Pakistan has a history of dropped catches. Just when opportunity swings our way, we let it slip through our fingers.
Today, we face another critical moment – and this one is coming fast. As the world shifts toward protectionism, the US, our largest export market, has imposed a 19 per cent tariff on Pakistani goods – slightly better than the 20 per cent rate on Bangladesh and Vietnam, and significantly lower than India’s 50 per cent plus penalties. For once, we hold a fragile competitive edge. It’s rare and fleeting.
We’ve been here before. Repeatedly, Pakistan has arrived at crossroads where smart policy choices could have unlocked massive export potential. Yet, high energy prices, excessive taxation, overregulation, poor infrastructure and recurring political and security unrest have kept us out of the race.
While global firms increasingly look to Asia for manufacturing alternatives, Pakistan remains absent from the investment map. Asia attracted nearly $400 billion in capital investment – 30 per cent of the global total and a five-year high – yet Pakistan received less than $216 million, a stark indicator of our marginal role in the region’s industrial landscape.
Even our closest ally, China – once eager to build export industries under CPEC – shifted its capital to Vietnam, Bangladesh and Ethiopia. Just last week, Handa Industries announced a $250 million investment in Bangladesh’s textile sector. Indian textile companies are eyeing Sri Lanka. Meanwhile, Pakistan – despite its strategic geography and massive labor force – remains too expensive, too uncertain and too uncompetitive for long-term investment.
The problem isn’t tariffs. It’s the cost of doing business in Pakistan. Our electricity and gas rates are among the highest in developing countries, while our tax regime resembles that of advanced economies – but without the efficiency. Law and order remain fragile. Customs procedures are clunky. Water shortages plague Karachi’s industrial zones. Logistics networks are underdeveloped. These are deal breakers.
Unless we fix these fundamentals, even favourable tariffs won’t help. We’ll miss the catch. Again.
So what must Pakistan do – and do now?
First, we must fast-track five high-potential sectors: textiles, IT, agro-processing, engineering goods and minerals. These are the sectors that can deliver non-debt foreign exchange, but only if we reduce their risks. That means immediate, tailored interventions: sector-specific energy pricing, rationalised taxation and a zero-tolerance approach to refund delays.
For textiles – our flagship export – this is a golden moment. The government must immediately engage with major textile exporters, approve export refinance quickly, ensure uninterrupted, competitively priced energy and launch an international campaign positioning Pakistan as a reliable alternate supplier. If we act now, we can gain market share from regional competitors – and lock in long-term orders.
Second, we must dismantle the policy-induced anti-export bias. Our tax system punishes exporters with late refunds, arbitrary levies, and high compliance costs. Simplify it. Digitise it. Let exporters export without being buried in bureaucracy. Importing raw materials should never be easier than exporting value-added goods.
Third, our diplomacy must pivot towards trade. Forget protocol. We need economic envoys who secure market access, remove non-tariff barriers, and build commercial relationships that last beyond political cycles. Our top 10 trading partners, including the US, China, and the EU, must become the focal point of our foreign policy. We must also explore untapped markets across the Gulf, Central Asia and Africa – and make trade, not geopolitics, our core message.
Fourth, we must activate our idle Special Economic Zones (SEZs). Most have become land banks, not industrial hubs. Instead, repurpose underutilized state buildings and infrastructure into Village Economic Zones (VEZs) – locally driven enterprise centers linked to agriculture, crafts, and small-scale manufacturing. These decentralised, demand-driven zones can transform rural economies and reduce dependence on cash handouts.
Fifth, Pakistan should also establish Joint Border Markets (JBMs) in every bordering district of Balochistan, Khyber Pakhtunkhwa and possibly southern Punjab. These markets can formalise cross-border trade with Iran and Afghanistan, curb smuggling and integrate local producers into regional value chains. JBMs are not just economic hubs – they are instruments of stability and prosperity in frontier regions.
Sixth, we must unlock capital for exporters – especially SMEs in non-traditional sectors. A digitized export finance pipeline, backed by government guarantees and routed through commercial banks, can bridge the credit gap. If a firm has a credible purchase order and export track record, finance them – don’t stall them.
At the same time, we must confront the reality of weak domestic investment. Pakistan’s investment-to-GDP ratio has hovered around 13–15 per cent for years – one of the lowest in South Asia. Private investors are deterred by inconsistent regulations, high borrowing costs, and lack of reliable infrastructure. Without a revival in domestic manufacturing, agro-processing and services investment, even the best export policies will fall short.
To sustain this momentum, Pakistan must pursue trade agreements with its neighbours. These agreements, grounded in the principle of comparative advantage, can open vast new markets for Pakistani goods. But they must be depoliticised and de-securitised. Economics must drive them – not security paranoia. Only then can we turn our geography from a liability into an asset.
None of this is wishful thinking. Countries like Vietnam, Bangladesh and Ethiopia have achieved dramatic export-led growth by focusing on fundamentals: competitive costs, predictable policy and a relentless drive for productivity. We can do the same if we choose to.
This is not just another moment. This could be the moment. We must act – or expire.
The writer is associate professor at the Pakistan Institute of Development Economics (PIDE). He can be reached at: dr.iqbaln@gmail.com
