LAHORE: There is strong resistance to economic reforms in Pakistan, as many of the country’s leading business groups amassed their wealth during the era of state-controlled industrialisation. This period was characterised by licensing, permits, protectionist policies and government incentives.
Most of these businesses have long benefited from import barriers, subsidies and preferential treatment. Even today, they lobby for protectionist policies rather than embracing open-market competition. As many of these enterprises are family-run, decision-making often remains conservative. The second and third generations have inherited wealth and business empires but, in many cases, have not significantly altered their strategic approaches.
The transition from a closed economy to a more competitive and deregulated one has been slow, as these business groups resist policies that would foster competition, such as tax reforms, trade liberalisation and stricter enforcement of economic documentation. In key industries such as cement, sugar, automobiles and banking, businesses prefer operating as cartels rather than competing through efficiency and innovation. This strategy ensures high profit margins but hampers broader economic progress.
While there are exceptions — some newer business leaders are adopting modern corporate governance, global competition and innovation — many of Pakistan’s industrial and commercial elites continue to operate with a mindset shaped by past decades of protectionist policies. This limits economic dynamism and contributes to stagnation in key sectors.
This mindset is evident in the policies that businesses demand from the government today. Instead of advocating for a more competitive and open economy, many established business groups push for measures that secure their interests, often at the expense of broader economic development.
For instance, businesses in industries such as automobiles, cement, sugar and textiles frequently lobby for high import tariffs and non-tariff barriers to shield themselves from foreign competition. The auto sector, for example, has enjoyed decades of protection yet has failed to develop a globally competitive industry. Textile exporters often seek subsidies and special incentives instead of focusing on improving productivity and innovation.
Despite being major beneficiaries of economic policies, large business groups resist efforts to expand the tax net. Many industrialists and traders oppose measures such as digital invoicing, withholding taxes and bank transaction documentation, fearing that greater transparency would limit their ability to evade taxes. The retail and wholesale sectors, despite their significant growth, continue to operate largely outside the formal tax system and resist government attempts to document their sales and profits.
Cartel-like behaviour allows certain industries, such as sugar, cement and flour milling, to maintain high prices without the pressure of genuine competition. The sugar industry, for instance, consistently lobbies for high support prices for sugarcane while simultaneously seeking subsidies for sugar exports. Similarly, the fertiliser industry secures government subsidies on gas for urea production but continues to sell at high prices domestically.
Independent power producers (IPPs) benefit from long-term contracts that guarantee returns, even when high energy costs burden the economy. The banking sector enjoys risk-free government borrowing at high interest rates, restricting credit availability for private-sector businesses.
The country’s elite businesses oppose deregulation and competition-driven reforms, fearing a loss of their dominant position. Large business groups resist privatisation efforts when they perceive a threat to their monopolistic advantages. Additionally, many remain reluctant to embrace e-commerce and digital transactions due to concerns that greater transparency would expose hidden revenues.
Since profits are secured through protection rather than efficiency, businesses have little incentive to invest in technology, research and development, or skill enhancement. As a result, Pakistan’s economy remains heavily dependent on a few sectors, such as textiles, while industries requiring innovation and global integration — such as engineering, electronics and IT — struggle to grow. Large business houses also stifle smaller enterprises by controlling supply chains, distribution networks, and access to financing. Rather than fostering self-sufficiency, businesses continue to rely on government favours, bailouts and subsidies.
While some new-generation entrepreneurs are attempting to break away from these outdated approaches, the overall business landscape remains dominated by an entrenched protectionist mindset.
