Enabling policy for social & creative enterprises through DICE Presentation at the launch of Developing Inclusive & Creative Enterprises programme by British Council 3rd October, 2018

1. DICE Policy Series
Enablingpolicy for
social and creative
enterprisesthrough
DICE

2. Problem Statement
Our entrepreneurs including
those in Social & Creative
Enterprise (SCE) sector face a
difficult regulatory and policy
environment

3. Doing Business (2018)
Pakistan ranks 147 out of 190 countries

4. What needs to change?
• Starting a business (rank = 142/190)
• Getting utility connection (167)
• Getting credit (105)
• Paying taxes (176)
• Trading across borders (171)
• Registering property (170)
• Dealing with construction permits (141)

5. Countries which have seen quick improvements in the
cost of doing business rank have improved:
Incorporation
Credit policy
Municipal permits
Tax regime
Utilities
Why are we doing this?

6. Why is this necessary?

7. We have a thriving startup culture in Pakistan
Not all graduate beyond startup phase; policy can help
Difficult to integrate in value chains; improving regulatory
environment can help
Even more difficult to participate in trade.
What is evidence telling us?

8. Is entrepreneurship culture inclusive?
There are gender-specific barriers to participation in
competitive businesses and trade
Social and creative entrepreneurship can help SDGs.
What is evidence telling us?

9. Reducing regulatory burden on social and creative
enterprises
In 2015, the share of creative industries in overall GDP
and employment was mere 4.5% and 3.7%
respectively.
What are we proposing?

10. Transactions costs in incorporation/renewals/registration
Tax compliance costs which constrain cash flows
Procedure and time costs in access to permits and utilities
Costs associated with credit verification
Rental laws proving to be a critical constraint for scale up
Ease participation in trade (tariff and non-tariff barriers).
Examples of regulatory burden

11. Multiplicity of taxes on same income base
Growing exposure to indirect taxes (in absence of VAT)
Withholding tax provisions stifling working capital
Definition issues with regards to services provided by
startups.
Case of tax regime

12. Central Bank’s SME Policy may recognize SCEs
Prudential regulations that ensure commercials banks take risk
on SCEs
Central bank may relax risk weighting calculation for lending to
startups
Case of credit policy

13. Crowdfunding platforms discouraged
Banking Companies Ordinance 1962, Section 27A prohibits
from inviting deposits of money from the public for investment
in their venture or for borrowing
Public Offering Regulations, 2017 permits companies to issue
shares to the public only where they have been in operation for
at least three years and have had a profitable track record for
two years
All such interventions are barriers to entry and scale up.
Engagement with SECP

14. New Social Welfare Policy Draft being discussed in Social
Welfare Departments in Punjab and Sindh
Foreign funds of non-profit bodies to be routed/vetted
through/by multiple focal departments in the government
District-specific NoC will be required; additional costs towards
expansion.
Non-profit or Company Act 2017 do not fully support for-profit
social enterprises.
Engagement with Social Welfare Departments

15. Improving policy makers understanding towards
Enabling government to understand how it can promote
SCEs (e.g. public procurement)
Providing basis for reduction in cost of doing business for
SCEs (e.g. non-commercial rates of utilities)
Reducing compliance of tax, labour, environment and
municipal laws (e.g. Charity Commission in UK)
Valuing social impact through fiscal and monetary policies
(e.g. tax relief for startup angels)
Need for a policy toolkit

16. Limited list of sectors in SEZs
Economic zones still not open to services-sector startups
Comprehensive dialogue needed on how creative enterprises
can contribute to SEZs
Social Enterprise SEZs in Cambodia and Liberia.
Supporting SCEs through CPEC’s SEZs

17. Develop a database of
Social and Creative
Enterprises
Updating binding
constraints faced by
SCEs/MSMEs
Issues paper for ECC
Support CSE at the
Planning Commission
Ensure support for SCE
in
5 Year Plan
Provincial plans and
strategies
Procurement Rules
(PPRA)
Annual Budgets
Private Member Bills in
Federal and Provincial
Governments
Key Outputs

18. Strengthening the case
for policy support to
SCEs
Mainstreaming women-
led, social businesses
Improved evidence and
research base on SCEs
Prioritized policy focus
on high impact SCE
sectors
Improved doing
business rank for
Pakistan
Successful interventions
in public sector e.g. CSE
at federal and provincial
levels
Expected Outcomes

19. Thank You
www.sdpi.org | www.sdpi.tv | vaqar@sdpi.org