NewKerala.com

Pakistan's 34% Higher Business Costs Cripple Export Competitiveness

The Pakistan Business Forum reports the cost of doing business is 34% higher than in comparable regional economies, severely undermining export competitiveness. Key factors include energy tariffs for industry that are significantly above regional benchmarks and a tax policy that burdens formal businesses. The crisis is starkly visible in the cotton sector, where over 400 ginning factories have closed, disrupting the vital textile industry. Despite awareness of the unsustainable situation, authorities have yet to implement effective corrective measures on the ground.

Key Points: Pakistan Exporters Lose Edge as Business Costs Soar 34%

  • Business costs 34% higher than regional rivals
  • Exports stagnant since 2022 despite global recovery
  • High energy tariffs cripple industrial competitiveness
  • Narrow tax base inflates supply chain costs
  • Cotton sector collapse disrupts textile exports
2 min read

High cost of doing business cripples Pakistan's exporters

Pakistan Business Forum reports costs 34% higher than regional rivals, crippling exports. Energy, tax policies blamed for factory closures and stagnant trade.

"Buyers do not wait for policy corrections; they shift orders elsewhere - Business Recorder article"

New Delhi, Feb 3

The Pakistan Business Forum has assessed the cost of doing business in the country to be around 34 per cent higher than in comparable regional economies, which means Pakistani exporters are losing price competitiveness in international markets that determine survival, according to an article in the Pakistani media.

For an economy that is trying desperately to pivot to export-generated growth, employment and foreign exchange, this disadvantage is simply unsustainable. Pakistan's exporters have already felt the consequences. Despite a recovery in global trade across several sectors, exports have remained stagnant since 2022, the article in the Karachi-based Business Recorder observed.

It highlights that regional competitors such as India, Bangladesh, and Vietnam have expanded market share by maintaining lower cost structures, stable policy frameworks and predictable operating environments. Pakistan, by contrast, has allowed costs to spiral through policy choices that actively undermine industrial competitiveness.

Energy pricing is one of the most damaging factors. Electricity and gas tariffs for industry remain significantly higher than regional benchmarks. These costs are driven by inefficiencies, misaligned subsidies, and the continued treatment of productive sectors as a source of fiscal extraction rather than economic growth. For export-oriented firms, energy expenses feed directly into unit costs, eroding margins and pricing them out of competitive bids. Buyers do not wait for policy corrections; they shift orders elsewhere, the article lamented.

Tax policy has further compounded the problem. The burden of revenue collection continues to fall disproportionately on a narrow group of documented businesses. Instead of broadening the tax base and eliminating distortions, policy has relied on higher effective rates, withholding mechanisms and indirect levies that inflate costs throughout the supply chain. This approach penalises formal production and weakens competitiveness while leaving structural leakages untouched, the article observes.

Nowhere is this policy failure more visible than in the cotton sector. Cotton underpins Pakistan's textile industry, the country's largest export earner and a major source of rural livelihoods. Yet more than 400 cotton ginning factories have closed, disrupting the entire value chain, the article stated.

Consequently, Farmers face reduced demand and lower returns, ginners have been pushed out of operation, and textile manufacturers increasingly rely on imported cotton, placing additional strain on foreign exchange reserves. This situation is not sustainable, and all relevant authorities are aware of it, yet despite all the talk, there's still nothing on the ground to offer any encouragement, the article added.

- IANS

Share this article:

Reader Comments

S
Shreya B
It's sad to see the cotton farmers suffering. Agriculture is the backbone of any economy. Here in India, we have our own challenges, but at least there is policy support for the textile sector. Hope things stabilize for the common people across the border.
A
Aman W
High energy costs are a killer for manufacturing. We've seen how reliable power and competitive tariffs helped Gujarat and Tamil Nadu become industrial hubs. Pakistan needs to fix its fundamentals instead of blaming others.
P
Priyanka N
As a small business owner, I understand the pain of a complex tax system. It chokes growth. The article is right about broadening the tax base. It's a lesson for all South Asian nations, including India. We must keep our systems simple and supportive for exporters.
D
David E
Working in international trade, I see this firsthand. Buyers have zero loyalty; they go where the price and reliability are. With 34% higher costs, Pakistan is simply pricing itself out of the market. A tough but necessary read for their policymakers.
K
Kavya N
The closure of 400 ginning factories is shocking. It shows how one weak link can break the entire chain. India should learn from this and double down on supporting our MSMEs and cotton farmers. Competitiveness is a daily battle.
V
Vikram M

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50