Bureaucracy wins big, businesses pay the price in Pakistan’s tight economy
By M Qadeer | LAHORE, Pakistan
News Analysis:
Pakistan’s business landscape is facing a perfect storm of challenges. On one hand, the Government of Punjab has expanded vehicle entitlements and fuel allowances for senior bureaucrats through its new transport policy, granting Chief Secretaries and IGs multiple high-powered vehicles with virtually unlimited fuel for official use. On the other hand, the Federal Board of Revenue (FBR) is rolling out online monitoring and mandatory Point of Sale (POS) systems for over 14 business sectors, including restaurants, hotels, gyms, hospitals, and professional services.
While the government frames these measures as steps to enhance transparency, digital monitoring, and tax compliance, local businesses are already feeling the pinch. Rising operational costs—especially high energy bills, coupled with an increasing tax burden—are squeezing profit margins. Small restaurants, hotels, and private educational institutions face mandatory integration with FBR’s system, yet the exemptions are limited, providing minimal relief.
Meanwhile, foreign investors appear to be losing confidence. The Securities and Exchange Commission of Pakistan (SECP) recently released a list of 125 foreign companies that have formally wound up operations in the country, covering major cities like Karachi, Lahore, Islamabad, and Peshawar. These firms span sectors from energy and construction to technology and consumer goods, signaling that high operational costs, regulatory complexity, and taxation are driving exits.
Local businesses echo similar concerns. Many small and medium enterprises (SMEs) struggle with monthly electricity surcharges, fuel price volatility, and frequent tax audits. The cumulative effect is discouraging reinvestment and expansion, while ambitious projects in hospitality, healthcare, and education remain financially constrained.
Economists warn that while governance reforms such as POS monitoring and bureaucratic transport upgrades may enhance administrative control, they risk widening the gap between the state and private sector. Local businesses argue that excessive operational burdens, combined with energy and tax pressures, could stifle economic growth and increase unemployment, particularly as foreign investors increasingly reconsider their presence in Pakistan.
The government faces a critical balancing act: ensuring fiscal compliance and bureaucratic efficiency without undermining domestic enterprise or discouraging foreign investment. If unaddressed, these combined pressures may slow recovery in key sectors and exacerbate Pakistan’s broader economic challenges.
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