EDITORIAL: Can Pakistani exporters compete with Bangladesh, Vietnam and India?

EDITORIAL: When the cost of doing business in Pakistan is estimated to be around 34 percent higher than in comparable regional economies – according to the Pakistan Business Forum (PBF) – the implications are immediate and severe. Exporters operating under such conditions are not merely facing pressure; they are losing price competitiveness in international markets that determine survival. For an economy that is trying desperately to pivot to export-generated growth, employment and foreign exchange, this disadvantage is simply unsustainable.

Pakistan’s exporters have already felt the consequences. Despite a recovery in global trade across several sectors, exports have remained stagnant since 2022.

Regional competitors such as Bangladesh, Vietnam and India have expanded market share by maintaining lower cost structures, stable policy frameworks and predictable operating environments. Pakistan, by contrast, has allowed costs to spiral through policy choices that actively undermine industrial competitiveness.

Energy pricing is one of the most damaging factors. Electricity and gas tariffs for industry remain significantly higher than regional benchmarks. These costs are driven by inefficiencies, misaligned subsidies and the continued treatment of productive sectors as a source of fiscal extraction rather than economic growth. For export-oriented firms, energy expenses feed directly into unit costs, eroding margins and pricing them out of competitive bids. Buyers do not wait for policy corrections; they shift orders elsewhere.

Tax policy has further compounded the problem. The burden of revenue collection continues to fall disproportionately on a narrow group of documented businesses. Instead of broadening the tax base and eliminating distortions, policy has relied on higher effective rates, withholding mechanisms and indirect levies that inflate costs throughout the supply chain. This approach penalises formal production and weakens competitiveness while leaving structural leakages untouched.

Nowhere is this policy failure more visible than in the cotton sector. Cotton underpins Pakistan’s textile industry, the country’s largest export earner and a major source of rural livelihoods. Yet more than 400 cotton ginning factories have closed, disrupting the entire value chain.

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Farmers face reduced demand and lower returns, ginners have been pushed out of operation, and textile manufacturers increasingly rely on imported cotton, placing additional strain on foreign exchange reserves. This situation is not sustainable, and all relevant authorities are aware of them, yet despite all the talk there’s still nothing on the ground to offer any encouragement.

This outcome is the result of domestic decisions. The imposition of 18 percent GST on cottonseed and oil cake has distorted incentives, raised costs and weakened the competitiveness of local cotton.

Instead of encouraging cultivation and strengthening the domestic supply chain, the policy has discouraged production and increased dependence on imports. The damage is felt simultaneously by farmers and the textile industry, making this failure particularly costly.

The broader risks are clear. Persistently high business costs threaten de-industrialisation, export market loss and rising unemployment. Once supply chains shift away, recovery becomes difficult and expensive. For Pakistan, which lacks the fiscal space to absorb prolonged export weakness, the stakes are especially high.

Pakistan cannot recover by pricing itself out of the markets it depends on. Competitiveness is not optional; it is the foundation of any sustainable rebound. The longer these structural costs remain unaddressed, the narrower the path back to growth will become.

Copyright Business Recorder, 2026