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.
(Disclaimer: This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)
