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Pakistan’s exports tell a story of both resilience and stagnation. According to the Pakistan Bureau of Statistics, exports have increased by 7 percent in the fiscal year 2023-24 compared to the previous fiscal year. Growth came from sectors like rice and IT-enabled services. However, growth paled in comparison to the declining trend over the past decade, with export volumes consistently lagging behind regional competitors.
Exporters in Pakistan face numerous barriers, each of which hinders their ability to compete globally. First and foremost, energy costs are prohibitively high. Electricity and gas rates are much higher than in countries like Bangladesh and Vietnam. Constant price hikes further destabilize the business.
Second, the tax system is a maze of complexity, often leaving exporters struggling to claim refunds while dealing with compliance burdens that disproportionately affect SMEs.
Third, financial intermediation is weak, with limited credit products and a lack of innovative financing mechanisms to support exporters, particularly emerging sectors.
Lack of infrastructure further compounds the problem. Poorly equipped dry ports, unreliable transport networks and inefficient warehousing options drive up logistics costs and reduce competitiveness. Regulatory burdens, including lengthy customs clearance times and complex processes for business registration, are equally debilitating. Add to this a high exchange rate that makes Pakistani goods less attractive in the global market and the challenges become even more difficult.
The structural problems do not end there. Pakistan’s export profile is very product and market oriented, dominated by textiles, with limited diversification in other sectors. Absence of skilled labor associated with industry needs inhibits growth, while lack of market intelligence inhibits efforts to penetrate non-traditional markets. The high costs associated with international certification further stifle the potential of new exporters. Gender barriers, particularly for women entrepreneurs, exacerbate the problem by limiting their access to finance, networking opportunities and secure trade infrastructure.
These obstacles are not insurmountable. Pakistan has the potential to regain its position in global markets through a comprehensive strategy targeting these challenges. This strategy requires coordination between government, private sector stakeholders and development organizations. Specific interventions can produce measurable effects if implemented effectively.
To address energy costs, the government should introduce a targeted energy subsidy program for exporters, supported by investments in renewable energy. For example, aligning energy tariffs with regional standards could potentially reduce production costs by 10-15 percent, making Pakistani exports more competitive. With an immediate focus on short-term relief and a long-term shift towards renewables, regulatory bodies like NEPRA and the Ministry of Energy can play an important role here.
Simplifying the tax system is another key priority. Automating refund mechanisms and consolidating taxes at the federal and provincial levels can reduce compliance costs for exporters. According to international case studies, this can free up working capital and increase SME exports by 20 percent. The Federal Board of Revenue should lead this initiative by leveraging technology to ensure transparency and efficiency.
Absence of skilled labor associated with the need of industry hinders growth. Lack of market intelligence hinders efforts to penetrate non-traditional markets. The high costs of international certification further stifle the potential of new exporters.
Access to finance requires innovative approaches. A trade financing accelerator—designed as a public-private partnership—can pool resources from banks, venture funds and government grants to offer customized financing products to exporters.
This approach could include export credit guarantees and flexible loan repayment options, reducing the financial burden on SMEs and encouraging new market entrants. State Bank of Pakistan and private financial institutions can initiate such programs with a medium-term goal of countrywide expansion.
Upgrading trade infrastructure is essential to reduce costs and improve supply chain efficiency. Modernization of dry ports, investment in cold storage facilities and improved road and rail connectivity can reduce logistics costs by up to 15 percent. Provincial transport departments and the Ministry of Commerce should collaborate to prioritize high-traffic export corridors for these upgrades.
On the regulatory front, digitalization holds the key to simplifying business processes. Fully operationalizing the Pakistan Single Window could drastically reduce customs clearance times, increasing export revenues by $1 billion annually. To maximize its impact, the system should be integrated into provincial and federal trade facilitation agencies.
Market diversification should be the cornerstone of Pakistan’s export strategy. With opportunities in emerging markets such as Africa and Central Asia, targeted trade missions and digital marketing campaigns can introduce Pakistani products to untapped consumers. Leveraging digital platforms for virtual trade exposure can also reduce market entry costs. Trade Development Authority of Pakistan and trade missions in embassies should take ownership of this initiative.
Development of a skilled labor force as per the requirements of the industry is another important area. Updating the curriculum in technical and vocational institutions, with linkages to industry and academia, can increase productivity by 20-25 percent in export-oriented sectors. Provincial Technical Boards and private sector stakeholders should drive this initiative with a focus on immediate and long-term workforce development.
To facilitate market access, the government should subsidize certification costs for exporters, especially in high-growth sectors such as IT and engineering. This could increase the global reputation of Pakistani products and services, which could increase export earnings by $500 million annually. Grants and loans for certification can be arranged through TDAP in collaboration with industry associations.
Women-led businesses deserve targeted support. Offering discounted participation in trade fairs, providing gender-sensitive trade infrastructure and creating specific financing schemes for women entrepreneurs can unlock significant economic potential. A 1-2% increase in GDP can be achieved by fully integrating women into the export ecosystem.
Finally, research and innovation should be prioritized. Allocating funds for export-oriented research and development (R&D) can increase Pakistan’s competitive edge through product diversification and innovation. The establishment of a national innovation fund under the Ministry of Science and Technology can ensure that R&D efforts are aligned with market needs.
Pakistan’s export journey is at a critical juncture. By removing these barriers through innovative, targeted interventions, the country can unlock its export potential and compete effectively in global markets. This transformation requires not only policy changes but also a collective effort by all stakeholders to build a sustainable and inclusive export ecosystem.
The author is an Associate Research Fellow at the Sustainable Development Policy Institute, currently heading the SDPI Center for Private Sector Engagement. He can be contacted at ahad@sdpi.org. The article does not necessarily represent the views of the organization.
