Can conglomerates drive Pakistan’s economic transformation?

LAHORE: Conglomerates have the potential to play a transformative role in developing economies, often serving as engines of industrialisation, job creation, innovation, and export expansion. However, in Pakistan, the behaviour of large business groups has diverged from this ideal, with many accused of preserving their dominance through protectionist policies rather than driving growth through innovation.

The strength of conglomerates lies in their ability to mobilise capital at scale, navigate complex markets, and operate across multiple sectors such as manufacturing, banking, energy and textiles. In environments where foreign investment is limited and public institutions are weak, such groups can fill critical investment gaps. Their organisational capacity allows them to adopt new technologies more rapidly than small and medium enterprises, meet international standards, and enter global markets with greater ease -- thus contributing to export diversification.

They also help distribute economic activity across sectors, reducing dependence on any single industry and cushioning the economy from sector-specific shocks. Large business groups can generate substantial employment, provide relatively stable jobs and contribute to workforce development through training and upskilling initiatives. In the absence of strong public infrastructure, some conglomerates have taken on the role of building industrial zones, power plants or logistics networks. At times, they have advocated for reforms that support a more favourable business environment, such as trade liberalisation and improvements in intellectual property rights and financial regulation.

Despite these advantages, Pakistan’s conglomerates have often fallen short of fulfilling such a role. Rather than driving transformation, many have sustained their influence through market protection, resisting reforms and crowding out smaller competitors. The current structure of these business groups has, in some cases, stifled innovation by discouraging new entrants and maintaining monopolistic control over key sectors such as cement, automobiles and fertilisers.

A major concern is the potential for cartelisation and rent-seeking in the absence of effective competition laws. The dominance of conglomerates in specific industries has allowed them to influence prices and restrict access for smaller businesses. Their close ties to policymakers can also result in preferential treatment, tax evasion, or regulatory capture, making it difficult for genuine reformers to implement policies that promote fairness and efficiency.

Furthermore, instead of focusing on high-value exports or technology-intensive industries, many conglomerates remain anchored in low-productivity sectors or protected markets. This limits the country’s ability to move up the global value chain and tap into more lucrative and sustainable export opportunities.

Nonetheless, with the right incentives and regulations, these powerful business groups can still be realigned toward national economic goals. Their scale and resources could support export transformation through integrated value chains in textiles and food processing, increased investment in logistics and cold storage, and the development of globally recognised brands in sectors such as apparel, dairy and processed foods. Achieving this would require a policy framework that supports research and development, provides concessional financing for modernisation, and enforces fair competition to curb monopolistic practices.If properly directed, conglomerates could yet become a force for economic progress rather than an obstacle to it.