Regulators exist to make markets work fairly, safely, and predictably, so that ease and cost of doing business support investment, scale, and consumer protection. In Pakistan, that purpose has quietly inverted. Over time, the regulatory system has evolved in ways that place greater emphasis on procedural compliance and institutional processes than on the ease of doing business that investment depends on.
The evidence sits in the investment numbers. Private investment is stuck at 11-14 per cent of GDP, against a regional median of 18-22pc. The industrial share of GDP is declining, and the economy is moving prematurely from agriculture to services without a manufacturing base in between. A country cannot build competitiveness or innovation without formal sector investment. One of the reasons our formal sector hesitates is that procedural and compliance demands have grown faster than the support for ease of doing business.
Here’s an example: a fast-moving consumer goods manufacturer needs a new product label approved by a provincial food authority. The approval is not based on a written rule. It depends on the personal interpretation of the officer handling the file, which can take six to seven months. When that officer is transferred, the process restarts from zero with the next officer’s interpretation.
The same product has to be cleared separately in each of the four provinces because there is no mutual recognition among Punjab, Sindh, Khyber Pakhtunkhwa, and Balochistan. Above this sits the Pakistan Standards & Quality Control Authority’s (PSQCA) federally mandated marking-fee regime, and the Pakistan Halal Authority as a third layer. For exporters, the gap widens further.
Pakistan has the regulators it needs; the ease of doing business is missing
Authority is dispersed across 118 federal bodies and four separate provincial regulator sets. A firm operating nationally navigates five overlapping systems, each with its own registrations, returns, inspections, and rule interpretations.
The State Bank handles cross-border payments and royalty remittances. The Securities and Exchange Commission of Pakistan handles incorporation. Though the Virtual One-Stop Shop has cut the registration steps from 10 to 5, and the Companies Regulations 2024 reduced the statutory forms from 75 to 28. But tax registration with the Federal Board of Revenue (FBR), sales tax with the four provincial revenue authorities, and municipal licences remain separate downstream processes.
Energy projects move between the National Electric Power Regulatory Authority, the Oil and Gas Regulatory Authority, the Directorate General of Petroleum Concessions, and provincial energy departments. Several of these bodies fund themselves through inspection and registration fees, which incentivise multiplying requirements rather than reducing them.
The cost, before any actual rate of tax or duty, is substantial. Firms make around 34 tax payments a year and spend roughly 283 hours on tax compliance. About 87pc of formal firms do not claim value-added tax refunds because the process costs more than the refund. A new electricity connection can cost more than 1,234pc of per-capita income before a single unit is consumed. They show up as working capital trapped, capex delayed, hiring postponed, and export competitiveness eroded.
The burden also falls unevenly, which is the clearest evidence of regulator misalignment. Industry contributes 70pc of total tax revenue from 18.4pc of GDP. Agriculture, at 23pc of GDP, pays 0.6pc. The salaried class, about 2pc of the labour force, pays 15pc. In food and beverage retail, an estimated 85pc of sales flow through informal vendors. Branded manufacturers face filmed inspections held up as proof of regulatory activity, while the unregulated vendor operating beside them is left untouched. The regulator is targeting the visible, not the risky.
As businesses that bear this burden directly, Pakistan Business Council (PBC)members have an obvious stake in reform, but that stake is precisely what makes the case credible. Those who comply know best where compliance has become detached from its purpose.
The reform over the last two years deserves credit. Over 660 reforms have been enacted across 135 institutions, with energy alone accounting for 118 of them. The Pakistan Regulatory Reforms Commission has eliminated 89 redundant requirements and simplified or digitised 241 more, with estimated annual compliance cost savings of Rs356.5bn. The Asaan Karobar Act 2025 has placed the reform infrastructure on a statutory footing. None of these is cosmetic. A new PBC report, ‘Solving Pakistan’s Regulatory Gridlock’, sets out where the next phase of reform needs to focus.
But the gap between announcement and delivery remains wide. Of the 330 proposed reforms, only 52 have been completed. The legislation excludes tax administration, the judiciary, energy pricing, and monetary policy, leaving the post-entry burden outside the reform machinery. Digitisation has helped at the front end but rarely at the back. Applications go online; the approval decision still rests on an individual officer’s judgment.
Our reform agenda must realign regulators to their original purpose. Approvals for low-risk activities should move from pre-clearance to notification with a later audit. Sales tax across FBR and the four provincial revenue authorities should be consolidated into a single filing. The PSQCA-provincial marking-fee impasse should be settled so that one set of food standards is enforced once.
Royalty and technical-fee remittances under pre-registered agreements should be clear within fixed legal timelines. And the inspection-fee model that rewards regulators for multiplying touchpoints should be replaced with consolidated funding that rewards efficient enforcement. The FY27 federal budget is the moment to set binding timelines and funding triggers against each of these. Anything less will mean another year of reform announced but not delivered.
What Pakistan needs is a time-bound regulatory implementation plan, with every reform owned, deadlined, and measured quarterly. The architecture is in place. What is missing is the willingness to reset what regulators are for. They should make it easier for businesses to invest and scale by ensuring that markets work fairly, safely, and predictably. They should not be instruments of revenue collection for the state.
Capital moves towards jurisdictions where rules are predictable, compliance is proportionate, and the government keeps its own deadlines. Pakistan has the institutional machinery. The political will to use it is what FY27 has to deliver.
The writer is the Chairperson of the Pakistan Business Council. This is the third of three pieces in PBC’s case for reform.
Published in Dawn, The Business and Finance Weekly, May 25th, 2026