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Pakistan's Business Costs 34% Higher Than Regional Peers, Study Reveals

A study by the Pakistan Business Forum reveals that structural policy failures make operating a business in Pakistan 34% more expensive than in comparable South Asian economies. Key drivers include electricity tariffs nearly double the regional average, an effective corporate tax burden as high as 55%, and a sharply weakened currency. High interest rates and complex regulatory requirements further discourage investment and entrepreneurship, leading to a decline in self-employment. Analysts argue these protected trade policies raise production costs without improving global competitiveness.

Key Points: Pakistan Business Costs 34% Higher Than South Asia: Study

  • High energy costs double regional average
  • Effective corporate tax burden up to 55%
  • Rupee depreciation from 110 to 280 per dollar since 2018
  • High interest rates at 12.5% stifle borrowing
  • Regulatory hurdles discourage entrepreneurship
2 min read

Doing biz in Pakistan 34 pc costlier than S. Asian economies, study flags structural policy failures

A PBF study finds doing business in Pakistan is 34% costlier due to high energy, taxes, loans, and a weak rupee, stifling growth.

"Operating a business in Pakistan is 34 per cent more expensive than in comparable South Asian economies. - Pakistan Business Forum study"

New Delhi, Feb 19

Pakistan's struggling growth story may not be about weak productivity or lack of innovation, but about the high cost of doing business created by state policies, according to a recent private sector analysis reported by Nikkei Asia.

The report, based on a study conducted by the Pakistan Business Forum (PBF), cited by The News International, found that operating a business in Pakistan is 34 per cent more expensive than in comparable South Asian economies.

Business leaders said this is not a temporary issue but a structural problem caused by high energy prices, heavy taxation, expensive loans and currency depreciation.

According to the study, electricity tariffs in Pakistan average around Rs34 per unit, nearly double the regional average of Rs17.

Fuel prices are also burdened with a petroleum levy of about Rs80 per litre. Interest rates remain high at 12.5 per cent, making borrowing costly for businesses.

At the same time, the Pakistani rupee has weakened sharply from Rs 110 per dollar in 2018 to about Rs 280 by December 2025, making imported raw materials and machinery far more expensive, the report stated.

The effective tax burden on companies can reach as high as 55 per cent, which is significantly above regional norms.

Business groups argue that this level of taxation reduces funds available for reinvestment and expansion, discouraging growth.

The impact is also visible in the country's workforce trends. Data from Gallup Pakistan shows that salaried employment now accounts for over 60 per cent of the workforce, up from about 53 per cent in 2010-11.

Meanwhile, self-employment has declined from 24.4 per cent to 21.8 per cent. Analysts say this reflects growing risk aversion, as high costs and regulatory hurdles discourage people from starting their own businesses.

Entrepreneurs have complained about complex licensing rules and multiple government departments increasing compliance costs.

A young graduate quoted in the Nikkei report said he dropped plans to open a restaurant after facing excessive regulatory requirements.

Experts also point to trade and industrial policies that restrict access to cheaper imported inputs in the name of protecting domestic producers.

Critics argue this approach raises production costs without improving competitiveness, leaving local manufacturers protected but unable to compete globally, according to the report.

- IANS

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Reader Comments

S
Sarah B
The data on salaried employment rising while self-employment falls is telling. It shows people are choosing job security over the risk of starting a business because the system is stacked against entrepreneurs. That's a worrying trend for any economy's long-term health.
V
Vikram M
Rs 80 per litre petroleum levy! 😳 And I thought our fuel prices were high. The currency crash from 110 to 280 is brutal for imports. This study highlights why economic stability and sensible taxation are non-negotiable for growth. Hope they can course-correct for the sake of their common citizens.
P
Priya S
While the analysis is sharp, we must be careful not to view this with any sense of superiority. Every nation faces challenges. However, it does reinforce the importance of the reforms India undertook—like the Insolvency and Bankruptcy Code and GST—despite their initial pains. Policy consistency matters.
R
Rohit P
That young graduate dropping his restaurant dream because of red tape... it's heartbreaking. This is why "ease of doing business" isn't just a buzzword. It's about real dreams and livelihoods. We have our own issues with compliance, but articles like this are a reminder to keep simplifying.
K
Karthik V
Protecting domestic industry is good, but if it makes local manufacturers uncompetitive globally, what's the point? It becomes a costly subsidy. The focus should be on making them efficient, not just shielding them. A lesson for all developing economies, really.

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