Ease of doing business – dream for businesses in Pakistan

Despite tall claims by the Federal and Provincial governments to encourage ease of doing business in order to promote industrialization, industries and other businesses in Pakistan are facing multiple issue due to uncertainty over jurisdiction of Federation or Provinces over many law including but not limited to Workers Welfare Fund. 

Post 18^th amendment, jurisdiction over employee related laws has been bestowed to provincial governments, however, as per the judgement dated March 20, 2018 of the Supreme Court of Pakistan, incase of Federal Industrial Relations Act, 2012, it has been held that Constitutionally, Federal Legislature has extra-territorial authority but no such extra-territorial authority has been given to the Provincial Legislature in respect of establishments doing business in more than one province known as trans-provincial establishments.

Based on the above referred judgement, Provincial Government cannot legislate labour related law in respect of establishments doing business in more than one province known as trans-provincial establishments and for such organizations, Federal law will prevail. However, Trans-provincial entities are being served with multiple notices from multiple authorities from multiple provinces to pay WWF / WPPF to them without realizing the fact that an entity, having presence in multiple provinces, cannot be expected to pay WWF / WPPF to all of them.

As per the Notification number 10(1)/2013-EOBI dated 06-08-2020 issued by the Ministry of Overseas Pakistanis & Human Resource Development, while referring to the Ministry of Inter Provincial Coordination’s letter No. 2(207)/2018-CCI dated March 12, 2020, following has been stated as having been approved:

“EOBI shall remain with Federal Government and WWF shall remain with the Federal Government till such a time a mutually agreed mechanism is developed.”

As per the minutes of the meeting dated October 2, 2020 [covered in Notification number 1-1/2020-Fund dated 09-10-2020 by the Ministry of Overseas Pakistanis & Human Resource Development] attended by the Secretaries Labour department of Sindh, Punjab, KPK and the Additional Secretary, Balochistan, it is evident that representative from Federation as well as all provinces have agreed as follows:

“i.   The province who have enacted the required legislation may go for collection of 2% from the standalone companies in their Provinces after the resolution of collection issue with FBR.

ii.  For the trans-provincial companies who have one or more offices in two or more than two provinces will contribute toward the Trust Fund Account through FBR and Participation Act, 1968.

Article 143 of the Constitution of Islamic Republic of Pakistan resolves the inconsistency between Federal and Provincial laws as follows:

“143.    If any provision of an Act of a Provincial Assembly is repugnant to any provision of an Act of Majlis-e-Shoora (Parliament) which Majlis-e-Shoora (Parliament) is competent to enact, then the Act of Majlis-e-Shoora (Parliament), whether passed before or after the Act of the Provincial Assembly, shall prevail and the Act of the Provincial Assembly shall, to the extent of the repugnancy, be void.”

Despite clarity as per the Constitution, agreement between the Federation and Provincial Governments, industries and other businesses are facing issues of multiple notices from Federal Government as well as all provincial governments each asking industries to pay WWF to them. Many industries have also challenged this issue of multiple notices from different departments, against which High Courts’ have issued interim stay orders. Resultantly, WWF amount is neither being paid to Federal Government nor to provincial governments. It is high time that all the Government functionaries sit together to resolve this issue for a win-win situation.