Over the past decade, cumulative tariffs have surged by 117 percent, skewing competition and steering investment toward politically favored sectors instead of globally competitive industries
By our correspondent
ISLAMABAD: The World Bank’s recent report casts a stark light on Pakistan’s trade and industrial policy framework, highlighting a troubling pattern of rising import tariffs that threaten to undermine the country’s economic potential. The report identifies steep import duties—especially regulatory duties (RDs) and additional customs duties (ACDs)—as significant obstacles stifling industrial growth and hampering the nation’s export performance.
It warns that the current system disproportionately benefits well-connected elites, fostering distortions that deter productive investment and innovation. Over the past decade, these cumulative tariffs have ballooned by as much as 117 percent, the report reveals, creating an uneven competitive landscape that encourages investment in politically favored sectors rather than globally competitive industries. Instead of nurturing innovation and scaling up manufacturing, Pakistan’s protectionist approach has slowed progress, leaving its export sector struggling.
The numbers underscore this decline: exports, which accounted for 15 percent of Pakistan’s GDP in the 1990s, have slipped to just 10 percent by 2024—placing Pakistan at the bottom of the South Asian export league. The World Bank emphasizes the urgent need for policy reform to restore investor confidence and diversify Pakistan’s export base. Key recommendations include reducing the tariff slabs to more reasonable levels, eliminating opaque levies such as RDs and ACDs, and moving towards a market-driven foreign exchange system.
Ensuring reliable and affordable energy supplies for industry and improving access to business financing also feature prominently in the report’s roadmap. Perhaps most crucially, the Bank calls for structural reforms including the full implementation of the proposed Investment Act and a comprehensive overhaul of bankruptcy laws. These measures are aimed at making it easier for businesses to enter and exit the market, a critical step for fostering a dynamic and resilient private sector that can respond swiftly to market changes.
The report echoes long-standing grievances voiced by Pakistani exporters, who have struggled with high input costs, inconsistent policies, and restricted access to modern technology. These challenges have made it difficult for Pakistan to keep pace with regional competitors like Bangladesh, Vietnam, and India, who have steadily expanded their manufacturing and export footprints. As Pakistan prepares to engage with the International Monetary Fund and seek fresh foreign investment, the pressure to reform its tariff and industrial policies is mounting.
