LAHORE: Pakistan’s current economic crisis is multifaceted, driven by governance failures, global economic challenges and domestic inefficiencies. However, the trade and industrial sectors’ persistent demands for economically unfeasible concessions have also exacerbated the situation.
The role of trade and industry in revenue leakages cannot be overlooked. Many businesses resist documentation, avoiding taxes and fuelling a shadow economy. Smuggling and under-invoicing are prevalent, with some sectors indirectly benefiting from these practices, causing significant revenue losses for the state.
Instead of advocating for measures to improve governance and the business climate, trade associations often push for short-term benefits such as subsidies and tax holidays. While concessions like reduced taxes, energy subsidies and bailouts can occasionally be justified, they often strain fiscal resources when not tied to performance or structural reforms. These demands divert funds from critical areas such as infrastructure, education and healthcare, further hindering sustainable development.
Trade and industry bodies possess the influence needed to drive meaningful reforms. By supporting documentation, compliance with tax reforms and adopting technology, they could contribute to sustainable growth and enhanced competitiveness.
While the private sector’s behaviour contributes to the crisis, the government’s role is equally critical. Weak institutional frameworks, poor governance and inefficiencies lead to rampant corruption. With a massive fiscal deficit, the state relies heavily on borrowing to balance budgets, leaving minimal resources for development. Political instability, global inflation and supply chain disruptions further compound economic difficulties.
A collaborative approach is essential. The private sector must guide the government on reforms, adopt transparent practices and comply with fair taxation. Simultaneously, the government must enforce accountability, address structural issues and build trust with stakeholders to establish a balanced and sustainable economic framework.
The private sectors of India, Bangladesh and Vietnam offer lessons for Pakistan. Businesses in these countries have historically emphasised long-term competitiveness, export growth and strategic collaboration with their governments rather than recurring demands for concessions.
In India, businesses have actively supported structural reforms, such as the Goods and Services Tax (GST), recognising its long-term benefits despite initial resistance. Collaborative initiatives like ‘Make in India’ have bolstered export sectors, including IT, pharmaceuticals, and manufacturing. Indian businesses have sought incentives tied to productivity or innovation, rather than blanket exemptions, and have embraced transparency to secure international trade.
Bangladesh’s ready-made garments (RMG) sector has benefited from targeted government incentives like duty-free raw material imports and tax holidays linked to export milestones. Rather than repeatedly seeking unsustainable concessions, Bangladeshi businesses have focused on efficiency, market access and meeting export targets.
Vietnam’s private sector partnered with the government during the Doi Moi reforms, fostering foreign direct investment and export-driven growth. Tax and land incentives in industries like electronics and textiles are performance-linked, emphasising global competitiveness over short-term benefits. Businesses prioritise meeting international standards rather than lobbying for transient concessions.
In contrast, collaboration between the private sector and the government in Pakistan often lacks the strategic focus observed in India, Bangladesh and Vietnam. To overcome its economic challenges, Pakistan must adopt a similar approach, emphasising long-term growth, global competitiveness and sustainable economic practices.