KARACHI: Doing business in Pakistan costs about 34% more than in comparable regional economies, the Pakistan Business Forum said, warning that elevated operating expenses are eroding industrial competitiveness and leaving exporters struggling to match rival producers in nearby markets.
The business group linked the cost gap to a mix of taxation, energy prices and currency volatility, and said the pressure is being felt across supply chains that rely on imported inputs, stable power and predictable regulatory treatment. It said the higher cost structure has weighed on manufacturing and constrained export performance.
Pakistan Business Forum officials cited what they described as an irrational tax framework that raises the price of production and compliance, alongside high electricity and gas tariffs that increase unit costs for factories. The forum also pointed to exchange rate instability as a factor that complicates pricing and procurement, particularly for firms dependent on imported raw materials and machinery.
The group highlighted strains in the cotton economy, a key input for the textile industry, Pakistan’s largest export sector. It said the imposition of an 18% general sales tax on local cottonseed and oil cake has raised costs and reduced demand for domestic cotton, contributing to financial losses for farmers and disruptions for processors.
Competitiveness pressure on textiles and cotton
Pakistan Business Forum South and Central Punjab Chairman Malik Talat Suhail said more than 400 cotton ginning factories have closed, interrupting the cotton value chain and affecting farmers, ginners and textile producers. The forum urged the government to withdraw the 18% tax on cottonseed and oil cake through a statutory regulatory order, arguing that easing taxes on domestic cotton by-products would reduce import dependence and support local cultivation.
The forum’s assessment comes as Pakistan continues to confront governance challenges that international institutions have linked to economic performance. Transparency International’s Corruption Perceptions Index for 2024 gave Pakistan a score of 27 out of 100 and ranked it 135 out of 180 countries, indicating persistent concerns about public-sector integrity.
Governance and corruption risks add to costs
The International Monetary Fund has also flagged governance and corruption vulnerabilities in areas that directly affect the cost of doing business, including taxation, procurement and oversight of key state institutions. In a governance and corruption diagnostic report referenced by the IMF, the Fund said reforms that strengthen controls, reduce complexity and improve transparency could lift economic output, underscoring the economic drag from weak governance.
Pakistan Business Forum said the combination of high input costs and administrative burdens leaves local producers at a disadvantage against regional competitors that face lower energy prices, more predictable tax administration and fewer transaction costs. The group called for policy steps focused on lowering industrial energy tariffs, rationalising taxes and stabilising the operating environment to reduce the gap it says has widened to 34% above regional norms. – By Content Syndication Services.