorporation is obtained. It is affixed on significant documents according to the provisions of the articles of association. For example, the company seal has to be affixed to the resolu- tions passed by directors in their board meetings. Entrepreneurs can get the seal made by private companies in a shop or in the market. LIST OF PROCE %63&4t DEALING WITH CONSTRUCTION PERMITS 71 Procedure 5. Register for income tax by applying for a National Comments: According to the amendment to EOBI Act, 1976, effective July 2008, Tax Number (NTN) at the tax facilitation center of the Regional every industry or commercial establishment with 5 or more employees must be Tax Office (RTO) of the Federal Board of Revenue (FBR) registered with the federal EOBI. Under the EOBI, insured employees are entitled to a pension (upon retirement), disability (if permanently disabled), old-age grant (upon Time: 5 days retirement if they do not have the minimum threshold for a pension), and survivor’s Cost: No cost pension. A contribution equal to 5% of minimum wages is paid by the employer and Comments: According to the Income Tax Ordinance, 2001, every company must 1% by the employee. register for income tax and obtain the National Tax Number (NTN) that is generally For initial registration, the company must submit a simple form that is uploaded required by other registering authorities such as Chambers of Commerce, the into the database. The allotment requests are sent to a center in Karachi that issues Import-Export Regulatory Authority, utility authorities, etc. Since 2002, after the the registration numbers along with certificates and cards and sends them to the introduction of the Income Tax Ordinance, 2001, an NTN is issued with a continuous company. Computerization of records is underway. valid term (without the need to renew the number). To apply, the company must submit a simple one-page form (the NTN Form) as well Procedure 10*. Register under the West Pakistan Shops and as proof of registration, the memorandum and articles of association, bank account Establishment Ordinance 1969 with the Labor Department of the number, copies of the national identity cards of its directors, and an attestation of District the registered business address at the nearest tax facilitation counter of the Regional Time: 7 days Tax Office in Pakistan. Cost: PKR 10 (registration fee) All applications are forwarded to the Central Registration Office (CRO) in Islamabad, which allots a uniform NTN to each company. The center processes the application Comments: Pakistan Shops and Establishment Ordinance, 1969, requires every and issues the NTN at no cost. The certificate is sent to the registered address of the establishment other than a one-man shop to be registered with the Deputy Chief applicant. The company can track the application online or through the RTO helpline. Inspector of the Labor Department in each district. This is to safeguard the labor If undelivered, the NTN certification can be collected from the specified office at the standards of the workers. Central Board of Revenue. The income tax is paid on filing the return, which is due To register, the employer must submit an application using Form A, accompanied within 6 months of the end of the company’s financial year (usually on June 30). by a bank challan. The application for a new establishment must be made within 2 Reform has been introduced to make the tax registration fully electronic. months of setting it up. Registration fees are the following: 1–5 workers: PKR 2; 6–10 workers: PKR 3; 11–20 workers: PKR 5; more than 20 workers: PKR 10. Once the fee Procedure 6*. Register for sales tax by applying for a Sales Tax has been paid, the Deputy Chief Inspector registers the establishment in the Register Number (STN) at the tax facilitation center of the Regional Tax of Establishments using Form B and issues a registration certificate using Form C. The Office (RTO) of the Federal Board of Revenue (FBR) certificate must be prominently displayed at the establishment. Time: 6 days * This procedure can be completed simultaneously with previous procedures. Cost: No cost Comments: According to Sections 14, 15, and 16 of the Sales Tax Act, 1990, and LIST OF PROCEDURES Sales Tax Rules, 2006, the company must register for sales tax by submitting an appli- cation using Form STR-1 at any tax facilitation counter at the nearest Regional Tax Of- fice (RTO). The local RTO forwards all applications to the Central Registration Office. Dealing with construction permits After verification, the CRO issues a Registration Certificate bearing the registration number and mails the same to the registered company, on prescribed Form STR-5. Faisalabad, Punjab Procedure 7*. Register for Professional Tax with the Excise and Procedures to build a warehouse Taxation Department of the District Warehouse value: USD 149,056 = PKR 9,800,000 Time: 5 days Data as of: December 2009 Cost: No cost Procedure 1. Request and obtain land record (record fard) from Comments: Following the Devolution Plan, 2001, a professional tax is enforced at the local Patwari the district level by the Excise and Taxation Department of the relevant provincial Time: 30 days district. According to the Sindh Professions, Trade, Callings and Employment Tax Rules, 1976, the tax is levied upon businesses, professionals, trades, callings, or Cost: PKR 40 companies employing such professionals. The district Excise and Taxation Officer Comments: The building company must obtain a land record (record fard) from the (ET officer) is empowered to enroll in a survey register every person engaged in any local Patwari at the Revenue Department. The request can be made either in person such business or profession and thereafter, give notice to said enrolled person. In the or in writing and the building company must specify the purpose of the certified case of a new business, the company is required to ask the ET officer to enroll it by copy, i.e., to apply for a building permit. The building company must submit the submitting a simple assessment form. The ET officer issues a demand number (regis- following documents when requesting the fard: tration number) that acts as the reference number for the registered company and is a. Copy of the certificate of incorporation; noted down on every bank challan when assessments are paid into the bank. b. Power of attorney for the person who acts on the company’s behalf; c. Proof of ownership: land title or sale deed. Procedure 8*. Register with the Sindh Employees Social Security Institution (SESSI) The fard specifies the land use and plot size and confirms ownership. The building company must pay the following fees: Time: 11 days 1. Rural areas: PKR 20 per copy; Cost: No cost 2. Urban areas: PKR 40 per copy. Comments: According to the Provincial Employees Social Security Ordinance 1965, registration with the Employees Social Security Institution is governed at Procedure 2. Request and obtain a building permit from the the provincial level by an independent self-generating institution called the Sindh ESSI. Employers covered under the scheme contribute 6% of the wages to insurable Town Municipal Administration (TMA) workers. The wage ceiling should not exceed PKR 10,000 per month or PKR 400 per Time: 45 days day. The registration is compulsory. The company has to fill up a simple form to be Cost: PKR 73,500 (PKR 70,000 building approval fee + PKR 3,500 scrutiny fee) allotted a registration number and to receive later an employee card. Comments: According to the TMA Faisalabad Building and Zoning Regulations of 2008, to get approval to execute the works, the building company must apply in Procedure 9*. Register with the Employees Old Age Benefits writing to the Town Officer (Planning and Coordination) of the relevant TMA and Institution (EOBI) submit the following documents: Time: 11 days a. Application form signed by the registered architect and by the attorney-in-fact; Cost: No cost b. Three sets of architectural drawings; c. Three sets of structural drawings (for buildings taller than 2 floors); 72 DOING BUSINESS IN PAKISTAN 2010 d. Record fard; Procedure 7*. Receive electricity inspection from Faisalabad e. Copy of the title deed; Electric Supply Company (FESCO) f. Copy of the company’s memorandum of incorporation; Time: 1 day g. Power of attorney to act on behalf of the company and a copy of the national Cost: No cost identification card. The building company must pay a building approval fee of PKR 5 per square foot of Procedure 8*. Receive inspection from the Water and Sanitation covered area and a scrutiny fee equal to 5% of the building approval fee. Both fees Agency (WASA) are paid at the TMA office. Time: 1 day When approved, the building company receives a signed copy of the drawings and a Cost: No cost letter of approval. If the building company does not receive a response to its application within 45 Procedure 9. Submit completion notice and request final days of submission, it can send a written communication by registered post to the inspection from the Town Municipal Administration (TMA) relevant TMA. If such communication is not answered within 15 days, the building Time: 1 day company can assume that the building plan approval has been granted and start construction (as per Art. 27.6, Section 192, Fourth Schedule, Chapter 14 of the Cost: No cost Punjab Local Government Ordinance, 2001). Comments: Within one month of completion of the works, the building company must submit a notice of completion to the Town Officer (Planning and Coordination) Procedure 3. Receive inspection from the Town Municipal of the TMA in order to receive the final inspection and certificate of completion (as Administration (TMA) per Art. 10.9.1 of TMA Faisalabad Building and Zoning Bye Laws, 2008). Time: 1 day Procedure 10*. Receive final inspection from the Town Municipal Cost: No cost Administration (TMA) Procedure 4. Request and obtain electricity connection from Time: 1 day Faisalabad Electric Supply Company (FESCO) Cost: No cost Time: 52 days Comments: Once the completion notice has been received by the TMA, an inspector from the Town Office (Planning and Coordination) inspects the building to verify that Cost: PKR 228,000 construction has been carried out according to the approved building plan and the Comments: The building company must submit an application to FESCO along with standards set by the bylaws (as per Art. 10.9.2 of the TMA Faisalabad Building and the following documents: Zoning Bye Laws, 2008). a. Copy of approved building plan and letter of approval; b. Wiring test report; Procedure 11*. Receive completion certificate from the Town c. Copy of a neighbor’s electricity bill; Municipal Administration (TMA) d. Proof of ownership; Time: 30 days e. Copy of the company’s memorandum of incorporation; Cost: No cost f. Power of attorney to act on behalf of the company and copy of the national Comments: After the final inspection has taken place, and provided that the works identification card of the attorney-in-practice; have been carried out according to the approved building plan, the Town Municipal g. Affidavit declaring that the building company has no arrears with FESCO. Officer of TMA issues a certificate of completion (as per Art.10.9.3 of TMA Faisalabad Building and Zoning Bye Laws, 2008). FESCO will inspect the site and issue an assessment letter. The company receives the connection upon payment of a connection fee. * This procedure can be completed simultaneously with previous procedures. Procedure 5*. Request and obtain water and sewerage DEALING WITH CONSTRUCTION PERMITS connection from the Water and Sanitation Agency (WASA) Time: 10 days Gujranwala, Punjab Cost: PKR 3,000 Procedures to build a warehouse Comments: In order to obtain a connection to the water and sewerage systems, the Warehouse value: USD 149,056 = PKR 9,800,000 building company must submit an application form to WASA along with the follow- Data as of: December 2009 ing documents: Procedure 1. Request and obtain land record (record fard) from a. Copy of the letter of approval of the building plan; the local Patwari b. Copy of the company’s memorandum of incorporation; Time: 21 days c. Power of attorney to act on behalf of the company and a copy of the national identification card. Cost: PKR 40 Comments: To apply for the building permit, the building company must submit Procedure 6*. Request and obtain telephone connection from fresh proof of ownership. The fard is only valid for 3 months, so the company must Pakistan Telecommunication Company Limited (PTCL) request and obtain a new copy before submitting the building plans. Time: 7 days Procedure 2. Request and obtain a building permit from the Cost: PKR 750 (amount paid with the first bill) Town Municipal Administration (TMA) Comments: As a result of the recent improvements of PTCL services, the building Time: 45 days company can apply for a new landline connection online (www.ptcl.com.pk) or by calling the helpline at 0800 8 0800. In order to obtain a commercial landline connec- Cost: PKR 44,100 (PKR 42,000 building approval fee + PKR 2,100 scrutiny fee) tion, the company must provide the following information: Comments: According to the TMA Gujranwala Building and Zoning Regulations of a. National identity card number and contact details of the applicant; 2009, to obtain approval to execute the works, the building company must apply in writing to the Town Officer (Planning and Coordination) of the relevant TMA and b. Company registration number and national tax number; submit the following documents: c. Address where the connection will be installed. a. Application form signed by the registered architect and the attorney-in-practice; The PTCL lineman will install the new landline connection within 7 days of place- b. Three sets of architectural drawings including building plan, key plan, and site ment of the order. plan; c. Three sets of structural drawings (for buildings taller than 2 floors); d. Record fard (valid for 3 months); e. Copy of the title deed; LIST OF PROCE %63&4t DEALING WITH CONSTRUCTION PERMITS 73 f. Copy of the company’s memorandum of incorporation; Procedure 8*. Receive electricity inspection from Gujranwala g. Power of attorney to act on behalf of the company and a copy of the national Electric and Power Supply Company (GEPCO) identification card of the attorney-in-practice. Time: 1 day The building company must pay a building approval fee of PKR 3 per square foot of Cost: No cost covered area and a scrutiny fee equal to 5% of the building approval fee. Both fees are paid at the TMA office. Procedure 9*. Receive inspection from Water and Sanitation If the building company does not receive a response to its application within 45 Agency (WASA) days of submission, it can send a written communication by registered post to the Time: 1 day relevant TMA. If such communication is not answered within 15 days, the building company can assume that the building plan approval has been granted and start Cost: No cost construction (as per Art. 27.6, Section 192, Fourth Schedule, Chapter 14 of the Punjab Local Government Ordinance, 2001). Procedure 10. Submit completion notice and request final inspection from the Town Municipal Administration (TMA) Procedure 3. Receive demarcation inspection from the Town Time: 1 day Municipal Administration (TMA) Cost: PKR 5,000 (completion certificate fee) Time: 1 day Comments: After the building has been completed, the building company must Cost: No cost submit the following documents to the TMA in order to receive the final inspection and the completion certificate: Procedure 4. Receive inspection from the Town Municipal a. Completion notice; Administration (TMA) b. Plans of the building as completed, signed by a licensed architect. Time: 1 day Cost: No cost Procedure 11*. Receive final inspection from the Town Municipal Administration (TMA) Procedure 5. Request and obtain electricity connection from Time: 1 day Gujranwala Electric and Power Supply Company (GEPCO) Cost: No cost Time: 60 days Comments: An inspector from TMA inspects the building to verify that construction Cost: PKR 228,000 has been carried out according to the approved building plan and the standards set Comments: The building company must submit an application to GEPCO along with by the bylaws. the following documents: a. Copy of the approved building plan and of the letter of approval; Procedure 12*. Receive completion certificate from the Town Municipal Administration (TMA) b. Wiring test report; Time: 20 days c. Copy of a neighbor’s electricity bill; Cost: No cost d. Proof of ownership of the plot; e. Copy of the company’s memorandum of incorporation; * This procedure can be completed simultaneously with previous procedures. f. Power of attorney to act on behalf of the company and a copy of the national identification card of the attorney-in-practice; DEALING WITH CONSTRUCTION PERMITS g. Affidavit declaring that the building company has no arrears with GEPCO. Hyderabad, Sindh The electric supply company will inspect the site and issue an assessment letter. The company receives the connection upon payment of the established connection fees. Procedures to build a warehouse A description of procedures and fees is available at www.gepco.com.pk. Warehouse value: USD 149,056 = PKR 9,800,000 Data as of: December 2009 Procedure 6*. Request and obtain water and sewerage connection from the Water and Sanitation Agency (WASA) Procedure 1. Request and obtain letter confirming the land title from the Revenue Department Time: 30 days Time: 30 days Cost: PKR 2,750 (PKR 750 for water connection + PKR 2,000 for sewerage connection) Cost: PKR 10 Comments: In order to obtain a connection to the water and sewerage systems, the building company must submit an application to WASA along with the following Comments: The building company must obtain a letter from the Revenue Depart- documents: ment confirming the land title and use and dimensions of the plot. a. Copy of the approved building plan and of the letter of approval; Procedure 2. Request and obtain no-objection certificate (NOC) b. Copy of the company’s memorandum of incorporation; and site plan from the Planning and Development Control c. Power of attorney to act on behalf of the company and a copy of the national Department of Hyderabad Development Authority (HDA) identification card. Time: 2 days Procedure 7*. Request and obtain telephone connection from Cost: No cost Pakistan Telecommunication Company Limited (PTCL) Comments: In order to obtain a clearance from the Planning and Development Time: 7 days Control Department of HDA and the site plan of the plot, the building company must submit an application along with proof of ownership of the plot, a copy of the Cost: PKR 750 (amount paid with the first bill) company’s memorandum of incorporation, power of attorney to act on behalf of the Comments: As a result of the recent improvements of PTCL services, the building company, and a copy of the national identification card of the attorney-in-practice. company can apply for a new landline connection online (www.ptcl.com.pk) or by calling the helpline at 0800 8 0800. In order to obtain a commercial landline Procedure 3. Request and obtain no-objection certificate connection, the company must provide the following information: (NOC) from the Water and Sanitation Agency of Hyderabad a. National identity card number and contact details of the applicant; Development Authority (HDA) b. Company registration number and national tax number; Time: 2 days c. Address where the connection will be installed. Cost: No cost The PTCL lineman will install the new landline connection within 7 days of place- Comments: In order to obtain this document, the building company must submit ment of the order. an application to the Water and Sanitation Agency of HDA. This clearance, required when applying for the building permit, testifies that the company has no arrears with WASA. 74 DOING BUSINESS IN PAKISTAN 2010 Procedure 4. Request and obtain a building permit from the Procedure 8*. Request and obtain water and sewerage Building Control Department of Hyderabad Development connection from the Water and Sanitation Agency (WASA) Authority (HDA) Time: 49 days Time: 45 days Cost: PKR 11,000 Cost: PKR 230,250 (scrutiny fee + demolition service fee + betterment charges + no- Comments: The building company must submit an application to the Water and objection certificate fee + rent of stacking material fee + building material charges) Sanitation Agency along with the following documents: Comments: The building company must submit an application (Forms A and B) to a. Copy of the approved building plan and letter of approval; the Building Control Department of HDA along with the following documents: b. Proof of ownership of the plot. a. Seven sets of architectural drawings with tracings; b. Structural drawings with design calculations; Procedure 9*. Request and obtain telephone connection from c. Certificate of undertaking signed by a licensed architect; Pakistan Telecommunication Company Limited (PTCL) d. Proof of ownership; Time: 7 days e. Site plan; Cost: PKR 750 (amount paid with the first bill) f. No-objection certificate (NOC) from the Planning and Development Control Comments: As a result of the recent improvements of PTCL services, the building Department of HDA; company can apply for a new landline connection online (www.ptcl.com.pk) or by calling the helpline at 0800 8 0800. In order to obtain a commercial landline connec- g. No-objection certificate (NOC) from the Water and Sanitation Agency of HDA; tion, the company must provide the following information: h. Copy of the company’s memorandum of incorporation; a. National identity card number and contact details of the applicant; i. Power of attorney to act on behalf of the company and a copy of the national b. Company registration number and national tax number; identification card of the attorney-in-practice. c. Address where the connection will be installed. The fees can be paid directly to HDA or at a designated bank. The following fees are charged: The PTCL lineman will install the new landline connection within 7 days of place- ment of the order. 1. Scrutiny fee: PKR 49,000 per square yard; 2. Demolition service fee: 50% of the scrutiny fee; Procedure 10*. Receive electricity inspection from Hyderabad 3. Betterment charges: PKR 50,000; Electric Supply Company (HESCO) 4. No-objection certificate (NOC) fee: 75% of the scrutiny fee; Time: 1 day 5. Rent of stacking materials: PKR 50,000; Cost: No cost 6. Building materials charges: PKR 20,000. If the building company does not receive a response to its application within 45 Procedure 11*. Receive inspection from the Water and Sanitation days of submission, it can send a written communication by registered post to HDA. Agency (WASA) If such communication is not answered within 15 days, the building company can Time: 1 day assume that the building plan approval has been granted and start construction (as Cost: No cost per Art. 27.6, Section 192, Sixth Schedule, Chapter 19 of the Sindh Local Government Ordinance, 2001). Procedure 12. Submit completion notice and request final inspection by the Building Control Department of Hyderabad Procedure 5. Request plinth-level inspection from the Building Development Authority (HDA) Control Department of Hyderabad Development Authority (HDA) Time: 1 day Time: 1 day Cost: PKR 24,500 (completion certificate fee) Cost: No cost Comments: Within three days of the building’s completion, the building company Comments: Once the works have reached plinth level (i.e., 2 feet above the ground), must submit a notice of completion and permission for occupation to the Building the building company must notify the Building Control Department of HDA and wait Control Department of HDA. Such notice must be submitted along with the follow- for permission to continue the works. ing documents: a. Architect’s certificate declaring that the works have been carried out under his or Procedure 6. Receive plinth-level inspection from the Building her supervision; Control Department of Hyderabad Development Agency (HDA) b. Certificate stating that the building has been connected to the ground (Earthing Time: 14 days Certificate); Cost: No cost c. Copy of the no-objection certificate (NOC) from the Water and Sanitation Agency Comments: A team of inspectors from the Building Control Department of HDA of HDA. inspects the site and, after verifying that the works have been carried out according The certificate of completion fee, equal to 50% of the scrutiny fee, can be paid at a to the approved building plan, gives permission to continue the works. designated bank or directly to HDA. Procedure 7. Request and obtain electricity connection from Procedure 13*. Receive final inspection by the Building Control Hyderabad Electric Supply Company (HESCO) Department of Hyderabad Development Authority (HDA) Time: 75 days Time: 1 day Cost: PKR 228,000 Cost: No cost Comments: The building company must submit an application to HESCO along with Comments: After the application has been submitted, a team of inspectors from the the following documents: Building Control Department of HDA inspects the site to verify that the works have a. Copy of the approved building plan and letter of approval; been carried out according to the approved building plans and standards prescribed b. Wiring test report; by the bylaws and by other municipal regulations (parapets, lighting system, landing slides, electricity meters, etc). c. Copy of a neighbor’s electricity bill; d. Proof of ownership (of the plot); Procedure 14*. Receive completion certificate from the Building e. Copy of the company’s memorandum of incorporation; Control Department of Hyderabad Development Authority (HDA) f. Power of attorney to act on behalf of the company and a copy of the national Time: 21 days identification card of the attorney-in-practice. Cost: No cost The electricity supply company will inspect the site and issue an assessment letter. Comments: After the final inspection has taken place, and provided that the works The company receives the connection upon payment of a connection fee. The ap- have been carried out according to the approved building plan, the Building Control plication form is available online at www.hesco.gov.pk. Department of HDA issues a certificate of completion. * This procedure can be completed simultaneously with previous procedures. LIST OF PROCE %63&4t DEALING WITH CONSTRUCTION PERMITS 75 DEALING WITH CONSTRUCTION PERMITS d. Proof of ownership of the plot; Islamabad, ICT e. Copy of the company’s memorandum of incorporation; Procedures to build a warehouse f. Power of attorney to act on behalf of the company and a copy of the national Warehouse value: USD 149,056 = PKR 9,800,000 identification card of the attorney-in-practice; Data as of: December 2009 g. Affidavit declaring that the building company has no arrears with IESCO. IESCO will inspect the site and issue an assessment letter. The company receives the Procedure 1. Request and obtain letter confirming the land connection upon payment of the established connection fees. A detailed description title from the One Window Operation (OWO) office of the Capital of procedures and fees and downloadable application forms are available at www. Development Authority (CDA) iesco.com.pk. Time: 10 days Cost: PKR 1,000 Procedure 7*. Request and obtain telephone connection from Comments: The company must obtain the ownership document/letter to submit Pakistan Telecommunication Company Limited (PTCL) with the building plans to the Capital Development Authority (CDA) when applying Time: 7 days for building approval. Cost: PKR 750 (amount paid with the first bill) Comments: As a result of the recent improvements of PTCL services, the building Procedure 2. Request and obtain a building permit from the company can apply for a new landline connection online (www.ptcl.com.pk) or by One Window Operation (OWO) office of the Capital Development calling the helpline at 0800 8 0800. In order to obtain a commercial landline connec- Authority (CDA) tion, the company must provide the following information: Time: 45 days a. National identity card number and contact details of the applicant; Cost: PKR 140,000 (building approval fee of PKR 10 per square foot of covered area) b. Company registration number and national tax number; Comments: The building company must apply for the building plan approval to the c. Address where the connection will be installed. OWO of CDA submitting the following documents: The PTCL lineman will install the new landline connection within 7 days of place- a. Four sets of building plans; ment of the order. b. Ownership documents; c. Particulars of the licensed professionals employed to prepare the plan and super- Procedure 8*. Receive electricity inspection from Islamabad vise work, including the professional registration number; Electric Supply Company (IESCO) d. Specification of the building’s intended use; Time: 1 day e. Full particulars of the land plot with a specification of its intended use (such as Cost: No cost residential, commercial, etc.). Concerned staff of CDA scrutinize these documents to confirm their orderliness and Procedure 9*. Receive inspection from the Water and Sewerage whether the plans comply with the regulations or bylaws of the CDA Ordinance Development Directorate of the Capital Development Authority (1960). (CDA) Time: 1 day Procedure 3. Request foundation inspection from the Capital Cost: No cost Development Authority (CDA) Time: 1 day Procedure 10. Submit completion notice to the One Window Cost: No cost Operation (OWO) office of the Capital Development Authority (CDA) Procedure 4. Receive foundation inspection from the Capital Time: 1 day Development Authority (CDA) Cost: PKR 70,000 (completion certificate fee) Time: 5 days Comments: Within one month of completion of the works, the building company Cost: No cost must submit a notice of completion to the CDA along with the following documents: a. Four sets of completion drawings signed by the architect and by the attorney-in- Procedure5. Request water and sewerage connection at the practice; One Window Operation (OWO) office of the Capital Development b. Power of attorney to act on behalf of the company and a copy of the national Authority (CDA) identification card of the attorney-in-practice. Time: 75 days Cost: PKR 75,000 Procedure 11*. Receive final inspection by the Capital Comments: The building company must submit the following documents to the Development Authority (CDA) CDA: Time: 1 day a. Water supply agreement form; Cost: No cost b. Form A-3 along with its enclosures; Comments: CDA officials inspect the building to verify that it has been completed c. Copy of the national identity card of the applicant; according to the completion plan. d. Copy of allotment letter; Procedure 12*. Receive completion certificate from the Capital c. Copy of possession letter; Development Authority (CDA) e. Copy of approval plan. Time: 12 days Procedure 6*. Request and obtain electricity connection from Cost: No cost Islamabad Electric Supply Company (IESCO) * This procedure can be completed simultaneously with previous procedures. Time: 55 days Cost: PKR 228,000 Comments: The building company must submit an application to IESCO along with the following documents: a. Copy of approved building plan and letter of approval; b. Wiring test report; c. Copy of a neighbor’s electricity bill; 76 DOING BUSINESS IN PAKISTAN 2010 DEALING WITH CONSTRUCTION PERMITS g. Letter from the owner, or the owner’s attorney, authorizing a named professional Karachi, Sindh whose license or registration number should also be provided, to complete and Procedures to build a warehouse comply with the requirements of the Sindh Building Control Ordinance of 1979 (and amendments), and with the requirements of the Karachi Building and Town Warehouse value: USD 149,056 = PKR 9,800,000 Planning Regulations of 2002 (and amendments). The letter should also indicate Data as of: December 2009 that a plinth certificate notice will be provided at the completion of the plinth level as required under Section 3-2.10 of the Karachi Building and Town Planning Procedure 1. Obtain letter from concerned authority confirming Regulations of 2002. The letter should also specify that the owner will abide by the land title all the aforementioned rules and regulations, and it must be signed by the owner Time: 30 days or the owner’s attorney, contain his or her national identity card number, email Cost: No cost address, mailing and permanent address, and telephone number as well as the Comments: The company must obtain a letter from the concerned authority signature and particulars of the architect and structural engineer. confirming the title or land use, the dimensions of the plot, and the possible 7. A form specifying the architect’s and structural engineer’s undertaking: existence of any road widening, cut line, or reservation. In Karachi, the lands are The KBCA operates under the Sindh Building Control Ordinance 1979, and falls under administered by various authorities, such as the Karachi Development Authority, the the control of the Minister for Local Government, Katchi Abadis and Spatial Develop- Karachi Municipal Corporation and the Board of Revenue, Government of Sindh. If ment Department, Government of Sindh. The Minister for Local Government, Katchi the land falls under the authority of the Karachi Municipal Corporation, for example, Abadis and Spatial Development Department acts as chief executive of KBCA. the required letter or certificate must be obtained from that same authority. If the property is in a military cantonment jurisdiction, the company must send the documents to the Cantonment Board, which takes about 30 days. The model consid- Procedure 2. Obtain building permit ered here assumes that the property is not located in this type of jurisdiction. Time: 60 days Cost: PKR 140,000 Procedure 3. Notify the Karachi Building Control Authority Comments: An application form must be submitted to the Karachi Building Control (KBCA) in writing of the completion of foundations Authority (KBCA) along with the following documents: Time: 1 day 1. A building plan, together with: Cost: No cost a. Full particulars of the land plot with a specification of its intended use (residen- Comments: Upon completion of the plinth level, the building company is required tial, commercial); to notify the KBCA so that the latter can verify the building lines. b. Two sets of all documents relating to the plot and a letter from the relevant authority confirming the title or land use, the plot dimensions, and the possible Procedure 4. Receive foundations work inspection from the existence of any road widening, cut line, or reservation. Karachi Building Control Authority (KBCA) 2. A plan description: Time: 15 days a. Any proposed and/or revised addition and/or alteration; Cost: No cost b. Any previous approval, if applicable; Comments: With the exception of Category 1 building works, Regulation No. 3-2.10 c. Details of any litigation relating to the plot. of the 2002 Regulations requires the building company to notify the KBCA upon completion of the plinth level and, in the case of a basement, upon completion of Note: The drawings should show plans, sections, and elevations, together with other foundations, so that KBCA can verify the building lines. Regulation No. 3-2.10 also necessary details pertaining to RCC elements, joinery work, covered areas, and the indicates that no further work can be carried out for the 15-day period following the like, of every floor, including the basement, if there is one. In addition, a block plan of notification date. the site, drawn to a scale of not less than 1:500 (1”:8’) should be included. Such plan and sections should show the building’s intended use; the access to and from the During this period, the KBCA either approves the building lines or informs the owner various parts of the building; the position dimensions; the means of ventilation; the or owner’s representative of any possible errors found. If no response is received proposed plinth height; the superstructure at each floor level; and the dimensions from the KBCA within the 15-day period, the owner can proceed with the building and descriptions of all the walls, floors, roofs, staircases, elevators, and the like. works after notifying the KBCA, provided that the construction is consistent with the approved building plan. 3. A description of the proposed construction: a. Type of building; Procedure 5. Request electricity connection b. Total floor area; Time: 75 days c. Number of floors; Cost: PKR 228,000 d. Number of units (for public sale projects only); Comments: To apply for electricity connection, an application form is to be submit- e. Parking spaces; ted to the Karachi Electric Supply Corporation Limited, along with the following f. Area of amenity space. documents: 4. Particulars of the licensed professionals employed to prepare the plan and super- a. Application form, duly verified by a licensed electrical contractor; vise the work: b. Copy of the applicant’s national identity card; a. Name; c. Copy of approved building plan (excluding projects approved for members of b. License number/professional registration number from the Public Engineering ABAD); Council (PEC); d. Copy of the letter under cover of which the approved building plan was issued. c. National identity card number; d. Mailing and permanent address and telephone number; Procedure 6*. Request telephone connection e. Office address and telephone number. Time: 7 days 5. A specification of the building’s intended use (i.e., whether it is destined for public Cost: PKR 750 sale). Comments: As a result of the recent improvements of PTCL services, the building 6. A list of other documents to be attached to the application (photocopies should company can apply for a new landline connection online (www.ptcl.com.pk) or by be duly attested by the professional): calling the helpline at 0800 8 0800. In order to obtain a commercial landline connec- tion, the company must provide the following information: a. Lease/sale deed, allotment order, mutation (or transfer) order (or extract); a. National identity card number and contact details of the applicant; b. Possession order; b. Company registration number and national tax number; c. Acknowledgment of possession; c. Address where the connection will be installed. d. Site plan; The PTCL lineman will install the new landline connection within 7 days of place- e. No-objection certificate (NOC), if applicable; ment of the order. f. National identity card; LIST OF PROCE %63&4t DEALING WITH CONSTRUCTION PERMITS 77 DEALING WITH CONSTRUCTION PERMITS Procedure 7*. Obtain copy of property tax valuation and copy of the certificate from the tax authorities Lahore, Punjab Time: 30 days Procedures to build a warehouse Cost: No cost Warehouse value: USD 149,056 = PKR 9,800,000 Comments: The company must obtain a copy of the property tax valuation and a Data as of: December 2009 copy of the certificate from the tax authorities, confirming that the company does not owe them any money. These documents are submitted along with the water Procedure 1. Request and obtain building plan approval from connection application. Lahore Development Authority (LDA) The Excise and Taxation Department of the Government of Sindh provides the Time: 45 days property tax valuation after the building is completed. The department inspects Cost: PKR 70,000 (building approval fee of PKR 5 per square foot of covered area) the building and issues a certificate to the owner of the building. The certificate Comments: According to the Building and Zoning Bye Laws of 2007, to get approval provides an assessment of the value of the building. If the building company has to execute the works, the building company must apply in writing to the Building any objections to this assessment, it is required to make them known within 14 Department of Lahore Development Authority (LDA) and submit the following days. Otherwise, the department issues a PT-1 Form, a certificate that provides the documents: assessed value of the property and the resultant property tax to be charged. a. Application form signed by the registered architect, the attorney-in-practice, and The documents needed are the following: a registered structural engineer; a. Application providing information relating to the building; b. Five sets of building plans (site plan, architectural drawings with elevations and b. Title documents/ documents evidencing title of the property; sections, structural drawings, and stability certificate), each signed by the relevant c. Approved building plan; professional (either the architect or the structural engineer); d. National identity card of the applicant. c. Proof of ownership (copy of the sale deed, copy of the allotment letter, or fard); d. Copy of the company’s memorandum of incorporation; Procedure 8. Receive inspection from the Excise and Taxation e. Power of attorney to act on behalf of the company and a copy of the national Department identification card of the attorney-in-practice. Time: 1 day The building company must pay building approval fees of PKR 5 per square foot of Cost: No cost covered area. When approved, the building company receives a signed copy of the drawings and a letter of approval. Procedure 9*. Request water and sewerage connection If the building company does not receive a response to its application within 45 Time: 60 days days of submission, it can send a written communication by registered post to the relevant TMA. If such communication is not answered within 15 days, the building Cost: PKR 90,000 company can assume that the building plan approval has been granted and start Comments: An application form is to be submitted to the Karachi Water and Sewer- construction (as per Art. 27.6, Section 192, Fourth Schedule, Chapter 14 of the age Board along with the following documents to apply for water and sewerage Punjab Local Government Ordinance, 2001). connection: a. Copy of the approved building plan along with a copy of the letter under cover of Procedure 2. Request and receive inspection at foundation level which the approved building plan was issued by the KBCA; from Lahore Development Authority (LDA) b. Proof of ownership of the plot, or, for a tenancy, a copy of the lease agreement; Time: 2 days c. Copy of the property tax valuation; Cost: No cost d. Copy of the certificate from the tax authorities, confirming that the company Comments: Inspectors from LDA must inspect the building site when the founda- owes them no money; tions have been laid. Inspections are free of cost. e. Copy of the applicant’s national identity card. Procedure 3. Receive inspection from Lahore Development Procedure 10. Apply for occupancy permit and request final Authority (LDA) inspection Time: 1 day Time: 1 day Cost: No cost Cost: No cost Comments: After the building is completed, a “notice of completion and permission Procedure 4. Request and obtain electricity connection from for occupation” form is to be submitted along with the architect’s certificate. After Lahore Electric Supply Company (LESCO) receipt of this notice, the KBCA inspects the building to verify that it has been built Time: 60 days according to the approved plans. Cost: PKR 228,000 Comments: The building company must submit an application to LESCO along with Procedure 11*. Receive final inspection the following documents: Time: 1 day a. Copy of the approved building plan and of the letter of approval; Cost: No cost b. Wiring test report; Procedure 12. Receive completion certificate from the Karachi c. Copy of a neighbor’s electricity bill; Building Control Authority (KBCA) d. Proof of ownership of the plot; Time: 51 days e. Copy of the company’s memorandum of incorporation; Cost: No cost f. Power of attorney to act on behalf of the company and a copy of the national identification card of the attorney-in-practice; * This procedure can be completed simultaneously with previous procedures. g. Affidavit declaring that the building company has no arrears with LESCO. The electricity supply company will inspect the site and issue an assessment letter. The company receives the connection upon payment of the established connection fees. A detailed description of procedures and fees and downloadable application forms are available at www.lesco.gov.pk. Procedure 5*. Receive electricity inspection from Lahore Electric Supply Company (LESCO) Time: 1 day Cost: No cost 78 DOING BUSINESS IN PAKISTAN 2010 DEALING WITH CONSTRUCTION PERMITS Procedure 6*. Request and obtain water and sewerage connection from the Water and Sanitation Agency (WASA) Multan, Punjab Time: 30 days Procedures to build a warehouse Cost: PKR 10,000 Warehouse value: USD 149,056 = PKR 9,800,000 Comments: The Water and Sanitation Agency (WASA) of Lahore is an agency of Data as of: December 2009 the Lahore Development Authority created by the LDA Act of 1975. WASA Lahore is responsible for the provision of water and sewerage to all areas (both those admin- Procedure 1. Request and obtain land record (record fard) from istered by TMAs and by LDA) within the approved scheme area. In order to obtain a the local Patwari connection to water and sewerage the following documents must be submitted: Time: 21 days a. Copy of the approved building plan; Cost: PKR 40 b. Application form; Comments: The building company must obtain a land record (record fard) from c. Attested copy of the national identity card of the applicant; the relevant Patwari at the Revenue Department. The request can be done either in person or in writing and the building company must specify the purpose of the d. Attested copy of the sale deed/proof of ownership; certified copy, i.e., to apply for a building permit. The building company must submit e. Site plan indicating location of property. the following documents when requesting the fard: After the application has been submitted, technical staff from WASA will be sent to a. Copy of the certificate of incorporation; inspect the site. After inspection they will provide the building company with a copy b. Power of attorney in favor of the person to act on behalf of the company; of the assessment of the materials needed and the fee charged for connection. c. Proof of ownership: land title or sale deed. Procedure 7*. Receive inspection from the Water and Sanitation The fard specifies the land use and plot size and confirms ownership. The building Agency (WASA) company must pay the following fees: Time: 1 day a. Rural areas: PKR 20 per copy; Cost: No cost b. Urban areas: PKR 40 per copy. Procedure 8*. Request and obtain telephone connection from Procedure 2. Request and obtain building plan approval from Pakistan Telecommunication Company Limited (PTCL) the Town Municipal Administration (TMA) Time: 7 days Time: 37 days Cost: PKR 750 (amount paid with the first bill) Cost: PKR 42,000 (scrutiny fee PKR 3 per square foot of covered area) Comments: As a result of the recent improvements of PTCL services, the building Comments: According to the TMA Multan Building and Zoning Regulations of Sep- company can apply for a new landline connection online (www.ptcl.com.pk) or by tember 2007, to obtain approval to execute the works, the building company must calling the helpline at 0800 8 0800. In order to obtain a commercial landline connec- apply in writing to the Town Officer (Planning and Coordination) of the relevant TMA tion, the company must provide the following information: and submit the following documents: a. National identity card number and contact details of the applicant; a. Application form signed by the registered architect and by the attorney-in-prac- tice; b. Company registration number and national tax number; b. Three sets of architectural drawings; c. Address where the connection will be installed. c. Three sets of structural drawings (for buildings taller than 2 floors); The PTCL lineman will install the new landline connection within 7 days of place- ment of the order. d. Record fard; e. Copy of the title deed; Procedure 9. Submit completion notice and request final f. Copy of the company’s memorandum of incorporation; inspection from Lahore Development Authority (LDA) g. Power of attorney to act on behalf of the company and a copy of the national Time: 1 day identification card. Cost: No cost The building company must pay building scrutiny fees of PKR 3 per square foot of Comments: After the building is completed, the building company must submit the covered area at the TMA office. When approved, the building company receives a following documents to the Building Department of LDA in order to receive the final signed copy of the drawings and a letter of approval. inspection and the completion certificate: If the building company does not receive a response to its application within 45 a. Completion notice; days of submission, it can send a written communication by registered post to the relevant TMA. If such communication is not answered within 15 days, the building b. Plans of the building as completed, signed by a licensed architect. company can assume that the building plan approval has been granted and start construction (as per Art. 27.6, Section 192, Fourth Schedule, Chapter 14 of the Procedure 10*. Receive final inspection from Lahore Punjab Local Government Ordinance, 2001). Development Authority (LDA) Time: 1 day Procedure 3. Receive inspection from the Town Municipal Cost: No cost Administration (TMA) Comments: Once the completion notice has been received by LDA, an inspector Time: 1 day inspects the building to verify that construction has been carried out according to Cost: No cost the approved building plan and standards set by the bylaws. Procedure 4. Request and obtain electricity connection from Procedure 11*. Receive completion certificate from Lahore Multan Electric and Power Supply Company (MEPCO) Development Authority (LDA) Time: 45 days Time: 36 days Cost: PKR 228,000 Cost: No cost Comments: The building company must submit an application to MEPCO along with Comments: After the final inspection has taken place, and provided that the works the following documents: have been carried out according to the approved building plan, the Lahore Develop- a. Copy of approved building plan and letter of approval; ment Authority (LDA) issues a certificate of completion. b. Wiring test report; * This procedure can be completed simultaneously with previous procedures. c. Copy of a neighbor’s electricity bill; d. Proof of ownership of the plot; e. Copy of the company’s memorandum of incorporation; LIST OF PROCE %63&4t DEALING WITH CONSTRUCTION PERMITS 79 f. Power of attorney to act on behalf of the company and a copy of the national Procedure 11*. Receive completion certificate from the Town identification card of the attorney-in-practice; Municipal Administration (TMA) g. Affidavit declaring that the building company has no arrears with MEPCO. Time: 44 days The electricity supply company will inspect the site and issue an assessment letter. Cost: No cost The company receives the connection upon payment of the established connection Comments: After the final inspection has taken place, and provided that the works fees. The application process is described online at www.mepco.com.pk, but the have been carried out according to the approved building plan, the Town Municipal application forms are not available for download. Officer of TMA issues a certificate of completion (as per Art.10.9.3 of TMA Multan Building and Zoning Bye Laws, 2007). Procedure 5*. Request and obtain water and sewerage connection from the Water and Sanitation Agency (WASA) * This procedure can be completed simultaneously with previous procedures. Time: 30 days Cost: PKR 1,500 DEALING WITH CONSTRUCTION PERMITS Comments: The building company must submit an application form to the Water Peshawar, Khyber Pakhtunkhwa and Sanitation Agency (WASA) along with the following documents: Procedures to build a warehouse a. Copy of the approved building plan; Warehouse value: USD 149,056 = PKR 9,800,000 b. Copy of title documents; Data as of: December 2009 c. Copy of the company’s memorandum of incorporation; d. Power of attorney to act on behalf of the company and a copy of the national Procedure 1. Request and obtain letter confirming the land title identification card of the attorney-in-practice. from the Revenue Department Time: 15 days Procedure 6*. Request and obtain telephone connection from Cost: PKR 250 Pakistan Telecommunication Company Limited (PTCL) Comments: The building company must obtain a letter from the Revenue Depart- Time: 7 days ment confirming the land title and use and dimensions of the plot. Cost: PKR 750 (amount paid with the first bill) Comments: As a result of the recent improvements of PTCL services, the building Procedure 2. Request and obtain approval of building plan from company can apply for a new landline connection online (www.ptcl.com.pk) or by the Town Municipal Authority (TMA) calling the helpline at 0800 8 0800. In order to obtain a commercial landline connec- Time: 30 days tion, the company must provide the following information: Cost: PKR 70,000 a. National identity card number and contact details of the applicant; Comments: In order to obtain approval to execute the works, the building company b. Company registration number and national tax number; must apply in writing to the Building Control Agency of TMA and provide the c. Address where the connection will be installed. following documents: The PTCL lineman will install the new landline connection within 7 days of place- a. Application form with company and project details; ment of the order. b. Four sets of submission drawings (architectural drawings with sections and eleva- tions; specifications on openings; details on foundations and sewerage line; and Procedure 7*. Receive electricity inspection from Multan Electric key and site plan); and Power Supply Company (MEPCO) c. Copy of the title deed (proof of ownership); Time: 1 day d. Copy of the company’s memorandum of incorporation; Cost: No cost e. Power of attorney to act on behalf of the company and a copy of the national identification card of the attorney-in-practice. Procedure 8*. Receive inspection from the Water and Sanitation The building approval fee of PKR 5 per square foot of covered area is paid using a Agency (WASA) bank challan (invoice). The officials responsible for the issuance of building plan ap- Time: 1 day provals meet twice a month to assess the applications and issue the approvals. Cost: No cost Procedure 3*. Pay building plan approval fees at a bank using a Procedure 9. Submit completion notice and request final challan inspection from the Town Municipal Administration (TMA) Time: 1 day Time: 1 day Cost: No cost Cost: No cost Comments: Within one month of the completion of the works, the building Procedure 4. Request and receive foundation inspection from company must submit the following documents to the Town Officer (Planning and the Building Control Authority (BCA) of the TMA Coordination) of the TMA in order to receive the final inspection and the completion Time: 1 day certificate (as per Art. 10.9.1 of TMA Multan Building and Zoning Bye Laws, 2007): Cost: No cost a. Completion notice; b. Plans of the building as completed, signed by a licensed architect. Procedure 5. Receive site inspection from the Building Control Authority (BCA) of the TMA Procedure 10*. Receive final inspection from the Town Municipal Time: 1 day Administration (TMA) Cost: No cost Time: 1 day Cost: No cost Procedure 6. Request electricity connection from Peshawar Comments: Once the completion notice has been received by the TMA, an inspector Electric Supply Company (PESCO) from the Town Office (Planning and Coordination) inspects the building to verify Time: 40 days that construction has been carried out according to the approved building plan Cost: PKR 228,000 and standards set by the bylaws (as per Art. 10.9.2 of the TMA Multan Building and Comments: In order to obtain the electricity connection, the building company Zoning Bye Laws, 2007). must submit the following documents to PESCO: a. Application and agreement form (with load details); 80 DOING BUSINESS IN PAKISTAN 2010 b. Abridged conditions of supply; Procedure 13*. Receive final inspection from the Town Municipal c. Attested copy of I.D. card of applicant; Administration (TMA) d. Attested copy of I.D. card of a witness; Time: 1 day e. Proof of ownership; Cost: No cost f. Affidavit; Comments: An inspector from the TMA Building Control Agency inspects the g. Memorandum and articles of association; building to verify that construction has been carried out according to the approved building plan and standards set by the bylaws. h. Form-29 (list of directors); i. Form-A (list of shareholders); Procedure 14*. Receive completion certificate from the Town j. Resolution from Board of Directors in favor of signatory. Municipal Administration (TMA) The electricity supply company will inspect the site and issue an assessment letter. Time: 35 days The company receives the connection upon payment of the established connection fees. Information on the application process and fees and downloadable application Cost: No cost forms are available at www.pesco.gov.pk. Comments: After the final inspection has taken place, and provided that the works have been carried out according to the approved building plan, the TMA issues a Procedure 7*. Request and obtain water connection from the certificate of completion. Public Health Department * This procedure can be completed simultaneously with previous procedures. Time: 14 days Cost: PKR 4,000 DEALING WITH CONSTRUCTION PERMITS Comments: To obtain the water connection, the building company must submit an application along with the following documents: Quetta, Balochistan a. Copy of the approved building plan; Procedures to build a warehouse b. Copy of the company’s memorandum of incorporation; Warehouse value: USD 149,056 = PKR 9,800,000 c. Power of attorney to act on behalf of the company and a copy of the national Data as of: December 2009 identification card of the attorney-in-practice. Procedure 1. Request and obtain letter confirming the land title from the Revenue Department Procedure 8*. Request and obtain telephone connection from Pakistan Telecommunication Company Limited (PTCL) Time: 30 days Time: 7 days Cost: PKR 40 Cost: PKR 750 (amount paid with the first bill) Comments: The building company must obtain a letter from the Revenue Depart- ment confirming the land title and use and dimensions of the plot. Comments: As a result of the recent improvements of PTCL services, the building company can apply for a new landline connection online (www.ptcl.com.pk) or by Procedure 2. Request and obtain a building plan approval from calling the helpline at 0800 8 0800. In order to obtain a commercial landline connec- tion, the company must provide the following information: the Town Municipal Administration (TMA) a. National identity card number and contact details of the applicant; Time: 60 days b. Company registration number and national tax number; Cost: PKR 84,200 (PKR 200 application fee + PKR 28,000 inspection fee + PKR 28,000 covered area charges + PKR 28,000 road charges) c. Address where the connection will be installed. Comments: In order to obtain approval to execute the works, the building company The PTCL lineman will install the new landline connection within 7 days of place- must apply in writing to the Town Officer (Planning and Coordination) of the relevant ment of the order. TMA and submit the following documents: a. Application form signed by a licensed architect and by the attorney-in-practice; Procedure 9*. Request and obtain sewerage connection from the Town Municipal Administration (TMA) b. Three sets of submission drawings (plans, elevations, sections, site plan, founda- tion details, specifications and details of openings, details regarding the building Time: 4 days company, and plot number in which the building is to be built); Cost: PKR 1,000 c. Letter confirming the land title; Comments: The building company must apply for the sewerage connection to the d. Letter of the building company that describes the project; TMA and pay the relevant fee. e. Copy of the company’s memorandum of incorporation; Procedure 10*. Receive electricity inspection from Peshawar f. Power of attorney to act on behalf of the company and a copy of the national Electric Supply Company (PESCO) identification card. Time: 1 day The building company must pay the building approval fees at the designated bank (National Bank of Pakistan). The following fees will be charged: Cost: No cost 1. Application fee: PKR 200; Procedure 11*. Receive inspection from the Public Health 2. Inspection fee: PRK 2 per square foot; Department 3. Covered-area charges: PKR 2 per square foot; Time: 1 day 4. Road charges: PKR 2 per square foot; Cost: No cost 5. Debris charges: PKR 25 (refundable after completion of the construction). When approved, the building company receives a signed copy of the drawings and a Procedure 12. Apply for completion certificate and request final letter of approval. inspection from the Town Municipal Administration (TMA) If the building company does not receive a response to its application within 45 Time: 1 day days of submission, it can send a written communication by registered post to the Cost: No cost relevant TMA. If such communication is not answered within 15 days, the building company can assume that the building plan approval has been granted and start Comments: Upon completion of the works, the building company must submit a construction (as per Art. 27.6, Section 195, Sixth Schedule, Chapter 19 of the Bal- notice of completion to the Building Control Agency of the TMA in order to receive ochistan Local Government Ordinance, 2001). final inspection and completion certificate. LIST OF PROCE %63&4t DEALING WITH CONSTRUCTION PERMITS 81 Procedure 3*. Pay building plan approval fees at a bank using a Procedure 10*. Receive electricity inspection from Quetta Electric challan Supply Company (QUESCO) Time: 1 day Time: 1 day Cost: No cost Cost: No cost Comments: The building company must pay the established fees at the National Bank of Pakistan using a bank challan. Procedure 11*. Receive inspection from the Water and Sanitation Agency (WASA) Procedure 4. Request and obtain foundation inspection from the Time: 1 day Town Municipal Administration (TMA) Cost: No cost Time: 1 day Cost: No cost Procedure 12. Submit completion notice and request final inspection from the Town Municipal Administration (TMA) Procedure 5. Request and obtain plinth-level and slab inspection Time: 1 day from the Town Municipal Administration (TMA) Cost: No cost Time: 1 day Comments: After the building is completed, the building company must notify the Cost: No cost completion of the works to the Town Officer of the relevant TMA. After the notifica- tion has been submitted, the inspectors of Town Office (Planning and Coordination) Procedure 6. Request and obtain first-floor inspection from the inspect the building to verify that construction has been carried out according to the Town Municipal Administration (TMA) approved building plan. Time: 1 day Procedure 13*. Receive final inspection from the Town Municipal Cost: No cost Administration (TMA) Procedure 7. Request and obtain electricity connection from Time: 1 day Quetta Electric Supply Company (QUESCO) Cost: No cost Time: 70 days Procedure 14*. Receive completion certificate from the Town Cost: PKR 228,000 Municipal Administration (TMA) Comments: The building company must submit an application to QUESCO along Time: 31 days with the following documents: Cost: No cost a. Copy of approved building plan and letter of approval; b. Wiring test report; * This procedure can be completed simultaneously with previous procedures. c. Copy of a neighbor’s electricity bill; d. Proof of ownership of the plot; DEALING WITH CONSTRUCTION PERMITS e. Copy of the company’s memorandum of incorporation; Rawalpindi, Punjab f. Power of attorney to act on behalf of the company and a copy of the national Procedures to build a warehouse identification card of the attorney-in-practice; Warehouse value: USD 149,056 = PKR 9,800,000 g. Affidavit declaring that the building company has no arrears with QUESCO. Data as of: December 2009 The electricity supply company will inspect the site and issue an assessment letter. The company receives the connection upon payment of the established connection Procedure 1. Request and obtain land record (record fard) from fees. the local Patwari Time: 20 days Procedure 8*. Request and obtain water and sewerage Cost: PKR 40 connection from the Water and Sanitation Agency (WASA) Comments: The building company must obtain a land record (record fard) from the Time: 42 days local Patwari at the Revenue Department. The request can be done either in person Cost: PKR 5,000 (water connection charges) or in writing and the building company must specify the purpose of the certified Comments: In order to obtain a connection to the water and sewerage system, the copy, i.e., to apply for a building permit. The building company must submit the building company must submit an application to the Sub-divisional Officer of WASA following documents when requesting the fard: along with the following documents: a. Copy of the certificate of incorporation; a. Stamp paper for water connection; b. Power of attorney in favor of the person to act on behalf of the company; b. Copy of a neighbor’s utility bill; c. Proof of ownership: land title or sale deed. c. Copy of the company’s memorandum of incorporation; The fard specifies the land use and plot size and confirms ownership. The building d. Power of attorney to act on behalf of the company and a copy of the national company must pay the following fees: identification card. 1. Rural areas: PKR 20 per copy; 2. Urban areas: PKR 40 per copy. Procedure 9*. Request and obtain telephone connection from Pakistan Telecommunication Company Limited (PTCL) Procedure 2. Request and obtain a building permit from the Time: 7 days Town Municipal Administration (TMA) Cost: PKR 750 (amount paid with the first bill) Time: 35 days Comments: As a result of the recent improvements of PTCL services, the building Cost: PKR 70,000 (scrutiny fee of PKR 5 per square foot of covered area) company can apply for a new landline connection online (www.ptcl.com.pk) or by Comments: According to the TMA Rawalpindi Building and Zoning Regulations of calling the helpline at 0800 8 0800. In order to obtain a commercial landline connec- 2007, to get the approval to execute the works, the building company must apply in tion, the company must provide the following information: writing to the Town Officer (Planning and Coordination) of the concerned TMA and a. National identity card number and contact details of the applicant; submit the following documents: b. Company registration number and national tax number; a. Application form signed by the registered architect and by the attorney-in-prac- c. Address where the connection will be installed. tice; The PTCL lineman will install the new landline connection within 7 days of place- b. Five sets of submission drawings (architectural drawings with elevations and ment of the order. sections, details about floors and roof, site plan, diagram of the sewerage disposal system, and area statement); c. Record Fard; 82 DOING BUSINESS IN PAKISTAN 2010 d. Copy of the memorandum of incorporation of the company; a. National identity card number and contact details of the applicant; e. Power of attorney to act on behalf of the company and a copy of the national b. Company registration number and national tax number; identification card. c. Address where the connection will be installed. The building company has to pay a scrutiny fee of PKR 5 per square foot of covered The PTCL lineman will install the new landline connection within 7 days of place- area. The fee can be paid directly at the TMA or through a bank challan. ment of the order. When approved, the building company receives a signed copy of the drawings and a letter of approval. Procedure 8*. Receive electricity inspection from Islamabad If the building company does not receive a response to its application within 45 Electric Supply Company (IESCO) days of submission, it can send a written communication by registered post to the Time: 1 day relevant TMA. If such communication is not answered within 15 days, the building Cost: No cost company can assume that the building plan approval has been granted and start construction (as per Art. 27.6, Section 192, Fourth Schedule, Chapter 14 of the Punjab Local Government Ordinance, 2001). Procedure 9*. Receive inspection from the Water and Sanitation Agency (WASA) Procedure 3. Request and receive setting out inspection from Time: 1 day the Town Municipal Administration (TMA) Cost: No cost Time: 1 day Cost: No cost Procedure 10. Submit completion notice and request final inspection from the Town Municipal Administration (TMA) Comments: After outlining the structure of the building on the ground, the building company must notify the Town Officer (Planning and Coordination) of the relevant Time: 1 day TMA. An authorized official of TMA will inspect the site and verify that the operation Cost: No cost has been carried out according to the approved building plan. Comments: Within one month of completion of the works, the building company must submit a notice of completion to the Town Officer (Planning and Coordination) Procedure 4. Receive inspection by the Town Municipal of the TMA in order to receive final inspection and completion certificate. (as per Art. Administration (TMA) 10.9.1 of TMA Rawalpindi Building and Zoning Bye Laws, 2007). Time: 1 day Cost: No cost Procedure 11*. Receive final inspection from the Town Municipal Administration (TMA) Procedure 5. Request and obtain electricity connection from Time: 1 day Islamabad Electric Supply Company Limited (IESCO) Cost: No cost Time: 70 days Comments: Once the completion notice has been received by the TMA, an inspector Cost: PKR 228,000 from the Town Office (Planning and Coordination) inspects the building to verify that construction has been carried out according to the approved building plan and Comments: The building company must submit an application to IESCO along with standards set by the bylaws (as per Art. 10.9.2 of the TMA Rawalpindi Building and the following documents: Zoning Bye Laws, 2007). a. Copy of the approved building plan and letter of approval; b. Wiring test report; Procedure 12*. Receive completion certificate from the Town c. Copy of a neighbor’s electricity bill; Municipal Administration (TMA) d. Proof of ownership of the plot; Time: 23 days e. Copy of the company’s memorandum of incorporation; Cost: No cost f. Power of attorney to act on behalf of the company and a copy of the national Comments: After the final inspection has taken place, and provided that the works identification card of the attorney-in-practice; have been carried out according to the approved building plan, the Town Municipal g. Affidavit declaring that the building company has no arrears with IESCO. Officer of TMA issues a certificate of completion (as per Art.10.9.3 of TMA Rawalpindi Building and Zoning Bye Laws, 2007). The electricity supply company will inspect the site and issue an assessment letter. The company receives the connection upon payment of the established connection fees. A detailed description of procedures and fees and downloadable application * This procedure can be completed simultaneously with previous procedures. forms are available at www.iesco.com.pk. DEALING WITH CONSTRUCTION PERMITS Procedure 6*. Request and obtain water and sewerage Sheikhupura, Punjab connection from the Water and Sanitation Agency (WASA) Procedures to build a warehouse Time: 25 days Warehouse value: USD 149,056 = PKR 9,800,000 Cost: PKR 6,425 Data as of: December 2009 Comments: The building company must submit an application form to the Water and Sanitation Agency (WASA) along with the following documents: Procedure 1. Request and obtain land record (record fard) and a. Copy of the letter of approval of the building plan; site plan (aks shajra) from the local Patwari b. Copy of the site plan; Time: 20 days c. Proof of ownership; Cost: PKR 80 (record fard and aks shajra) d. Copy of the company’s memorandum of incorporation; Comments: The building company must obtain a land record (record fard) and a site e. Power of attorney to act on behalf of the company and a copy of the national plan (aks shajra) from the local Patwari. The request can be made either in person or identification card of the attorney-in-practice. in writing. The fard specifies the land use and plot size and confirms ownership. The aks shajra is a site plan, sketched by the Patwari, that depicts the plot and surround- ing area. Procedure 7*. Request and obtain telephone connection from Pakistan Telecommunication Company Limited (PTCL) Procedure 2. Request and obtain a building plan approval from Time: 7 days the Tehsil Municipal Administration (TMA) Cost: PKR 750 (amount paid with the first bill) Time: 45 days Comments: As a result of the recent improvements of PTCL services, the building Cost: PKR 14,000 (scrutiny fee of PKR 1 per square foot of covered area) company can apply for a new landline connection online (www.ptcl.com.pk) or by calling the helpline at 0800 8 0800. In order to obtain a commercial landline connec- Comments: In order to obtain approval to execute the works, the building company tion, the company must provide the following information: must apply in writing to the Town Officer (Planning and Coordination) of the relevant TMA and submit the following documents: LIST OF PROCE %63&4t DEALING WITH CONSTRUCTION PERMITS 83 a. Application form; a. Copy of the company’s memorandum of incorporation; b. Five sets of architectural drawings; b. Power of attorney to act on behalf of the company and a copy of the national identification card; c. Structural drawings; c. Proof of ownership. d. Record fard; e. Aks shajra; Procedure 8*. Request and obtain telephone connection from f. Copy of the company’s memorandum of incorporation; Pakistan Telecommunication Company Limited (PTCL) g. Power of attorney to act on behalf of the company and a copy of the national Time: 7 days identification card of the attorney-in-practice. Cost: PKR 750 (amount paid with the first bill) The building company can pay the scrutiny fee either at the designated bank or Comments: As a result of the recent improvements of PTCL services, the building directly to the Building Plan Clerk of the TMA. When approved, the building company company can apply for a new landline connection online (www.ptcl.com.pk) or by receives a signed copy of the drawings and a letter of approval. calling the helpline at 0800 8 0800. In order to obtain a commercial landline connec- If the building company does not receive a response to its application within 45 tion, the company must provide the following information: days of submission, it can send a written communication by registered post to the a. National identity card number and contact details of the applicant; relevant TMA. If such communication is not answered within 15 days, the building company can assume that the building plan approval has been granted and start b. Company registration number and national tax number; construction (as per Art. 27.6, Section 192, Fourth Schedule, Chapter 14 of the c. Address where the connection will be installed. Punjab Local Government Ordinance, 2001). The PTCL lineman will install the new landline connection within 7 days of place- ment of the order. Procedure 3. Request plinth-level inspection from the Tehsil Municipal Administration (TMA) Procedure 9*. Receive electricity inspection from Lahore Electric Time: 1 day Supply Company (LESCO) Cost: No cost Time: 1 day Comments: Once the building has reached the plinth level (i.e. 2 feet above the Cost: No cost ground), the building company must stop the works and notify the Town Officer (Planning and Coordination) of TMA. Procedure 10*. Receive inspection from the Town Office (Infrastructure and Service) of the Tehsil Municipal Procedure 4. Receive plinth-level inspection from the Tehsil Administration (TMA) Municipal Administration (TMA) Time: 1 day Time: 3 days Cost: No cost Cost: No cost Comments: Once the building company has reached the plinth level, an inspector Procedure 11. Submit completion notice and request final from TO (P&C) of the TMA visits the construction site and verifies that construction is inspection from the Tehsil Municipal Administration (TMA) being carried out according to the approved building plan. The inspection results are Time: 1 day given immediately to the building company. If no inconsistency is found, the build- Cost: No cost ing company can resume the works immediately. Comments: After the building is completed, the building company must notify the Procedure 5. Receive inspection from the Tehsil Municipal Town Officer (Planning and Coordination) of the Tehsil Municipal Administration. After the notification has been submitted, inspectors of the Town Office (Planning Administration (TMA) and Coordination) will inspect the building to certify that construction has been Time: 1 day carried out according to the approved building plan. Cost: No cost Procedure 12*. Receive final inspection from the Tehsil Municipal Procedure 6. Request and obtain electricity connection from Administration (TMA) Lahore Electric Supply Company Limited (LESCO) Time: 1 day Time: 65 days Cost: No cost Cost: PKR 228,000 Comments: The building company must submit an application to LESCO along with Procedure 13*. Receive completion certificate from the Tehsil the following documents: Municipal Administration (TMA) a. Copy of the approved building plan and letter of approval; Time: 42 days b. Wiring test report; Cost: No cost c. Copy of a neighbor’s electricity bill; d. Proof of ownership of the plot; * This procedure can be completed simultaneously with previous procedures. e. Copy of the company’s memorandum of incorporation; DEALING WITH CONSTRUCTION PERMITS f. Power of attorney to act on behalf of the company and a copy of the national identification card of the attorney-in-practice; Sialkot, Punjab g. Affidavit declaring that the building company has no arrears with LESCO. Procedures to build a warehouse The electricity supply company will inspect the site and issue an assessment letter. Warehouse value: USD 149,056 = PKR 9,800,000 The company receives the connection upon payment of the established connection Data as of: December 2009 fees. A detailed description of procedures and fees and downloadable application forms are available at www.lesco.gov.pk. Procedure 1. Request and obtain letter confirming the land title from the local Patwari Procedure 7*. Request and obtain water and sewerage Time: 15 days connection from the Town Office (Infrastructure and Services) of Cost: PKR 40 the Tehsil Municipal Administration (TMA) Comments: The building company must obtain a land record (record fard) from the Time: 40 days local Patwari at the Revenue Department. The request can be done either in person Cost: PKR 2,500 or in writing and the building company must specify the purpose of the certified Comments: In order to obtain a connection to the water and sewerage systems, copy, i.e., to apply for a building permit. The building company must submit the the building company submits an application to the Town Office (Infrastructure and following documents when requesting the fard: Services) of TMA, along with the following documents: a. Copy of the certificate of incorporation; 84 DOING BUSINESS IN PAKISTAN 2010 b. Power of attorney in favor of the person to act on behalf of the company; Procedure 8. Request and obtain electricity connection from c. Proof of ownership: land title or sale deed. Gujranwala Electric and Power Supply Company (GEPCO) The fard specifies the land use and the plot size and confirms ownership. The build- Time: 45 days ing company must pay the following fees: Cost: PKR 228,000 1. Rural areas: PKR 20 per copy; Comments: The building company must submit an application to GEPCO along with 2. Urban areas: PKR 40 per copy. the following documents: a. Copy of the approved building plan and letter of approval; Procedure 2. Request and obtain a no-objection certificate (NOC) b. Wiring test report; from the Environmental Protection Agency (EPA) c. Copy of a neighbor’s electricity bill; Time: 30 days d. Proof of ownership of the plot; Cost: PKR 15,000 e. Copy of the company’s memorandum of incorporation; Comments: Every non-residential project must obtain a clearance from the District f. Power of attorney to act on behalf of the company and copy of the national Office of the Environmental Protection Agency (EPA) in Sialkot. The building identification card of the attorney-in-practice; company must submit a copy of the building plan along with a detailed description of the project. Inspectors from the EPA will visit the site and draft a report that will g. Affidavit declaring that the building company has no arrears with GEPCO. be examined along with the other documents submitted. If the building company The electricity supply company will inspect the site and issue an assessment letter. does not receive any answer within 30 days, it can be assumed that the no-objection The company receives the connection upon payment of the established connection certificate (NOC) has been granted. fees. A description of procedures and fees are available at www.gepco.com.pk. Procedure 3*. Receive inspection from the Environmental Procedure 9*. Request and obtain water and sewerage Protection Agency (EPA) connection from the Town Municipal Administration (TMA) Time: 1 day Time: 25 days Cost: No cost Cost: PKR 3,200 (water connection charges) Comments: In order to obtain a connection to the water and sewerage systems, the Procedure 4. Request and obtain a building permit from the building company must submit an application to the Town Office (Infrastructure and Town Municipal Administration (TMA) Service) of TMA along with the following documents: Time: 38 days a. Copy of the approved building plan along with a copy of the letter of approval; Cost: PKR 70,000 (scrutiny fee of PKR 5 per square foot of covered area) b. Proof of ownership of the plot. Comments: According to the TMA Sialkot Building and Zoning Regulations of 2007, c. Copy of the company’s memorandum of incorporation; to get approval to execute the works, the building company must apply in writing d. Power of attorney to act on behalf of the company and copy of the national to the Town Officer (Planning and Coordination) of the relevant TMA and submit the identification card of the attorney-in-practice. following documents: a. Application (Forms A and B) signed by a registered architect and by the attorney- Procedure 10*. Request and obtain telephone connection from in-practice; Pakistan Telecommunication Company Limited (PTCL) b. Six sets of submission drawings (building plan with sections and elevations, site Time: 7 days plan, and key plan) signed by a registered architect; Cost: PKR 750 (amount paid with the first bill) c. Record fard; Comments: As a result of the recent improvements of PTCL services, the building d. Copy of the company’s memorandum of incorporation; company can apply for a new landline connection online (www.ptcl.com.pk) or by e. Power of attorney to act on behalf of the company and copy of the national calling the helpline at 0800 8 0800. In order to obtain a commercial landline connec- identification card. tion, the company must provide the following information: The building company must pay building scrutiny fees of PKR 5 per square foot of a. National identity card number and contact details of the applicant; covered area at the TMA office. b. Company registration number and national tax number; When approved, the building company receives a signed copy of the drawings and a c. Address where the connection will be installed. letter of approval. The PTCL lineman will install the new landline connection within 7 days of place- If the building company does not receive a response to its application within 45 ment of the order. days of submission, it can send a written communication by registered post to the relevant TMA. If such communication is not answered within 15 days, the building Procedure 11*. Receive electricity inspection from Gujranwala company can assume that the building plan approval has been granted and start Electric and Power Supply Company (GEPCO) construction (as per Art. 27.6, Section 192, Fourth Schedule, Chapter 14 of the Punjab Local Government Ordinance, 2001). Time: 1 day Cost: No cost Procedure 5. Request and receive demarcation inspection from the Town Municipal Administration (TMA) Procedure 12*. Receive water and sewerage inspection from the Time: 3 days Town Municipal Administration (TMA) Cost: No cost Time: 1 day Comments: Inspectors from TMA inspect the building site after the demarcation of Cost: No cost the outline of the building. Procedure 13. Submit completion notice and request final Procedure 6. Receive inspection from the Town Municipal inspection from the Town Municipal Administration (TMA) Administration (TMA) Time: 1 day Time: 1 day Cost: No cost Cost: No cost Comments: In order to receive the final inspection and the completion certificate, the building company must submit the following documents to the Town Officer Procedure 7. Receive inspection from the Town Municipal (Planning and Coordination) of the TMA within one month of completion of the Administration (TMA) works (as per Art. 10.9.1 of TMA Sialkot Building and Zoning Bye Laws, 2007): Time: 1 day a. Completion notice; Cost: No cost b. Plans of the building as completed, signed by a licensed architect. LIST OF PROCE %63&4t DEALING WITH CONSTRUCTION PERMITS 85 Procedure 14*. Receive final inspection from the Town Municipal Comments: A team of inspectors from the Taluka Municipal Administration inspects Administration (TMA) the site and, after verifying that the works have been carried out according to the approved building plan, gives permission to continue the works. Time: 1 day Cost: No cost Procedure 5. Request and obtain electricity connection from Comments: Once the completion notice has been received by the TMA, an inspector Hyderabad Electric Supply Company (HESCO) from the Town Office (Planning and Coordination) inspects the building to verify Time: 75 days that construction has been carried out according to the approved building plan and standards set by the bylaws (as per Art. 10.9.2 of the TMA Sialkot Building and Cost: PKR 228,000 Zoning Bye Laws, 2007). Comments: The building company must submit an application to HESCO along with the following documents: Procedure 15*. Receive completion certificate from the Town a. Copy of the approved building plan and letter of approval; Municipal Administration (TMA) b. Wiring test report; Time: 29 days c. Copy of a neighbor’s electricity bill; Cost: No cost d. Proof of ownership of the plot; Comments: After the final inspection has taken place, and provided that the works e. Copy of the company’s memorandum of incorporation; have been carried out according to the approved building plan, the Town Municipal f. Power of attorney to act on behalf of the company and a copy of the national Officer of TMA issues a certificate of completion (as per Art.10.9.3 of TMA Sialkot identification card of the attorney-in-practice. Building and Zoning Bye Laws, 2007). The electricity supply company will inspect the site and issue an assessment letter. The company receives the connection upon payment of the connection fee. The * This procedure can be completed simultaneously with previous procedures. application form is available online at www.hesco.gov.pk. DEALING WITH CONSTRUCTION PERMITS Procedure 6*. Request and obtain water and sewerage Sukkur, Sindh connection from the Taluka Municipal Administration (TMA) Procedures to build a warehouse Time: 30 days Warehouse value: USD 149,056 = PKR 9,800,000 Cost: PKR 2,000 Data as of: December 2009 Comments: The building company must submit an application to the Town Office (Infrastructure and Services) of the Taluka Municipal Administration along with the Procedure 1. Request and obtain letter confirming the land title following documents: from the Revenue Department a. Copy of the approved building plan along with a copy of the letter of approval; Time: 21 days b. Proof of ownership of the plot; Cost: PKR 10 c. Copy of the company’s memorandum of incorporation; Comments: The building company must obtain a letter from the Revenue Depart- d. Power of attorney to act on behalf of the company and a copy of the national ment confirming the land title and use and dimensions of the plot. identification card of the attorney-in-practice. Procedure 2. Request and obtain a building permit from the Procedure 7*. Request and obtain telephone connection from Taluka Municipal Administration (TMA) Pakistan Telecommunication Company Limited (PTCL) Time: 30 days Time: 7 days Cost: PKR 70,000 Cost: PKR 750 (amount paid with the first bill) Comments: In order to obtain approval to execute the works, the building company Comments: As a result of the recent improvements of PTCL services, the building must apply in writing to the Town Office (Planning and Coordination) of the Taluka company can apply for a new landline connection online (www.ptcl.com.pk) or by Municipal Administration and submit the following documents: calling the helpline at 0800 8 0800. In order to obtain a commercial landline connec- a. Application form; tion, the company must provide the following information: b. Architectural drawings; a. National identity card number and contact details of the applicant; c. Structural drawings; b. Company registration number and national tax number; d. Fresh proof of ownership; c. Address where the connection will be installed. e. Copy of the company’s memorandum of incorporation; The PTCL lineman will install the new landline connection within 7 days of place- f. Power of attorney to act on behalf of the company and a copy of the national ment of the order. identification card of the attorney-in-practice. When approved, the building company receives a signed copy of the drawings and a Procedure 8*. Receive electricity inspection from Hyderabad letter of approval. Electric Supply Company (HESCO) If the building company does not receive a response to its application within 45 days Time: 1 day of submission, it can send a written communication by registered post to the Taluka Cost: No cost Municipal Administration. If such communication is not answered within 15 days, the building company can assume that the building plan approval has been granted Procedure 9*. Receive water and sewerage inspection from the and start construction (as per Art. 27.6 , Section 192, Sixth Schedule, Chapter 19 of Taluka Municipal Administration (TMA) the Sindh Local Government Ordinance, 2001). Time: 1 day Procedure 3. Request plinth-level inspection from the Taluka Cost: No cost Municipal Administration (TMA) Procedure 10. Submit completion notice and request final Time: 1 day inspection from the Taluka Municipal Administration (TMA) Cost: No cost Time: 1 day Comments: Once the works have reached plinth level, the building company must notify the Taluka Municipal Administration and wait for permission to continue. Cost: No cost Comments: After the building is completed, the building company must notify the Procedure 4. Receive plinth-level inspection from the Taluka Taluka Municipal Administration (TMA). After the notification has been submitted, Municipal Administration (TMA) TMA inspectors will carry out an inspection to certify that construction has been carried out according to the approved building plans. Time: 6 days Cost: No cost 86 DOING BUSINESS IN PAKISTAN 2010 Procedure 11*. Receive final inspection from the Taluka Procedure 5. Execute and register the sale deed, pay the Municipal Administration (TMA) registration fee and pay the transfer of immovable property tax Time: 1 day at the Registrar's Office Cost: No cost Time: 3 days Comments: Once the completion notice has been received by the Taluka Municipal Cost: PKR 64,501 (1% of the property value for registration fee + 1% of the property Administration (TMA), an inspector inspects the building to verify that construction value for the transfer of immovable property tax) has been carried out according to the approved building plan and the standards set Comments: The buyer presents the sale deed at the Registration Office for formal by the bylaws. execution. Before the sale deed can be executed, the buyer must pay the registration fee—1% of the property value as per the Registration Act of 1908—and the transfer Procedure 12*. Receive completion certificate from Taluka of immovable property tax—fixed at 1% of the property value by the Tehsil Munici- Municipal Administration (TMA) pal Administration (TMA) bylaws—to the TMA representative at the Registrar’s office. Time: 22 days After all the payments have been completed, the Sub Registrar issues the buyer a collection receipt, which the buyer can use to obtain a copy of the sale deed from the Cost: No cost same office. The Sub Registrar then executes the sale deed and registers it, retains Comments: After the final inspection has taken place, and provided that the works one copy, and forwards another to the Revenue Office for further processing. have been carried out according to the approved building plan, the Taluka Municipal Administration issues a certificate of completion. Procedure 6. Transfer the property title to the new owner at the Revenue Office * This procedure can be completed simultaneously with previous procedures. Time: 25 days Cost: No cost LIST OF PROCEDURES Comments: The buyer submits the registered sale deed to the Registration Office or to the Patwari to transfer the property to his name. The Patwari registers the transfer Registering property and sends it to the Girdawar, who compares the sale deed with his records. The Girdawar then sends the registered sale deed to the Tehsildar, who is in charge of its final transfer and entry into the revenue records. Faisalabad, Punjab Property value: USD 49,050 = PKR 3,225,038 * This procedure can be completed simultaneously with previous procedures Data as of: December 2009 Gujranwala, Punjab Procedure 1. Obtain a fard jamabandi document from the local Property value: USD 49,050 = PKR 3,225,038 Patwari Data as of: December 2009 Time: 3 days Procedure 1. Obtain a fard jamabandi document from the local Cost: PKR 50 Patwari Comments: By law, the “fard jamabandi”—a proof of ownership that confirms that Time: 3 days the property is in the owner’s rightful possession and is free of all encumbrances—is Cost: PKR 50 to be obtained by the seller on behalf of the buyer from the local Patwari, the subor- dinate official at the Revenue Office. In practice, however, it is the buyer who usually Comments: By law, the “fard jamabandi”—a proof of ownership that confirms that approaches the Patwari directly and obtains the ownership document. In Faisalabad, the property is in the owner’s rightful possession and is free of all encumbrances— a non-encumbrance certificate used to be obtained by advertising the transaction in is to be obtained by the seller on behalf of the buyer from the local Patwari, the the newspapers. This practice has now been replaced by the more convenient one of subordinate official at the Revenue Office. In practice, however, it is the buyer who obtaining the fard jamabandi document. usually approaches the Patwari directly and obtains the ownership document. In Gujranwala, a non-encumbrance certificate used to be obtained by advertising the Procedure 2. Pay the stamp duty and the capital value tax at the transaction in the newspapers. This practice has now been replaced by the more convenient one of obtaining the fard jamabandi document. local branch of the State Bank or National Bank of Pakistan Time: 1 day Procedure 2. Pay the stamp duty and the capital value tax at the Cost: PKR 193,502 (2% of the property value for stamp duty + 4% of the property local branch of the State Bank or National Bank of Pakistan value for the capital value tax) Time: 1 day Comments: After the proof of ownership has been obtained from the Patwari, the Cost: PKR 193,502 (2% of the property value for stamp duty + 4% of the property buyer pays the stamp duty—2% of the property value in Punjab, as listed in the value for the capital value tax) appendix to the Stamp Act, 1889—at the Government Treasury or at a local branch of the National Bank of Pakistan. At the same time, the buyer pays the capital value Comments: After the proof of ownership has been obtained from the Patwari, the tax—4% of the property value as per the Federal Budget—whose proof of payment buyer pays the stamp duty—2% of the property value in Punjab, as listed in the will be necessary later on to register the sale deed. appendix to the Stamp Act, 1889—at the Government Treasury or at a local branch of the National Bank of Pakistan. At the same time, the buyer pays the capital value Procedure 3. Obtain stamp paper from the Treasury Office tax—4% of the property value as per the Federal Budget—whose proof of payment will be necessary later on to register the sale deed. Time: 1 day Cost: No cost Procedure 3. Obtain stamp paper from the Treasury Office Comments: After the stamp duty has been paid, the buyer presents the receipt Time: 1 day as proof of payment to the Treasury Office or stamp vendors in order to obtain the Cost: No cost relevant stamp paper, on which the sale purchase agreement will be drafted by a lawyer or a certified deed writer. Comments: After the stamp duty has been paid, the buyer presents the receipt as proof of payment to the Treasury Office or stamp vendors in order to obtain the Procedure 4. Hire a deed writer or a lawyer to draft the sale relevant stamp paper, on which the sale purchase agreement will be drafted by a lawyer or a certified deed writer. purchase agreement Time: 1 day Cost: PKR 1,000 (legal fees) Comments: The buyer hires a lawyer or a certified deed writer to write the leasehold right on the stamp paper, as well as all the necessary operative terms and conditions in the deed. The deed contains inter alia all the details regarding the par- ties, the property transacted, the property value, rights, easements available, and all other necessary information. LIST LIST OFOF t REGISTERING PROCE %63&4t PROCEDURES STARTING APROPERT Y BUSINESS 87 Procedure 4. Hire a deed writer or a lawyer to draft the sale Procedure 3. Pay the stamp duty and the capital value tax at the purchase agreement local branch of the State Bank or National Bank of Pakistan Time: 1 day Time: 1 day Cost: PKR 2,000 (legal fees) Cost: PKR 225,753 (3% of the property value for stamp duty + 4% of the property Comments: The buyer hires a lawyer or a certified deed writer to write the value for the capital value tax) leasehold right on the stamp paper, as well as all the necessary operative terms and Comments: After the proof of ownership has been obtained from the Patwari, conditions in the deed. The deed contains inter alia all the details regarding the par- the buyer pays the stamp duty—3% of the property value in Sindh, as listed in the ties, the property transacted, the property value, rights, easements available, and all appendix to the Stamp Act, 1889—at the Government Treasury or at a local branch other necessary information. of the National Bank of Pakistan. At the same time, the buyer pays the capital value tax—4% of property value as per the Federal Budget—whose proof of payment will Procedure 5. Execute and register the sale deed, pay the be necessary later on to register the sale deed. registration fee and pay the transfer of immovable property tax at the Registrar's Office Procedure 4. Obtain stamp paper from the Treasury Office Time: 4 days Time: 1 day Cost: PKR 64,501 (1% of the property value for registration fee + 1% of the property Cost: No cost value for the transfer of immovable property tax) Comments: After the stamp duty has been paid, the buyer presents the receipt Comments: The buyer presents the sale deed at the Registration Office for formal as proof of payment to the Treasury Office or stamp vendors in order to obtain the execution. Before the sale deed can be executed, the buyer must pay the registration relevant stamp paper, on which the sale purchase agreement will be drafted by the fee—1% of the property value as per the Registration Act of 1908—and the transfer lawyer or a certified deed writer. of immovable property tax—fixed at 1% of the property value by the Tehsil Munici- pal Administration (TMA) bylaws—to the TMA representative at the Registrar’s office. Procedure 5. Hire a deed writer or a lawyer to draft the sale After all the payments have been completed, the Sub Registrar issues the buyer a purchase agreement collection receipt, which the buyer can use to obtain a copy of the sale deed from the Time: 1 day same office. The Sub Registrar then executes the sale deed and registers it, retains Cost: PKR 5,000 (legal fees) one copy, and forwards another to the Revenue Office for further processing. Comments: The buyer hires a lawyer or a certified deed writer to write the Procedure 6. Transfer the property title to the new owner at the leasehold right on the stamp paper, as well as all the necessary operative terms and conditions in the deed. The deed contains inter alia all the details regarding the par- Revenue Office ties, the property transacted, the property value, rights, easements available, and all Time: 30 days other necessary information. Cost: No cost Comments: The buyer submits the registered sale deed to the Registration Office or Procedure 6. Execute and register the sale deed, pay the to the Patwari to transfer the property to his name. The Patwari registers the transfer registration fee and pay the transfer of immovable property tax and sends it to the Girdawar, who compares the sale deed with his records. The at the Registrar's Office Girdawar then sends the registered sale deed to the Tehsildar, who is in charge of its Time: 34 days final transfer and entry into the revenue records. Cost: PKR 64,501 (1% of the property value for registration fee + 1% of the property value for the transfer of immovable property tax) * This procedure can be completed simultaneously with previous procedures Comments: The buyer presents the sale deed at the Registration Office for formal execution. Before the sale deed can be executed, the buyer must pay the registration REGISTERING PROPERTY fee—1% of the property value as per the Registration Act of 1908—and the transfer Hyderabad, Sindh of immovable property tax—fixed at 1% of the property value by the Taluka Munici- Property value: USD 49,050 = PKR 3,225,038 pal Administration (TMA) bylaws—to the TMA representative at the Registrar’s office. After all the payments have been completed, the Sub Registrar issues the buyer a Data as of: December 2009 collection receipt, which the buyer can use to obtain a copy of the sale deed from the Procedure 1. Advertise the transaction in a newspaper to invite same office. The Sub Registrar then executes the sale deed and registers it, retains objections one copy, and forwards another to the Revenue Office for further processing. Time: 14 days * This procedure can be completed simultaneously with previous procedures Cost: PKR 1,000 Comments: The buyer publishes a public notice in an Urdu newspaper, inviting ob- REGISTERING PROPERTY jections / claims on the transaction. After publication, there is a fourteen-day waiting period for objections, if any. Advertisements are published in local newspapers (dai- Islamabad, ICT lies) having a large circulation. Simultaneously, the buyer will verify the authenticity Property value: USD 49,050 = PKR 3,225,038 of the documents presented by the seller, the seller’s authority to act on behalf of the Data as of: December 2009 company to sell this property, and the presence of any encumbrances attached to the property to be transferred. Procedure 1. Obtain a fard jamabandi document from the local Patwari Procedure 2*. Obtain a non-encumbrance certificate from the Time: 3 days Tehsildar's Office Cost: PKR 50 Time: 1 day Comments: By law, the “fard jamabandi”—a proof of ownership that confirms that Cost: No cost the property is in the owner’s rightful possession and is free of all encumbrances—is Comments: The seller must obtain a non-encumbrance certificate on behalf of the to be obtained by the seller on behalf of the buyer from the local Patwari, the subor- buyer at the Sub Registrar / Tehsildar under whose jurisdiction the property falls by dinate official at the Revenue Office. In practice, however, it is the buyer who usually submitting the following documents: approaches the Patwari directly and obtains the ownership document. In Islamabad, a. Application form; a non-encumbrance certificate used to be obtained by advertising the transaction in the newspapers. This practice has now been replaced by the more convenient one of b. Original of the national identity card of the property owner; obtaining the fard jamabandi document. c. Photocopy of the sale deed; d. Affidavit; Procedure 2. Pay the stamp duty and the capital value tax at the e. Record of rights / fard. local branch of the State Bank or National Bank of Pakistan The document confirms that the property is free of all encumbrances (pending legal Time: 1 day disputes, mortgages, etc.). Should the seller obtain the certificate from the Revenue Cost: PKR 129,002 (2% of the property value for stamp duty + 4% of the property Record Department, written confirmation is made on the fard itself. value for the capital value tax) 88 DOING BUSINESS IN PAKISTAN 2010 Comments: After the proof of ownership has been obtained from the Patwari, the Procedure 2. Hire a deed writer or a lawyer to draft the sale buyer pays the stamp duty—2% of the property value in Islamabad, as mentioned purchase agreement in the table appended with the Stamp Act, 1889—at the Government Treasury or at a local branch of the National Bank of Pakistan. At the same time, the buyer pays the Time: 1 day capital value tax—4% of property value as per the Federal Budget—whose proof of Cost: PKR 5,000 payment will be necessary later on to register the sale deed. Comments: It is common practice in Pakistan to hire a lawyer or deed writer to draft the sale purchase agreement. Procedure 3. Obtain stamp paper from the Treasury Office Time: 1 day Procedure 3. Pay the stamp duty, capital value tax, registration Cost: No cost fee and transfer of immovable property tax at the local branch of Comments: After the stamp duty has been paid, the buyer presents the receipt the State Bank or National Bank of Pakistan as proof of payment to the Treasury Office or stamp vendors in order to obtain the Time: 1 day relevant stamp paper, on which the sale purchase agreement will be drafted by a Cost: PKR 290,253 (3% of the property value for stamp duty + 4% of the property lawyer or a certified deed writer. value for the capital value tax + 1% of the property value for registration fee + 1% of the property value for the transfer of immovable property tax) Procedure 4. Hire a deed writer or a lawyer to draft the sale Comments: The capital value tax (CVT, 4% of the property value as per the Finance purchase agreement Act, 2009) is applicable in urban areas for residential property exceeding one kanal in Time: 1 day area and, in the case of commercial properties, without any threshold of land area or Cost: PKR 1,000 (legal fees) size of the property. However, where the value of such property is not recorded, the CVT is payable at PKR 50 per square yard. Fees are paid at the Government Treasury Comments: The buyer hires a lawyer or a certified deed writer to write the or National Bank of Pakistan, an autonomous bank jointly owned by the Government leasehold right on the stamp paper, as well as all the necessary operative terms and of Pakistan and the public, who issue a receipt that is taken to the Stamp Office. conditions in the deed. The deed contains inter alia all the details regarding the par- The Stamp Office will, upon production of receipt, issue a stamp paper of the value ties, the property transacted, the property value, rights, easements available, and all (money deposited) on the sale deed. Such typed stamp paper will be presented later other necessary information. before the Registrar, who registers the change of ownership. Procedure 5. Execute and register the sale deed, pay the Procedure 4. Obtain a non-encumbrance certificate from the registration fee and pay the transfer of immovable property tax Town Nazim at the Registrar's Office Time: 1 day Time: 3 days Cost: No cost Cost: PKR 32,250 (1% of the property value for registration fee) Comments: The town Nazim issues a no-objection certificate (NOC) permitting the Comments: The buyer presents the sale deed at the Registration Office for formal sale of property by the seller, provided all amounts due and payable in respect of the execution. Before the sale deed can be executed, the buyer must pay the registration property have been satisfied. fee—1% of the property value as per the Registration Act of 1908. After all the pay- ments have been completed, the Sub Registrar issues the buyer a collection receipt, Procedure 5. Obtain stamp paper from the stamp office which the buyer can use to obtain a copy of the sale deed from the same office. The Sub Registrar then executes the sale deed and registers it, retains one copy, and Time: 1 day forwards another to the Revenue Office for further processing. Cost: No cost Comments: The receipt of payment obtained in procedure 4 is taken to the Stamp Procedure 6. Transfer the property title to the new owner at the Office of the Government, which then issues a stamp paper for the value of the sale Revenue Office deed. The stamp paper will be presented later to the Registrar, who registers the Time: 30 days change of ownership. Cost: No cost Procedure 6. Execute and register the sale deed at the Comments: The buyer submits the registered sale deed to the Registration Office or Registration's authority to the Patwari to transfer the property to his name. The Patwari registers the transfer and sends it to the Girdawar, who compares the sale deed with his records. The Time: 38 days Girdawar then sends the registered sale deed to the Tehsildar, who is in charge of its Cost: No cost final transfer and entry into the revenue records. Comments: The conveyance deed must be executed before the registering author- ity. Execution of the deed is done before the Sub Registrar of Conveyance/Assur- * This procedure can be completed simultaneously with previous procedures ances of the area, the official responsible under the Registration Act. Registration of the deed automatically follows the execution of the sale deed. A receipt is issued REGISTERING PROPERTY immediately, but the deed is delivered a few weeks later. The name of the buyer is recorded in the new deed, showing the change in ownership. The documents should Karachi, Sindh include: Property value: USD 49,050 = PKR 3,225,038 a. Conveyance / sale deed (stamped after payment in procedure 4); Data as of: December 2009 b. National identity cards of both parties; Procedure 1. Advertise the transaction in newspapers to invite c. Original title deed of seller; objections d. Power of attorney in original, with copies (if the parties have authorized someone Time: 8 days else through a power of attorney). Cost: PKR 3,000 * This procedure can be completed simultaneously with previous procedures Comments: The buyer publishes a public notice in an Urdu newspaper, inviting objections / claims on the transaction. After publication, there is a seven-day waiting period for objections, if any. Advertisements are published in local newspapers (dai- lies) having a large circulation. Simultaneously, the buyer will verify the authenticity of the documents presented by the seller, the seller’s authority to act on behalf of the company to sell this property, and the presence of any encumbrances attached to the property to be transferred. LIST LIST OFOF t REGISTERING PROCE %63&4t PROCEDURES STARTING APROPERT Y BUSINESS 89 REGISTERING PROPERTY Procedure 6. Transfer the property title to the new owner at the Lahore, Punjab Revenue Office Property value: USD 49,050 = PKR 3,225,038 Time: 19 days Data as of: December 2009 Cost: No cost Procedure 1. Obtain a fard jamabandi document from the local Comments: The buyer submits the registered sale deed to the Registration Office or to the Patwari to transfer the property under his name. The Patwari registers the Patwari transfer, then sends it to the Girdawar who compares the sale deed with his records. Time: 3 days The Girdawar then sends the registered sale deed to the Tehsildar, who is in charge Cost: PKR 50 of the final transfer and entry into the revenue records. Comments: By law, the “fard jamabandi”—a proof of ownership that confirms that the property is in the owner’s rightful possession and is free of all encumbrances—is * This procedure can be completed simultaneously with previous procedures to be obtained by the seller on behalf of the buyer from the local Patwari, the subor- dinate official at the Revenue Office. In practice, however, it is the buyer who usually REGISTERING PROPERTY approaches the Patwari directly and obtains the ownership document. In Lahore, a Multan, Punjab non-encumbrance certificate used to be obtained by advertising the transaction in the newspapers. This practice has now been replaced by the more convenient one of Property value: USD 49,050 = PKR 3,225,038 obtaining the fard jamabandi document. Data as of: December 2009 Procedure 2. Pay the stamp duty and the capital value tax at the Procedure 1. Obtain a fard jamabandi document from the local local branch of the State Bank or National Bank of Pakistan Patwari Time: 1 day Time: 3 days Cost: PKR 193,502 (2% of the property value for stamp duty + 4% of the property Cost: PKR 50 value for the capital value tax) Comments: By law, the “fard jamabandi”—a proof of ownership that confirms that Comments: After the proof of ownership has been obtained from the Patwari, the the property is in the owner’s rightful possession and is free of all encumbrances—is buyer pays the stamp duty—2% of the property value in Punjab, as mentioned in to be obtained by the seller on behalf of the buyer from the local Patwari, the subor- the table appended with the Stamp Act, 1889—at the Government Treasury or at a dinate official at the Revenue Office. In practice, however, it is the buyer who usually local branch of the National Bank of Pakistan. At the same time, the buyer pays the approaches the Patwari directly and obtains the ownership document. In Multan, a capital value tax—4% of property value as per the Federal Budget—whose proof of non-encumbrance certificate used to be obtained by advertising the transaction in payment will be necessary later on to register the sale deed. the newspapers. This practice has now been replaced by the more convenient one of obtaining the fard jamabandi document. Procedure 3. Obtain stamp paper from the Treasury Office Time: 1 day Procedure 2. Pay the stamp duty and the capital value tax at the local branch of the State Bank or National Bank of Pakistan Cost: No cost Time: 1 day Comments: After the stamp duty has been paid, the buyer presents the receipt as proof of payment to the Treasury Office or stamp vendors in order to obtain the Cost: PKR 193,502 (2% of the property value for stamp duty + 4% of the property relevant stamp paper, on which the sale purchase agreement will be drafted by a value for the capital value tax) lawyer or a certified deed writer. Comments: After the proof of ownership has been obtained from the Patwari, the buyer pays the stamp duty—2% of the property value in Punjab, as listed in the Procedure 4. Hire a deed writer or a lawyer to draft the sale appendix to the Stamp Act, 1889—at the Government Treasury or at a local branch purchase agreement of the National Bank of Pakistan. At the same time, the buyer pays the capital value tax—4% of property value as per the Federal Budget—whose proof of payment will Time: 1 day be necessary later on to register the sale deed. Cost: PKR 2,000 (legal fees) Comments: The buyer hires a lawyer or a certified deed writer to write the Procedure 3. Obtain stamp paper from the Treasury Office leasehold right on the stamp paper, as well as all the necessary operative terms and Time: 1 day conditions in the deed. The deed contains inter alia all the details regarding the par- ties, the property transacted, the property value, rights, easements available, and all Cost: No cost other necessary information. Comments: After the stamp duty has been paid, the buyer presents the receipt as proof of payment to the Treasury Office or stamp vendors in order to obtain the Procedure 5. Execute and register the sale deed, pay the relevant stamp paper, on which the sale purchase agreement will be drafted by a registration fee and pay the transfer of immovable property tax lawyer or a certified deed writer. at the Registrar's Office Procedure 4. Hire a deed writer or a lawyer to draft the sale Time: 5 days purchase agreement Cost: PKR 64,501 (1% of the property value for registration fee + 1% of the property Time: 1 day value for the transfer of immovable property tax) Cost: PKR 3,000 (legal fees) Comments: The buyer presents the sale deed at the Registration Office for formal execution. Before the sale deed can be executed, the buyer must pay the registration Comments: The buyer hires a lawyer or a certified deed writer to write the fee—1% of the property value as per the Registration Act of 1908—and the transfer leasehold right on the stamp paper, as well as all the necessary operative terms and of immovable property tax—fixed at 1% of the property value by the Tehsil Munici- conditions in the deed. The deed contains inter alia all the details regarding the par- pal Administration (TMA) bylaws—to the TMA representative at the Registrar’s office. ties, the property transacted, the property value, rights, easements available, and all After all the payments have been completed, the Sub Registrar issues the buyer a other necessary information. collection receipt, which the buyer can use to obtain a copy of the sale deed from the same office. The Sub Registrar then executes the sale deed and registers it, retains Procedure 5. Execute and register the sale deed, pay the one copy, and forwards another to the Revenue Office for further processing. registration fee and pay the transfer of immovable property tax at the Registrar's Office Time: 5 days Cost: PKR 64,501 (1% of the property value for registration fee + 1% of the property value for the transfer of immovable property tax) Comments: The buyer presents the sale deed at the Registration Office for formal execution. Before the sale deed can be executed, the buyer must pay the registration fee—1% of the property value as per the Registration Act of 1908—and the transfer of immovable property tax—fixed at 1% of the property value by the Tehsil Munici- pal Administration (TMA) bylaws—to the TMA representative at the Registrar’s office. 90 DOING BUSINESS IN PAKISTAN 2010 After all the payments have been completed, the Sub Registrar issues the buyer a Procedure 5. Execute and register the sale deed, pay the collection receipt, which the buyer can use to obtain a copy of the sale deed from the registration fee and pay the transfer of immovable property tax same office. The Sub Registrar then executes the sale deed and registers it, retains at the Registrar's Office one copy, and forwards another to the Revenue Office for further processing. Time: 8 days Procedure 6. Transfer the property title to the new owner at the Cost: PKR 64,501 (1% of the property value for registration fee + 1% of the property Revenue Office value for the transfer of immovable property tax) Time: 30 days Comments: The buyer presents the sale deed at the Registration Office for formal execution. Before the sale deed can be executed, the buyer must pay the registration Cost: No cost fee—1% of the property value as per the Registration Act of 1908—and the transfer Comments: The buyer submits the registered sale deed to the Registration Office or of immovable property tax—fixed at 1% of the property value by the Town Munici- to the Patwari to transfer the property to his name. The Patwari registers the transfer pal Administration (TMA) bylaws—to the TMA representative at the Registrar’s office. and sends it to the Girdawar, who compares the sale deed with his records. The After all the payments have been completed, the Sub Registrar issues the buyer a Girdawar then sends the registered sale deed to the Tehsildar, who is in charge of its collection receipt, which the buyer can use to obtain a copy of the sale deed from the final transfer and entry into the revenue records. same office. The Sub Registrar then executes the sale deed and registers it, retains one copy, and forwards another to the Revenue Office for further processing. * This procedure can be completed simultaneously with previous procedures Procedure 6. Transfer the property title to the new owner at the REGISTERING PROPERTY Revenue Office Peshawar, Khyber Pakhtunkhwa Time: 28 days Property value: USD 49,050 = PKR 3,225,038 Cost: No cost Data as of: December 2009 Comments: The buyer submits the registered sale deed to the Registration Office or to the Patwari to transfer the property to his name. The Patwari registers the transfer Procedure 1. Obtain a fard jamabandi document from the local and sends it to the Girdawar, who compares the sale deed with his records. The Patwari Girdawar then sends the registered sale deed to the Tehsildar, who is in charge of its final transfer and entry into the revenue records. Time: 3 days Cost: PKR 50 * This procedure can be completed simultaneously with previous procedures Comments: By law, the “fard jamabandi”—a proof of ownership that confirms that the property is in the owner’s rightful possession and is free of all encumbrances—is REGISTERING PROPERTY to be obtained by the seller on behalf of the buyer from the local Patwari, the subor- dinate official at the Revenue Office. In practice, however, it is the buyer who usually Quetta, Balochistan approaches the Patwari directly and obtains the ownership document. In Peshawar, Property value: USD 49,050 = PKR 3,225,038 a non-encumbrance certificate used to be obtained by advertising the transaction in Data as of: December 2009 the newspapers. This practice has now been replaced by the more convenient one of obtaining the fard jamabandi document. Procedure 1. Obtain a fard jamabandi document from the local Patwari Procedure 2. Pay the stamp duty and the capital value tax at the Time: 4 days local branch of the State Bank or National Bank of Pakistan Cost: PKR 50 Time: 1 day Comments: By law, the “fard jamabandi”—a proof of ownership that confirms that Cost: PKR 225,753 (3% of the property value for stamp duty + 4% of the property the property is in the owner’s rightful possession and is free of all encumbrances—is value for the capital value tax) to be obtained by the seller on behalf of the buyer from the local Patwari, the subor- Comments: After the proof of ownership has been obtained from the Patwari, the dinate official at the Revenue Office. In practice, however, it is the buyer who usually buyer pays the stamp duty—3% of the property value in Khyber Pakhtunkhwa, as approaches the Patwari directly and obtains the ownership document. In Quetta, a listed in the appendix to the Stamp Act, 1889—at the Government Treasury or at a non-encumbrance certificate used to be obtained by advertising the transaction in local branch of the National Bank of Pakistan. At the same time, The buyer pays the the newspapers. This practice has now been replaced by the more convenient one of capital value tax—4% of property value as per the Federal Budget—whose proof of obtaining the fard jamabandi document. payment will be necessary later on to register the sale deed. Procedure 2. Pay the stamp duty and the capital value tax at the Procedure 3. Obtain stamp paper from the Treasury Office local branch of the State Bank or National Bank of Pakistan Time: 1 day Time: 1 day Cost: No cost Cost: PKR 290,253 (5% of the property value for stamp duty + 4% of the property Comments: After the stamp duty has been paid, the buyer presents the receipt value for the capital value tax) as proof of payment to the Treasury Office or stamp vendors in order to obtain the Comments: After the proof of ownership has been obtained from the Patwari, the relevant stamp paper, on which the sale purchase agreement will be drafted by a buyer pays the stamp duty—5% of the property value in Balochistan, as listed in the lawyer or a certified deed writer. appendix to the Stamp Act, 1889—at the Government Treasury or at a local branch of the National Bank of Pakistan. At the same time, the buyer pays the capital value Procedure 4. Hire a deed writer or a lawyer to draft the sale tax—4% of property value as per the Federal Budget—whose proof of payment will purchase agreement be necessary later on to register the sale deed. Time: 1 day Cost: PKR 200 (legal fees) Procedure 3. Obtain stamp paper from the Treasury Office Comments: The buyer hires a lawyer or a certified deed writer to write the Time: 1 day leasehold right on the stamp paper, as well as all the necessary operative terms and Cost: No cost conditions in the deed. The deed contains inter alia all the details regarding the par- Comments: After the stamp duty has been paid, the buyer presents the receipt ties, the property transacted, the property value, rights, easements available, and all as proof of payment to the Treasury Office or stamp vendors in order to obtain the other necessary information. relevant stamp paper, on which the sale purchase agreement will be drafted by a lawyer or a certified deed writer. LIST LIST OFOF t REGISTERING PROCE %63&4t PROCEDURES STARTING APROPERT Y BUSINESS 91 Procedure 4. Hire a deed writer or a lawyer to draft the sale Procedure 3. Obtain stamp paper from the Treasury Office purchase agreement Time: 1 day Time: 1 day Cost: No cost Cost: PKR 1,000 (legal fees) Comments: After the stamp duty has been paid, the buyer presents the receipt Comments: The buyer hires a lawyer or a certified deed writer to write the as proof of payment to the Treasury Office or stamp vendors in order to obtain the leasehold right on the stamp paper, as well as all the necessary operative terms and relevant stamp paper, on which the sale purchase agreement will be drafted by a conditions in the deed. The deed contains inter alia all the details regarding the par- lawyer or a certified deed writer. ties, the property transacted, the property value, rights, easements available, and all other necessary information. Procedure 4. Hire a deed writer or a lawyer to draft the sale purchase agreement Procedure 5. Execute and register the sale deed, pay the Time: 1 day registration fee and pay the transfer of immovable property tax Cost: PKR 3,000 (legal fees) at the Registrar's Office Comments: The buyer hires a lawyer or a certified deed writer to write the Time: 20 days leasehold right on the stamp paper, as well as all the necessary operative terms and Cost: PKR 64,501 (1% of the property value for registration fee + 1% of the property conditions in the deed. The deed contains inter alia all the details regarding the par- value for the transfer of immovable property tax) ties, the property transacted, the property value, rights, easements available, and all Comments: The buyer presents the sale deed at the Registration Office for formal other necessary information. execution. Before the sale deed can be executed, the buyer must pay the registration fee—1% of the property value as per the Registration Act of 1908—and the transfer Procedure 5. Execute and register the sale deed, pay the of immovable property tax—fixed at 1% of the property value by the Tehsil Munici- registration fee and pay the transfer of immovable property tax pal Administration (TMA) bylaws—to the TMA representative at the Registrar’s office. at the Registrar's Office After all the payments have been completed, the Sub Registrar issues the buyer a Time: 5 days collection receipt, which the buyer can use to obtain a copy of the sale deed from the same office. The Sub Registrar then executes the sale deed and registers it, retains Cost: PKR 64,501 (1% of the property value for registration fee + 1% of the property one copy, and forwards another to the Revenue Office for further processing. value for the transfer of immovable property tax) Comments: The buyer presents the sale deed at the Registration Office for formal Procedure 6. Transfer the property title to the new owner at the execution. Before the sale deed can be executed, the buyer must pay the registration Revenue Office fee—1% of the property value as per the Registration Act of 1908—and the transfer of immovable property tax—fixed at 1% of the property value by the Tehsil Munici- Time: 25 days pal Administration (TMA) bylaws—to the TMA representative at the Registrar’s office. Cost: No cost After all the payments have been completed, the Sub Registrar issues the buyer a Comments: The buyer submits the registered sale deed to the Registration Office or collection receipt, which the buyer can use to obtain a copy of the sale deed from the to the Patwari to transfer the property to his name. The Patwari registers the transfer same office. The Sub Registrar then executes the sale deed and registers it, retains and sends it to the Girdawar, who compares the sale deed with his records. The one copy, and forwards another to the Revenue Office for further processing. Girdawar then sends the registered sale deed to the Tehsildar, who is in charge of its final transfer and entry into the revenue records. Procedure 6. Transfer the property title to the new owner at the Revenue Office * This procedure can be completed simultaneously with previous procedures Time: 30 days Cost: No cost REGISTERING PROPERTY Comments: The buyer submits the registered sale deed to the Registration Office Rawalpindi, Punjab or to the Patwari to transfer the property under his name. The Patwari registers the Property value: USD 49,050 = PKR 3,225,038 transfer, then sends it to the Girdawar who compares the sale deed with his records. The Girdawar then sends the registered sale deed to the Tehsildar, who is in charge Data as of: December 2009 of the final transfer and entry into the revenue records. Procedure 1. Obtain a fard jamabandi document from the local Patwari * This procedure can be completed simultaneously with previous procedures Time: 3 days REGISTERING PROPERTY Cost: PKR 50 Comments: By law, the “fard jamabandi”—a proof of ownership that confirms that Sheikhupura, Punjab the property is in the owner’s rightful possession and is free of all encumbrances— Property value: USD 49,050 = PKR 3,225,038 is to be obtained by the seller on behalf of the buyer from the local Patwari, the Data as of: December 2009 subordinate official at the Revenue Office. In practice, however, it is the buyer who usually approaches the Patwari directly and obtains the ownership document. In Procedure 1. Obtain a fard jamabandi document from the local Rawalpindi, a non-encumbrance certificate used to be obtained by advertising the Patwari transaction in the newspapers. This practice has now been replaced by the more Time: 3 days convenient one of obtaining the fard jamabandi document. Cost: PKR 50 Procedure 2. Pay the stamp duty and the capital value tax at the Comments: By law, the “fard jamabandi”—a proof of ownership that confirms that local branch of the State Bank or National Bank of Pakistan the property is in the owner’s rightful possession and is free of all encumbrances— is to be obtained by the seller on behalf of the buyer from the local Patwari, the Time: 1 day subordinate official at the Revenue Office. In practice, however, it is the buyer who Cost: PKR 193,502 (2% of the property value for stamp duty + 4% of the property usually approaches the Patwari directly and obtains the ownership document. In value for the capital value tax) Sheikhupura, a non-encumbrance certificate used to be obtained by advertising the Comments: After the proof of ownership has been obtained from the Patwari, the transaction in the newspapers. This practice has now been replaced by the more buyer pays the stamp duty—2% of the property value in Punjab, as listed in the convenient one of obtaining the fard jamabandi document. appendix to the Stamp Act, 1889—at the Government Treasury or at a local branch of the National Bank of Pakistan. At the same time, the buyer pays the capital value tax—4% of property value as per the Federal Budget—whose proof of payment will be necessary later on to register the sale deed. 92 DOING BUSINESS IN PAKISTAN 2010 REGISTERING PROPERTY Procedure 2. Pay the stamp duty and the capital value tax at the local branch of the State Bank or National Bank of Pakistan Sialkot, Punjab Time: 1 day Property value: USD 49,050 = PKR 3,225,038 Cost: PKR 193,502 (2% of the property value for stamp duty + 4% of the property Data as of: December 2009 value for the capital value tax) Procedure 1. Obtain a fard jamabandi document from the local Comments: After the proof of ownership has been obtained from the Patwari, the Patwari buyer pays the stamp duty—2% of the property value in Punjab, as listed in the appendix to the Stamp Act, 1889—at the Government Treasury or at a local branch Time: 4 days of the National Bank of Pakistan. At the same time, the buyer pays the capital value Cost: PKR 50 tax—4% of property value as per the Federal Budget—whose proof of payment will Comments: By law, the “fard jamabandi”—a proof of ownership that confirms that be necessary later on to register the sale deed. the property is in the owner’s rightful possession and is free of all encumbrances—is to be obtained by the seller on behalf of the buyer from the local Patwari, the subor- Procedure 3. Obtain stamp paper from the Treasury Office dinate official at the Revenue Office. In practice, however, it is the buyer who usually Time: 1 day approaches the Patwari directly and obtains the ownership document. In Sialkot, a Cost: No cost non-encumbrance certificate used to be obtained by advertising the transaction in the newspapers. This practice has now been replaced by the more convenient one of Comments: After the stamp duty has been paid, the buyer presents the receipt obtaining the fard jamabandi document. as proof of payment to the Treasury Office or stamp vendors in order to obtain the relevant stamp paper, on which the sale purchase agreement will be drafted by a Procedure 2. Pay the stamp duty and the capital value tax at the lawyer or a certified deed writer. local branch of the State Bank or National Bank of Pakistan Procedure 4. Hire a deed writer or a lawyer to draft the sale Time: 1 day purchase agreement Cost: PKR 193,502 (2% of the property value for stamp duty + 4% of the property Time: 1 day value for the capital value tax) Cost: PKR 1,500 (legal fees) Comments: After the proof of ownership has been obtained from the Patwari, the buyer pays the stamp duty—2% of the property value in Punjab, as listed in the Comments: The buyer hires a lawyer or a certified deed writer to write the appendix to the Stamp Act, 1889—at the Government Treasury or at a local branch leasehold right on the stamp paper, as well as all the necessary operative terms and of the National Bank of Pakistan. At the same time, the buyer pays the capital value conditions in the deed. The deed contains inter alia all the details regarding the par- tax—4% of property value as per the Federal Budget—whose proof of payment will ties, the property transacted, the property value, rights, easements available, and all be necessary later on to register the sale deed. other necessary information. Procedure 3. Obtain stamp paper from the Treasury Office Procedure 5. Execute and register the sale deed, pay the registration fee and pay the transfer of immovable property tax Time: 1 day at the Registrar's Office Cost: No cost Time: 3 days Comments: After the stamp duty has been paid, the buyer presents the receipt as proof of payment to the Treasury Office or stamp vendors in order to obtain the Cost: PKR 64,501 (1% of the property value for registration fee + 1% of the property relevant stamp paper, on which the sale purchase agreement will be drafted by a value for the transfer of immovable property tax) lawyer or a certified deed writer. Comments: The buyer presents the sale deed at the Registration Office for formal execution. Before the sale deed can be executed, the buyer must pay the registration Procedure 4. Hire a deed writer or a lawyer to draft the sale fee—1% of the property value as per the Registration Act of 1908—and the transfer purchase agreement of immovable property tax—fixed at 1% of the property value by the Tehsil Munici- pal Administration (TMA) bylaws—to the TMA representative at the Registrar’s office. Time: 1 day After all the payments have been completed, the Sub Registrar issues the buyer a Cost: PKR 1,000 (legal fees) collection receipt, which the buyer can use to obtain a copy of the sale deed from the Comments: The buyer hires a lawyer or a certified deed writer to write the same office. The Sub Registrar then executes the sale deed and registers it, retains leasehold right on the stamp paper, as well as all the necessary operative terms and one copy, and forwards another to the Revenue Office for further processing. conditions in the deed. The deed contains inter alia all the details regarding the par- ties, the property transacted, the property value, rights, easements available, and all Procedure 6. Transfer the property title to the new owner at the other necessary information. Revenue Office Time: 30 days Procedure 5. Execute and register the sale deed, pay the Cost: No cost registration fee and pay the transfer of immovable property tax at the Registrar's Office Comments: The buyer submits the registered sale deed to the Registration Office or to the Patwari to transfer the property to his name. The Patwari registers the transfer Time: 6 days and sends it to the Girdawar, who compares the sale deed with his records. The Cost: PKR 64,501 (1% of the property value for registration fee + 1% of the property Girdawar then sends the registered sale deed to the Tehsildar, who is in charge of its value for the transfer of immovable property tax) final transfer and entry into the revenue records. Comments: The buyer presents the sale deed at the Registration Office for formal execution. Before the sale deed can be executed, the buyer must pay the registration * This procedure can be completed simultaneously with previous procedures fee—1% of the property value as per the Registration Act of 1908—and the transfer of immovable property tax—fixed at 1% of the property value by the Tehsil Munici- pal Administration (TMA) bylaws—to the TMA representative at the Registrar’s office. After all the payments have been completed, the Sub Registrar issues the buyer a collection receipt, which the buyer can use to obtain a copy of the sale deed from the same office. The Sub Registrar then executes the sale deed and registers it, retains one copy, and forwards another to the Revenue Office for further processing. LIST LIST OFOF t REGISTERING PROCE %63&4t PROCEDURES STARTING APROPERT Y BUSINESS 93 Procedure 6. Transfer the property title to the new owner at the Procedure 3. Pay the stamp duty and the capital value tax at the Revenue Office local branch of the State Bank or National Bank of Pakistan Time: 21 days Time: 1 day Cost: No cost Cost: PKR 225,753 (3% of the property value for stamp duty + 4% of the property Comments: The buyer submits the registered sale deed to the Registration Office or value for the capital value tax) to the Patwari to transfer the property to his name. The Patwari registers the transfer Comments: After the proof of ownership has been obtained from the Patwari, and sends it to the Girdawar, who compares the sale deed with his records. The the buyer pays the stamp duty—3% of the property value in Sindh, as listed in the Girdawar then sends the registered sale deed to the Tehsildar, who is in charge of its appendix to the Stamp Act, 1889—at the Government Treasury or at a local branch final transfer and entry into the revenue records. of the National Bank of Pakistan. At the same time, the buyer pays the capital value tax—4% of property value as per the Federal Budget—whose proof of payment will * This procedure can be completed simultaneously with previous procedures be necessary later on to register the sale deed. REGISTERING PROPERTY Procedure 4. Obtain stamp paper from the Treasury Office Sukkur, Sindh Time: 1 day Cost: No cost Property value: USD 49,050 = PKR 3,225,038 Comments: After the stamp duty has been paid, the buyer presents the receipt Data as of: December 2009 as proof of payment to the Treasury Office or stamp vendors in order to obtain the Procedure 1. Advertise the transaction in a newspaper to invite relevant stamp paper, on which the sale purchase agreement will be drafted by a objections lawyer or a certified deed writer. Time: 14 days Procedure 5. Hire a deed writer or a lawyer to draft the sale Cost: PKR 1,000 purchase agreement Comments: The buyer publishes a public notice in an Urdu newspaper, inviting ob- Time: 1 day jections / claims on the transaction. After publication, there is a fourteen-day waiting Cost: PKR 4,000 (legal fees) period for objections, if any. Advertisements are published in local newspapers (dai- lies) having a large circulation. Simultaneously, the buyer will verify the authenticity Comments: The buyer hires a lawyer or a certified deed writer to write the of the documents presented by the seller, the seller’s authority to act on behalf of the leasehold right on the stamp paper, as well as all the necessary operative terms and company to sell this property, and the presence of any encumbrances attached to conditions in the deed. The deed contains inter alia all the details regarding the par- the property to be transferred. ties, the property transacted, the property value, rights, easements available, and all other necessary information. Procedure 2*. Obtain a non-encumbrance certificate from the Tehsildar's Office Procedure 6. Execute and register the sale deed, pay the registration fee and pay the transfer of immovable property tax Time: 1 day at the Registrar's Office Cost: No cost Time: 32 days Comments: The seller must obtain a non-encumbrance certificate on behalf of the buyer at the Sub Registrar / Tehsildar under whose jurisdiction the property falls by Cost: PKR 64,501 (1% of the property value for registration fee + 1% of the property submitting the following documents: value for the transfer of immovable property tax) a. Application form; Comments: The buyer presents the sale deed at the Registration Office for formal execution. Before the sale deed can be executed, the buyer must pay the registration b. Original of the national identity card of the property owner; fee—1% of the property value as per the Registration Act of 1908—and the transfer c. Photocopy of the sale deed; of immovable property tax—fixed at 1% of the property value by the Taluka Munici- d. Affidavit; pal Administration (TMA) bylaws—to the TMA representative at the Registrar’s office. e. Record of rights / fard. After all the payments have been completed, the Sub Registrar issues the buyer a collection receipt, which the buyer can use to obtain a copy of the sale deed from the The document confirms that the property is free of all encumbrances (pending legal same office. The Sub Registrar then executes the sale deed and registers it, retains disputes, mortgages, etc.). Should the seller obtain the certificate from the Revenue one copy, and forwards another to the Revenue Office for further processing. Record Department, written confirmation is made on the fard itself. * This procedure can be completed simultaneously with previous procedures 95 Doing Business in Pakistan 2010 was pro- of Khyber Pakhtunkhwa and the Finance duced by a World Bank Group team led by Department-Government of Baluchistan co- Jana Malinska and Mehnaz Safavian, as well ordinated and facilitated data collection in as Manuel Garcia Huitron (from April 2008 their respective provinces. Special thanks go to June 2009) and Teymour Abdel Aziz to Khaqan Hassan Najeeb, Director General; (from June to November 2009). The report Shujat Ali, Former Joint Secretary; Aamir Acknowledgments was produced under the general direc- Akbar Mittro, Team Leader; and Naveed tion of Mierta Capaul. The team comprised Iftikhar, National Doing Business Focal Per- Kiran Afzal, Anjum Ahmad, Santiago Croci, son from ERU for their leadership and out- Contact details for local partners Iftikhar Gillani, Iva Hamel, Jamal Khan, standing work coordinating all aspects of are available on the Aikaterini Leris, Brice Richard and Alessio the project; and to Rafia Syed and Mehnaz Doing Business website at Zanelli. Claudia Contreras, Trimor Mici, Bhaur from the Government of Punjab and Maria Camila Roberts, Pilar Sanchez-Bella to Fawad Khan Yousafzai from the Federal http://subnational.doingbusiness.org and Imtiaz Sheikh provided valuable as- Bureau of Revenue for their valuable sup- sistance to complete the project. port. Crown Agents, especially Martyn Am- Shahnaz Arshad, Svetlana Bagaudi- bury, also provided support. nova, Amer Zafar Durrani, Satu Kristiina The project was funded by the United Kahkonen, Eric David Manes, Marialisa States Agency for International Develop- Motta, Frank Sader, John Speakman, and ment (USAID), the UK AID from the De- Zenaida Hernandez Uriz reviewed the partment for International Development full text. Peer-review comments were also (DFID), and the World Bank Group. The received from Dobromir Christow, Pe- Swiss State Secretariat for Economic Affairs nelope Fidas, Ankur Huria, Oliver Lorenz, (SECO) provided in-kind support to the Andres Frederic Martinez, Andrei Mikh- project. nev, Dana Omran, Richard Stern, Uma More than 130 accountants, architects, Subramanian, and Mahesh Uttamchandani. business consultants, custom brokers, engi- Karim Belayachi, Federico Bustelo, Sarah neers, freight forwarders, lawyers, property Cuttaree, Marie Delion, Jacqueline den experts and utility providers contributed Otter, Sabine Hertveldt, Sana Ikram, Nang to Doing Business in Pakistan 2010. The Jiang, Joanna Nasr, Caroline Otonglo, Tea team of Daudpota and Co., led by Faisal K. Trumbic, Yara Salem, and Luis Aldo San- Daudpota coordinated data collection for chez-Ortega provided assistance at various the starting a business, registering property stages of the project. The website (http:// and enforcing contracts indicators. Surridge www.doingbusiness.org/Pakistan) was de- and Beecheno coordinated the dealing with veloped by Graeme Littler, Felipe Iturralde, construction permits questionnaires. A.F. Hashim Zia and Preeti Endlaw. The report Ferguson and Co. (PriceWaterhouseCoo- was edited by Grace Morsberger and de- pers) and especially Mirza Taqi-ud-Din signed by G. Quinn Information Design. Ahmad, coordinated the tax data collec- Doing Business in Pakistan 2010 is the tion. The Pakistan Institute for Develop- result of a request from Pakistan’s Ministry ment Economics (PIDE) coordinated the of Finance and the Government of Punjab’s trading across borders questionnaires. Planning and Development Department. The team wants to extend its special The Economic Reforms Unit (ERU) of Paki- gratitude to more than 120 national and stan’s Ministry of Finance coordinated the local government officials, as well as mem- overall project, and provided support and bers of the judiciary who participated in the guidance with data collection. The Com- project and who made valuable comments merce and Investment Department-Gov- during the consultation and data review ernment of Punjab, the Sindh Bureau of Sta- period. The names of those participants tistics-Government of Sindh, the Planning wishing to be acknowledged individually are and Development Department-Government listed on the following pages. 96 DOING BUSINESS IN PAKISTAN 2010 P U B L IC OF F IC IA L S FA I S A L A BA D Qaisar Ghouri Ghulam Murtaza Nizamani Saila Masood Syed Mukkaram Sultan Inspector Excise and Income Tax Officer Deputy Registrar Bukhari Mahboob Ahmad Taxation (Professional Regional Tax Office Securities and Exchange District Officer Joint Registrar Tax) (Federal Board of Commission of Pakistan (Coordination) Faisalabad City District Excise and Taxation Revenue) Karachi City District Government Department (Government Amir Akbar Mittro Government of Punjab) Naveed Asim Rajput PSD specialist, Team Leader Iqbal Hussain Khan Deputy Director Investment Climate Unit Shaukat Hussain Executive District Officer Farooq Ahmed Khan Building Control Economic Reforms Unit, Joint Registrar Faisalabad City District Director (Administration Department (Hyderabad Ministry of Finance Securities and Exchange Government and Finance) Development Authority) (Government of Pakistan) Commission of Pakistan Gujranwala Development Kiran Khurshid Authority Barkaat Rizvi Dr. Khaqan Hasan Najeeb Hafiz Muhammad Javed Deputy District Officer Executive District Officer Director General District Officer (Master (Revenue) Raja Sarfraz Khan (Revenue) Economic Reforms Unit, Plan) Faisalabad City District Assistant Excise and Hyderabad City District Ministry of Finance Karachi City District Government Taxation Officer Government (Government of Pakistan) Government (Professional Tax) Shareen Newton Excise and Taxation Syed Nadeem Rizwan Mahfooz Paracha Muhammad Naeem Khan Town Officer (Planning) Department (Government Director District Attorney Joint Registrar Town Municipal of Punjab) Building Control District Administration Securities and Exchange Administration Department (Hyderabad ICT Commission of Pakistan Shamshad Mahmood Development Authority) Muhammad Ramzan Deputy District Officer Saeed-Ur- Rahman Ansar Ali Khan District Officer (Registration) Syed Barkat Ahmed Rizwi Financial Advisor Taxation Officer of (Planning) Tehsil Municipal Executive District Officer Capital Development Income Tax Faisalabad City District Authority Revenue office Authority Regional Tax Office Government (Federal Board of Zaigham Mazhar Ghulam Sarwar Mubasher Saeed Saddozai Revenue) Anjum Raza Syed District Officer (Labor) Assistant Director Additional Registrar of Senior Civil Judge Labour Department Labour Depatrment Companies Ifitikhar Ahmed Khan District Courts (Government of Punjab) (Government of Sindh) Securities and Exchange Engineer Commission of Pakistan Karachi Water and Nazar Siyal G U J R A N WA L A Bashir Ahmed Nawaz Sewerage Board District Officer (Excise Excise and Taxation Beenish Saleem Rana Liaqat Ali and Taxation) Officer Deputy Director Fouz Khalid Khan Business Manager Excise and Taxation Excise and Taxation Securities and Exchange Assistant Commissioner of Pakistan Department (Government Department (Professional Commission of Pakistan Income Tax Telecommunication of Punjab) Tax) Regional Tax Office Saliha Zakir Shah (Federal Board of Limited (PTCL) Mir Ijaz Hussain Talpur Assistant Collector Nauman Raza Revenue) Syed Mohammad Amjad District Officer Executive District Officer FBR (Sales Tax Unit) Executive District Officer (Social Planning and Hyderabad City District Tanveer ul Haq Khan Government Muhammad Siddique Deputy Director (Law) Commercialization) Director Company Law Tehsil Municipal Gujranwala City District Bureau Of Statistics I SL A M A BA D Securities and Exchange (Government of Sindh) Authority Government Commission of Pakistan Rana Maqsood Anjum Asif Muzaffar Sheikh Mateen Alam Nayyar Mahmood Fawad Khan Yousafzai Director Assistant Director Deputy Registrar Deputy Collector Secretary Information (Finance) Securities and Exchange FBR (Sales Tax Unit) Employees Old-Age Management System Benefits Institution Water and Sanitation Commission of Pakistan Federal Bureau of Revenue Agency (WASA) Sanaullah Aman (EOBI), Government of H Y DE R A BA D Director General (Water Syed Iqbal Haider Zaidi Pakistan Rana Mohammad Arshad and Sewerage Management Director Javed Memon Supervisor Aurangzeb Babar Wing) Employees Old-Age Gujranwala Electricity Capital Development Director Excise and Director Tax II Benefits Institution Taxation / District Officer Power Company Excise and Taxation Authority (EOBI), Government of Property Tax Ashraf Cheema Department (Professional Khalid Aziz Banth Pakistan Excise and Taxation Inspector Excise and Tax) Member Direct Taxes Department (Government Taxation (Professional Azhar Hussain Federal Board of Revenue K A R AC H I of Sindh) Tax) Deputy Director (Tax II) (FBR) Manzoor Ahmed Memon Excise and Taxation Najeeb Ahmed Excise and Taxation Tahir Banuri District Officer (Solid Director Department (Government Department (Professional of Punjab) Director Building Control Waste Management) Sindh Bureau of Statistics Tax) Capital Development Karachi City District Kazi Jan Mohammad Abdul Waheed Dar Sattar Kazi Authority Government Deputy Director Additional Deputy Officer Lawyer (High Court) Mazhar Hussain Niaz Ahmed Revenue (Zone II) (Recoveries) Punjab Employees and Razi Uddin Khan Acting Chairman Programmer Karachi City District Social Security Institution Director Capital Development Bureau Of Statistics Government Sindh Employees Social Authority (Government of Sindh) Ghulam Hussain Shahid Rao Riaz Ejaz Security Institution Deputy District Officer Jawed Hussain Manzoor Ahmed Statistical Officer (Revenue) Naveed Ahmed Khan Registrar of Companies Executive District Officer Bureau Of Statistics Gujranwala City District Deputy Director Securities and Exchange (Legal Advisor) (Government of Sindh) Government Building Control Commission of Pakistan Karachi City District Syed Muhammed Shakaib Department (Hyderabad Government Muhammad Umar Farooq Naveed Iftikhar District Officer Development Authority) Research Associate Khawaja Mohammad (Coordination) Town Officer (Planning and Coordination) Aftab Ahmed Khatri Economic Reforms Unit, Badiuzzaman Works and Services Town Municipal District Coordination Ministry of Finance Controller of Building Department (City District Administration Officer (Government of Pakistan) (Town Planning) Government) Hyderabad City District Karachi Building Control Fahim Ahmed Siddiquui Farasat Ali Khan Authority Government Assistant Commissioner Director Revenue District Administration ACKNOWLEDGMENTS 97 P U B L IC OF F I C IA L S L A H OR E M U LTA N Mehrab Shah Rana M. Mohsin Aamir Ijaz District Officer (Revenue) Inspector District Officer Abdul Latif Chaudhry Maqbool Ahmad City District Government Excise and Taxation Revenue department Deputy Regional Head Assistant Director Department (Professional (Sialkot District Employees Old-Age (Planning and Design) Abdullah Shah Tax) Government) Benefits Institution Water and Sanitation Assistant Director (EOBI), Government of Agency (WASA) (Planning) Amin Mughal Mohammad Akram Javed Pakistan Quetta Electricity Supply Town Officer (Planning Town Officer (Planning Iqbal Ahmed Company and Coordination) and Coordination) Faraz Ahmed Chaudhry Deputy Director (Town Tehsil Municipal Tehsil Municipal Town Nazim Planning) R AWA L P I N DI Administration Administration Town Municipal Multan Development Administration (Gulberg Authority Jamshed Aftab Abdul Waris Sandho Abdul Shakoor Mahar Town) Town Officer (Planning) Officer Taluka Officer Kahlid Durrani Rawalpindi Development Excise and Taxation Taluka Municipal Qasim Cheema Town Officer Authority Department (Professional Administration Deputy Collector (Sales Town Municipal Tax) Tax) Administration Zahid Iqbal Khawaja Khurram Naeem Federal Board of Revenue Registrar Shabir Sheikh Deputy Collector (Headquarters) P E SHAWA R City District Government District Officer (Labour) (Customs) Labour Department Sumbrial Dry Port Maratab Dogar Javed Amjad Arshad Patwari (Government of Punjab) Assistant Director A. Majeed Pathan Town Officer Patwari Employees Old-Age City District Government Mouizam Usman District Coordination Town Municipal District Officer Officer Benefits Institution Administration (EOBI), Government of Muhammad Tahir Revenue department City District Government Pakistan Mian Maqsood Gul Assistant Director (Sheikhupura District Government) Abdul Rasheed Sheikh Assistant Chief Rawalpindi Development Javed Iqbal Authority Sub Registrar Foreign Aid, Planning and Office of the Sub- Managing Director Development Department SIA L KOT Water and Sanitation Registrar (Khyber Pakhtunkhwa SH E I K H U P U R A Agency (WASA) Government) Malik Mohammad Akram Khalid Kafeel Afzal Ahmed Town Officer Q U E T TA Executive District Officer (Infrastructure and Inspector Sales Tax Services) Regional Tax Office City District Government Abdul Khalid Achakzai Tehsil Municipal Zarrar Malik Basharat Javed Jehangir Administration Town Officer (Planning) Town Officer Director Town Municipal Ch. Shaukat Ali Employees Old-Age (Infrastructure and Administration Services) Deputy Director Benefits Institution (Technical) (EOBI), Government of Saeed Agha Tehsil Municipal Deputy District Officer Administration Gujranwala Electricity Pakistan Power Company (Sialkot (Coordination) Azam Khan Sidra Mansur City District Government Circle) Deputy Registrar Naib Tehsildar Fazal M. Baloch Town Municipal Authority Aman Sabir Khan Securities and Exchange Manager for Sialkot Dry Commission of Pakistan Town Officer (Planning) Rana Abdul Latif Town Municipal Port Trust Sagheer Ahmad Deputy District Officer Karachi Port Handling Administration Tehsil Municipal Director Human Resources Khalid Butt Lahore Electricity Supply Naveed Iftikhar Administration Supervisor General Manager Company Abdul Latif Sumbrial Dry Port Water and Sanitation Deputy District Officer Mahboob Elahi Sheikh Agency (WASA) Muhammad Ayoub Chachar Director Commercial Excise and Taxation Haji Qahir Department (Professional City Surveyor Lahore Electricity Supply Mukhtiarkar Sukkur Company Executive Engineer Tax) Water and Sanitation Waseem Ahsan Cheema Agency (WASA) District Officer Enviroment Protection Agency 98 DOING BUSINESS IN PAKISTAN 2010 P R I VAT E P ROF E S SI ONA L S Ahmed Abbas Shaukat Ali Tanveer Akhtar Chaudry Latif Kakar Sohail Mehmood Associate Director Lawyer (High Court) Lawyer Lawyer (High Court) Surridge and Beecheno Ravi Akbar Towels Tanveer Law Associates Barristers Chamber Samad Law Associates Sahibzada Muhammad Munir Qasim Ali Asifa Dar Safdar Kanasiro Irfan Memon Abbasi Trade Manager Lawyer (High Court) Lawyer Architect Senior Lawyer M/s ABC (Pvt.) Ltd. Suhails Law Associates Adnan Kassi Naveed Iqbal Mughal Abbasi Law Associates Barrister at Law / Lawyer Muhammad Zeeshan Ali Faisal Daudpota Principal University Law Salim Chechi Law Shabbir Ahmad Associate Lawyer (High Court) College Export Manager Chaundhary Law Khalid Daudpota & Co. Legis Law Firm Muhammad Azhar Khan Masood Textile Mill Associates Mughal Junaid Daudpota Abdul Majeed Khan Lawyer (High Court) Shoaib Ahmad Muhammad Arif Lawyer (High Court) Chairman Mughal Law Associates Export Assistant Account Manager Khalid Daudpota & Co. Arbab A. Majeed & Leatherfield (Pvt.) Ltd. Telsa Industries (Pvt.) Ltd. Associates Waseemuddin Mumtaz Muhammad Ahmed Dodhy Lawyer Shakeel Ahmad Gulrukh Arshad Architect Waseem Ullah Khan Mumtaz Law Chamber Lawyer (Supreme Court) Lawyer (High Court) N. Jenagir & Associates Lawyer Heems Law Firm Abbasi Law Associates Raheela Mustafa Mirza Taqi Udin Ahmad Malik Jamshed Ghias Lawyer Manager Shamim Asghar Associate Afaq Khan Price Waterhouse Coopers Director Kh. Awais Law Chambers Regional Manager Asma Nadeem Novex Inam Industires Lawyer (High Court) Maqsood Ahmad Ar Gohar Asma Law Associates Director Muhammad Asher Architect Shafqat Khatri Fateh Textile Mills Ltd. Export Manager Gurudino Assistant Manager Muhammad Idrees Three Stars Hoisery Manager Marketing Nakshbandi Kamran Ahmed GNS Enterprises Fateh Textile Mills Ltd. Lawyer (High Court) Lawyer Haji Muhammad Asif Nakshbandi Advocates Mandviwalla & Zafar Owner Sardar Ahmed Haleemi Tahir Khattak & Co. Asif Impex Lawyer (High Court) Architect H. Shakil Ahmed S. Mengal Law Chamber Shah Faisal Nasapi Lawyer (Supreme Court) Naveed Aslam Mohammad Yaqoob Larik Lawyer Shakil Law Firm Architect Nadia Huma Hashmat Lawyer Taseer Law Associates Naveed Aslam & Associates Lawyer (High Court) Saifullah Khan Magsi Bilal Ahmed Hashmat Habib Law Lawyer Rana Ehtesham Naseer Lawyer M. B. Ather Associates Lawyer Asmar Law Associates Export Manager Barristers Chamber Hafiz Qaiser Naveed Ravi Akbar Towels Ahmed Zulfiqar Hayat Basharat Ahmed Zahid Mahmood Lawyer Director Sale Executive Abbasi Law Associates Associate Mechanical Muhammad Ayaz Leatherfield (Pvt.) Ltd. Engineer Import Manager Pakistan Cargo Ali Nazim B. A. Brothers Starlet Innovations (Pvt.) Aashiq Hussian Ltd. Mirza Muhammad Ilyas Lawyer Muhammad Awais Ahsan Import Manager Mahmood Zain Law Chamber Ravi Akbar Towels Senior Lawyer Lawyer Sophia Ayyaz Shareen Newton Mandviwalla and Zafar Lawyer (High Court) Makhdoom Faiq Hussian Ilyas Law Associates Advocates Maken & Maken Law Architect Lawyer Mirza Muhammad Iftikhar Arbab Muhammad Omer Associates District Courts Mahmood Mian Masroor Akbar Lawyer Lawyer (High Court) Mohammad Ayyaz Syed Muhammad Irfan Lawyer Arbab A. Majeed & Maudood Law Associates Lawyer Architect Ilyas Law Associates Associates Maken & Maken Law DEMC Illahi Bux Maitlo Muhammad Akbar Associates Kauser Pervaiz Export Manager Faisal Jamil Lawyer (High Court) Senior Lawyer Starlet Innovations (Pvt.) Waseem Bari Export Manager Maitlo Law Chamber Kauser Pervaiz Associates Ltd. Assistant Account Feroze Textile Industries Jamshed Ghias Malik Manager Malik Shahid Pervaiz (Pvt.) Ltd. Lawyer Abbas Ali Telsa Industries (Pvt.) Ltd. Lawyer Lawyer (High Court) Amir Javed Shahbaz Ahmad Malik Kauser Pervaiz Associates Abbas Ali & Co. Abdul Qadir Chaudhary Lawyer (High Court) Senior Lawyer Architect Rizwan Ali Qadri Amir Javed & Associates Najmul Hassan Ali Architect Abdul Qadir Ejaz Ali Mangi Senior Lawyer Lawyer Sikander Javed Deputy Attorney General Adnan Iqbal Chaudhry (Sukkur) Ejaz Ahmed Qadri Lawyer (Supreme Court) Farman Ali Lawyer (High Court) Sikander Law Firm Sindh High Court Architect Lawyer Malik, Chaudhry, Ahmed Owais Ahmad Qadri Kazi Munawar Ali & Siddiqi Asmatullah Kakar Gulshan Masood Lawyer Lawyer (High Court) Lecturer Lawyer United Law Associates Asghar Ali Chaudry University Law College Kauser Pervaiz Associates Lawyer J. R. Associates ACKNOWLEDGMENTS 99 P R I VAT E P ROF E S SI ONA L S Ishaq Qureshi Nouman Salahuddin Jawad Shaukat Wajahat Ullah Lawyer Director Lawyer Lawyer Mirza Raheed-uddin Moon Star Industries Anees Shehzad Sheikh Law Associates Senior Executive Officer Hamza Saleem Import Manager Haidar Ali Unar Import Leatherfield (Pvt.) Ltd. Feroze Textile Industries Lawyer Lawyer (Pvt) Ltd. Mandviwalla & Zafar Imran Shehzad Shoro Law Associates Mirza Muhammad Saqib Lawyer Khwaja Muhammad Usman Tariq Saeed Rana Mubashar Hassan Sheikh Senior Associate Lawyer Lawyer Ilyas Law Associates Senior Lawyer Mandviwalla and Zafar Surridge and Beecheno M. Raheel Kamran Sheikh Advocates Zahid Majeed Rana Riaz Karim Sardar Lawyer Lawyer (High Court) Saleem Akhtar Warraich Lawyer Zahid Law Chamber Karim Law Associates Asmar A. Sheikh Lawyer (High Court) Muhammad Ali Sena Senior Advocate Irfanullah Warraich Muhammad Razaq Rana Asmar Law Associates Lawyer Lawyer Lawyer Razaq Law Chamber Surridge and Beecheno Sajid Mehmood Sheikh Bashir Warraich Law Lawyer (Supreme Court) Chamber Tanveer ur Rehman Kashif Shabbir QA Director Afridi, Shah & Minallah Shabana Yamin Randhawa Lawyer (High Court) Inam Industires Haider Ali Shoro Lawyer (High Court) Randahawa Law Associates Lawyer Asma Law Associates Adil Shafi Lawyer District Courts Muhammad Younas Muhammad Raza Senior Manager Mandviwalla & Zafar Mustafa Shoro Director A. F. Ferguson & Co. Lawyer Starlet Innovations (Pvt.) Azhar Maqbool Shah Ltd. Associate Shoro Law Associates Khalid Rehman Lawyer Surridge and Beecheno Moeen Ahmen Siddique Huma Ijaz Zaman Surridge and Beecheno Lawyer Partner Muhammad Shahid Mandviwalla and Zafar Executive Logistics Law Raiv Syed Qamar Hussain Sabzwari Advocates Associate Masood Textile Mill Afzal Suhail District & Sessions Judge Sami-Ullah Zia Sabzwari Law Associates Ibrahim Shahid Lawyer Mian Abdul Saeed Lawyer (High Court) Sajeel Sheryar Swati Asmar Law Associates Lawyer Shahids, Barristers and Lawyer Mian Law Associates Law Associates District Courts Mian Arif Said Muhammad Tahir Lawyer (High Court) Manager Revenue and Accounts Three Stars Hoisery Investment Climate Advisory Services of the World Bank Group Economic Reforms Unit Ministry of Finance Government of Pakistan THE WORLD BANK HT TP://SUBNATIONAL.DOINGBUSINESS.ORG