ISLAMABAD: The cost of doing business in Pakistan is approximately 34 per cent higher than in comparable regional economies, creating a severe competitiveness crisis for local industries, the Pakistan Business Forum (PBF) said on Thursday. The business body warned that unless urgent structural reforms are introduced, Pakistan risks long-term deindustrialisation, declining exports and worsening economic instability.
In an official statement, the PBF said that high operational costs have seriously undermined the ability of Pakistani businesses to compete in international markets. It attributed the situation to irrational taxation policies, excessive electricity and gas tariffs, and ongoing currency instability, all of which have placed domestic exporters at a disadvantage compared to competitors in countries such as Bangladesh, India and Vietnam.
According to the forum, Pakistan’s exports have remained largely stagnant since 2022, despite a recovery in global trade across several sectors. The PBF argued that local exporters have been unable to capitalise on improving international demand due to their inflated cost structures and unpredictable policy environment.
PBF Chairman Ahmad Jawad said that under current conditions, Pakistani businesses are struggling to survive, let alone expand their export footprint. He noted that the country’s industrial cost base is significantly misaligned with regional economies that offer lower energy prices, more stable exchange rates and supportive taxation frameworks.
To address the crisis, Mr Jawad called on the government to immediately rationalise the taxation system, reduce electricity and gas prices for industrial users, and adopt a clear and consistent policy to strengthen and stabilise the national currency. He stressed that policy uncertainty has eroded business confidence and discouraged long-term investment.
The PBF chairman proposed stabilising the rupee at Rs240 per dollar, arguing that a stronger and predictable exchange rate would help control inflation, reduce the cost of imported raw materials and bring stability to export contracts. He said that continuous currency devaluation has failed to deliver export growth and has instead contributed to rising production costs and economic uncertainty.
Over the past six years, the rupee has depreciated by nearly Rs160 against the US dollar, a development that Mr Jawad described as a reflection of weak economic management rather than genuine market forces. He added that while the rupee is currently holding its value, the exchange rate remains artificially high when assessed against Pakistan’s foreign exchange reserves and broader economic fundamentals.
According to the PBF, repeated devaluations have largely benefited speculative activity while damaging productive sectors of the economy. The forum warned that without exchange rate stability, exporters cannot plan effectively or compete sustainably in global markets.
The statement also highlighted a growing crisis in Pakistan’s cotton sector. PBF Chairman for South and Central Punjab Malik Talat Suhail expressed serious concern over the closure of more than 400 cotton ginning factories, which has disrupted the entire cotton value chain. He said the closures have negatively affected farmers, ginners and the textile industry, one of Pakistan’s most important export sectors.
Mr Suhail pointed out that cotton ginners are facing an uneven playing field due to the imposition of 18 per cent general sales tax on local cottonseed and oil cake. He said this tax has increased costs, reduced demand for local cotton and caused financial losses for farmers. He added that cotton remains a major component of Pakistan’s import bill, and discouraging local production has increased reliance on expensive imports.
The PBF urged the government to remove the 18 per cent GST on cottonseed and oil cake, stating that such a move would encourage cotton cultivation in Punjab and Sindh, revive domestic production and ease pressure on foreign exchange reserves. The forum called for an immediate issuance of a statutory regulatory order to withdraw the tax by February, ahead of the upcoming early cotton harvest.
The PBF warned that without timely intervention, Pakistan could face further declines in cotton output, additional factory closures and mounting stress on the economy. It called on the federal government to engage closely with stakeholders and adopt pro-business, pro-export and pro-farmer policies to restore competitiveness and place the economy on a sustainable growth path.
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