Pakistan seeks higher exports, more jobs, greater value addition and lower reliance on imports. Yet its economic environment often discourages the scale needed to achieve these goals. Businesses remain small, divide operations or deploy capital elsewhere. Farmers cultivate fragmented holdings, while manufacturers spread limited demand across too many products and platforms, often in response to government policies. In doing so, ambitious targets neglect the scale required to deliver them.
Scale matters because tooling, product development, management, training, certification and environmental compliance become cheaper when spread over greater output. Foreign buyers also require consistent quality, reliable delivery and capacity for substantial orders; price alone is not enough.
The World Bank’s 2023 assessment of Pakistan’s productivity identified a striking weakness: formal firms operating for 10–15 years were approximately the same size as those operating for more than 40 years. It also found that the average Pakistani exporter was less than half the size of its Bangladeshi counterpart. Firms were ageing without growing sufficiently.
Taxation is central to the problem. When growth brings disproportionate compliance costs, arbitrary demands and greater exposure to officials, expansion loses its appeal. Uneven enforcement lets informal competitors undercut documented businesses, while squeezing existing taxpayers encourages concealment and fragmentation. Broadening the tax base must accompany a predictable, less punitive environment for formal growth.
When growth brings disproportionate compliance costs, arbitrary demands and greater exposure to officials, expansion loses its appeal
Businesses also constrain scale. Owners may resist sharing ownership, hiring professional managers or investing without subsidies and guaranteed returns, while family succession can divide productive assets. Policy uncertainty, expensive energy, weak contract enforcement and inadequate finance reinforce these tendencies. Long-term commitment requires predictable policies.
Textiles illustrate the consequences. Although Pakistan has integrated exporters, parts of its weaving, processing and subcontracting base remain fragmented. Smaller units struggle to finance modern equipment, skilled supervision, wastewater treatment and traceability. They also lack the negotiation muscle with global customers. Capacity must grow alongside the management and compliance systems demanding markets require.
Japan’s trading houses offer one lesson. Companies such as Mitsui, Mitsubishi Corporation and Marubeni combine marketing with finance, logistics, commercial intelligence and risk management. Pakistan could encourage accountable export houses that coordinate orders across qualified producers, connect them with buyers and assume responsibility for quality, delivery and compliance.
Scale also needs people and systems. Recruiting more skilled women would widen the talent pool; safe transport and childcare are therefore investments in productive capacity. Shared digital systems can connect independent factories or farmers through common specifications, traceability and delivery schedules.
Finance should follow export orders through the production chain. Supporting only final exporters achieves little if suppliers cannot finance materials, equipment or wages. Although Pakistan’s framework covers indirect exporters, access must work in practice. Financing against confirmed orders and accepted invoices could help smaller suppliers grow with their customers.
The automobile industry presents another scale problem. Dividing limited demand among many platforms prevents component vendors from recovering costly mould and tooling investments as orders from established assemblers decline. Successive policies have ignored volume per platform, risking engineering capability that could also serve agriculture and defence. International experience shows how market integration and production concentration can create the scale Pakistan is rapidly fragmenting.
Brazil–Argentina automotive integration is instructive. Under Mercosur-linked arrangements, manufacturers divided production to serve regional demand: Toyota located Hilux and Fortuner production in Argentina, while Brazil supplied Corolla vehicles regionally. Morocco instead concentrated production around Renault and Stellantis, built export-oriented plants, improved ports and rail, secured preferential market access and attracted component suppliers. Installed capacity is already around one million vehicles. By contrast, Pakistan’s auto and tax/tariff policies have fragmented scale, while its trade agreements have promoted imports over exports.
Agriculture requires another approach. Small farms are not necessarily less productive per acre, but scattered plots and limited output complicate mechanisation, storage, quality consistency and access to buyers. Larger operational scale can be achieved without transferring land ownership. Voluntary pooling of services, machinery hire, coordinated cultivation and collective marketing can preserve farmers’ independence while improving commercial viability.
India’s Amul shows the possibilities. Village dairy societies connect producers to processing unions and a marketing federation, giving millions of farmers collection, processing and distribution capabilities beyond any member’s resources. FrieslandCampina similarly combines independent farms in the Netherlands with a professionally managed international dairy business.
These examples show how cooperative ownership can create scale. Pakistan could apply the principle to dairy, horticulture and other value chains through shared collection, grading, packing and cold storage. Success requires transparent accounts, dependable payments, competent management and effective member oversight — not merely a cooperative on paper.
South Korea offers a complementary lesson: investment and technological learning were tied to exports. Pakistan should encourage internationally competitive firms, but any public support must be transparent, time-bound and conditional on measurable results. Concentrated ownership also requires effective competition oversight and fair treatment of suppliers.
Government must first remove penalties on growth by simplifying compliance, improving tax neutrality, facilitating justified consolidation and enforcing contracts. Shared laboratories, treatment facilities, training and logistics can address specific obstacles, while businesses contribute capital, professional management and cooperation. Support should be judged by productivity, sustained exports and competitive domestic value addition.
Pakistan needs both larger productive enterprises and institutions that allow smaller producers to participate at scale. Export houses, cooperatives and specialised supplier networks provide different routes to that goal. Industrial policy should make expansion commercially worthwhile and cooperation practical. Tax and other policies must stop punishing size. We cannot continue to penalise growth at the level of the firm and expect it to materialise in the national accounts.
The writer is a former CEO of Unilever Pakistan and of the Pakistan Business Council
Published in Dawn, The Business and Finance Weekly, October 12th, 2026
