ISLAMABAD, Dec 4: The caretaker government is considering a proposal to remove directors of companies found guilty of illegal trade practices from the board of directors, Dawn has learnt.

Informed sources said on Tuesday that the World Bank, which is funding the capacity building of the Competition Commission, has favoured the proposal.

The bank wants strict laws to ensure prudent business practices in Pakistan. It observes that as competition law is a law of general application, coordination, formalised or otherwise is needed to ensure effective application of responsibilities of the competition agency and other regulators in Pakistan.

Sources said that World Bank had asked Pakistan to deepen and expand reforms to new and more complex areas including cartelisation and manipulation. In this regard, the bank regretted that the second generation reforms were not adequately implemented by the previous government and that the caretakers should take the notice of it.

The bank also wanted the government to implement a competition policy aimed at having a strong competition culture throughout the economy, equal opportunities for all viable entities to participate in the economy, entrepreneurship and thereby developing a fertile ground for innovation, skills development and product diversification.

The bank also believed that wide range of efforts were needed to remove unnecessary barriers to entry, created either by badly designed regulations and policies or by anti-competitive business policies by private firms.

Fostering effective competition through an effective competitive policy is supportive of a business environment which improves efficiencies, leads to allocation of resources in the best manner and in which abuse of market power is prevented through competition.

At the same time, the bank maintained that implementation of explicit competition policy will need to avoid procedures that might pose unnecessary transaction or compliance cost on firms.

An effective competition policy framework involves a multifaceted set of initiatives, all of which are new to Pakistan, the bank said.

Sources said that the World Bank wanted Pakistan to promote sustainable economic development and improve the well-being of all citizens by protecting and promoting competition in the economy. It said that private and public barriers to competition needed to be prevented from hindering the development path to guarantee maximisation of consumer and producer welfare in a dynamic framework.

It said that competition policy and its regulatory framework will support an environment in which entry and growth is fostered, anti competitive behaviour by all firms is prevented and abuse of market power by dominant firms is restrained.

The current economic landscape, the bank said, requires active policy and institutional reform to deepen competitive forces. Adjusting from a legacy of heavy protection to an environment of increased competition both national and internationally, the economy is now relying on a dynamic and flexible private sector for growth, employment and poverty reduction.

Barriers to entry and exit have improved, and the cost of doing business has been reduced but all are still significant, particularly for Small and Medium Enterprises (SMEs). Indicators extracted from Doing Business 2007, below demonstrate that Pakistan ranks somewhere in the middle of South Asian countries in key areas, but somewhat lower when compared globally.

The bank said that there was consensus among policymakers, academic and the business community that sustained growth will come from improvement in Pakistan’s international competitiveness in an increasingly globalised world market. At the same time SMEs dominate economic livelihood and represent the seeds for growing innovative firms but are particularly disadvantaged by obstacles to their own growth and development.

With both ends of the economic spectrum in mind, the government needed to be committed to improve three second generation areas which have impact on firm level productivity, economic governance, efficiency of factor markets and provision of infrastructure services.

The goal is thriving market which rewards innovation and risk-taking while penalizes activities which distort proper functioning of markets.

Sources said that the World Bank also wanted the government to raise public awareness of the benefits of competition and the role of the competition policy to deliver better economic outcomes by championing competition more broadly to develop a competition culture in society.