In Pakistan’s evolving business landscape, the contrast between the formal and informal sectors is stark. On one side, multinational corporations (MNCs), fast-moving consumer goods (FMCG) companies, and legally registered businesses navigate a maze of regulations, ensuring compliance with global standards, internal audits, and an expanding list of provincial and federal requirements. On the other, an informal economy flourishes—largely unregulated and often unchecked. The question that arises is whether Pakistan’s regulatory framework is fostering a level playing field or simply making it more difficult for legitimate businesses to survive.
At the recent Unlocking Business Potential: Navigating Ease of Doing Business in Pakistan conference, organized by CoRe Alliance, Baby Food and Nutrition Council, and Fruit Juice Council, industry leaders, policymakers, and stakeholders discussed the growing challenges of doing business in Pakistan. A recurring theme emerged: the need for regulatory harmonization. The discussions made one thing very clear—Pakistan’s regulatory structure, instead of supporting businesses, is often working against them.
For businesses operating legally, regulation isn’t just about following the law—it’s a constant juggling act. Companies are required to obtain multiple licenses, register with various authorities, comply with different provincial laws, and keep up with changing tax codes. Many industries also follow global compliance requirements to meet international standards.
But here’s the paradox: while the formal sector deals with increasing compliance costs, over-taxation, and regulatory red tape, the informal economy remains largely unregulated. Counterfeit goods flood the market, tax evasion is rampant, and smuggling continues to undercut legally registered businesses. A market that punishes compliance while rewarding avoidance makes it harder for legitimate enterprises to thrive.
Businesses that play fair end up spending millions in compliance costs, while those that don’t simply find loopholes and continue operating. This isn’t just an economic issue—it’s a moral one. How can businesses be expected to invest, grow, and innovate when success is determined not by efficiency and quality but by who can dodge regulations the best?
The lack of harmonization in regulations is another major challenge. Every province has its own set of rules, making it difficult for businesses to expand, standardize operations, or even predict costs. A company operating in multiple provinces must adhere to different tax structures, conflicting food safety standards, and varied environmental policies, leading to confusion, inefficiency, and higher operational expenses. This fragmentation is particularly evident in environmental regulations, where differing standards create significant compliance burdens. Companies are forced to navigate inconsistent environmental policies, leading to increased operational costs and delays in obtaining necessary permits. The lack of a unified environmental regulatory framework not only stifles business efficiency but also undermines sustainable development efforts.
At the conference, business leaders called for a “One Standard, One Registration” model—a unified national framework that would streamline compliance and create a more predictable business environment. They emphasized that regulations should protect consumers and ensure fair competition, not suffocate businesses with unnecessary bureaucracy.
However, enforcement, or the lack thereof, remains a significant issue.
One of the most frustrating realities for Pakistan’s formal sector is the unchecked growth of counterfeit goods and parallel trade. While legal businesses struggle to meet compliance requirements, counterfeiters and smugglers flood the market with fake and unregulated products, damaging brand reputation, consumer trust, and economic stability.
Government agencies like food authorities, law enforcement, and the National Tariff Commission are responsible for addressing these issues. However many business leaders argue that enforcement is either too weak or selectively applied. In many cases, instead of targeting real culprits, regulations trap those who are already following the law, making it even harder for them to operate.
During the conference, industry representatives raised critical concerns. How can food authorities be better equipped to fight counterfeit products? What steps should the National Tariff Commission take to curb parallel trade? How can the media help raise awareness about counterfeit and grey-market goods? These are not hypothetical questions—they have real-world consequences for businesses, consumers, and the economy. Without stronger penalties and a more focused enforcement strategy, legitimate businesses will continue to suffer while illicit trade thrives.
The impact of overregulation extends beyond business operations—it directly affects investment. Investors, both local and international, look for stability, predictability, and fairness when deciding where to put their money. Why would they choose Pakistan when the business environment is so unpredictable?
Another critical issue is the misalignment of environmental laws, which further complicates business operations. Companies in the manufacturing, food processing, and energy sectors often struggle with conflicting environmental standards across different regions. This regulatory patchwork not only increases compliance costs but also leads to delays in setting up new facilities or expanding existing operations. A harmonized environmental regulatory framework would ensure that businesses can implement sustainable practices without unnecessary bureaucratic hurdles, balancing economic growth with environmental responsibility.
While countries around the world are simplifying regulations and making it easier to start and grow businesses, Pakistan remains stuck in outdated bureaucratic structures. If the country truly wants to increase exports, attract foreign direct investment (FDI), and drive economic growth, it must fix the way it regulates businesses.
The way forward requires more than just dialogue—it demands decisive action. Redundant regulatory requirements that increase operational costs must be eliminated. A single-window digital platform for tax filings, factory licensing, and product registration must be implemented to streamline business processes. Provincial and federal tax policies must be harmonized to remove distortions that hinder competitiveness. Most importantly, enforcement against counterfeit products and parallel trade must be strengthened to ensure a fair playing field for all businesses.
The formal sector is not calling for exemptions or favoritism—it is simply asking for fairness and rationalization. The current system penalizes compliance while rewarding avoidance, creating an uneven business environment that discourages investment and economic expansion. The discussions at the Unlocking Business Potential conference underscored the urgent need for harmonized regulatory frameworks, streamlined taxation policies, and stricter enforcement mechanisms.
Pakistan stands at a crossroads. It can either continue with the status quo, where regulatory inefficiencies push compliant businesses to the brink while informal enterprises operate without consequence, or it can embrace reform, ensuring that regulation serves as an enabler rather than an impediment to business growth. If policymakers truly want to unlock the country’s economic potential, they must move beyond policy discussions and implement concrete reforms—because when legitimate businesses thrive, so does the economy.
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