Bureaucratic Hurdles Hinder Business

Corruption is an unseen cost of conducting business in Pakistan

nasiraijaz June 29, 2025

0 28 4 minutes read

The other major area of concern is the uneven application of policies at the provincial level

Ahmed Shayan Iqbal

In today’s global economy, economic competitiveness is increasingly interlinked with the ease of starting, doing, and growing business. For Pakistan—a nation fraught with potential but beset by bureaucratic delay, political instability, and infrastructure deficiencies—making it easier to do business has assumed the status of a national imperative. The “Ease of Doing Business” initiative is one of the most visible areas in which the government, over the last decade, has tried to streamline procedures, cut red tape, and lure local as well as foreign investors. But has it improved things for businesspeople and investors? Somewhere between hope and reality.

The World Bank’s “Ease of Doing Business Index” has been a worldwide benchmark to measure the regulatory environment of economies for a long time. Pakistan had previously ranked as low as 136th in 2018. But thanks to focused reforms and structural reforms, the nation rose by 28 ranks to 108th in the 2020 report. This was welcomed as a great improvement and an indication that Pakistan was serious about reworking its business environment. Reforms were introduced in the areas of starting a business, registering property, obtaining electricity, paying taxes to trade across borders, and resolving insolvency.

The most significant accomplishment was the ease of business registration. Earlier, setting up a company used to involve complicated documentation, frequent visits to the government offices, and delayed waiting times. With online portals and the harmonization of the Securities and Exchange Commission of Pakistan (SECP) with other government agencies, the process has become easier. Nowadays, business registration in Pakistan can, in most situations, be completed within a week—a far cry from the months it would take previously.

In the same vein, tax payment processes were also streamlined and computerized. The Federal Board of Revenue introduced the IRIS portal, facilitating online filing of returns and payments by businesses. Although tax compliance is still a hassle owing to the variety of taxes as well as audits, this shift towards digital infrastructure is in the right direction.

Energy sector reforms, specifically how to get an electricity connection, have also been important. In the past, companies had to spend months waiting for a connection, which slowed up productivity. By reducing the number of steps and enhancing coordination among departments, the time it takes to get connected has been brought down. This is especially important in a nation where electrical blackouts and fluctuating supply have historically stunted industrial growth.

However, with all progress notwithstanding, problems continue on numerous fronts. For small and medium-sized enterprises (SMEs), which constitute the backbone of the Pakistani economy, access to finance continues to be a significant hurdle. Banks are reluctant to lend in the absence of significant collateral, and credit guarantee schemes are either underutilized or weakly implemented. Women entrepreneurs, specifically, also confront extra impediments—not merely in accessing funds but also in facing societal and institutional impediments.

The other major area of concern is the uneven application of policies at the provincial level. Punjab and Sindh have gone a long way in establishing business facilitation centers and providing one-window services, while the rest of the provinces are behind. Provincial-level bureaucratic delays coupled with non-uniformity in regulations often deter potential investors from exploring beyond metropolitan areas.

Corruption is also an unseen cost of conducting business in Pakistan. In spite of having watchdogs for anti-corruption, most businessmen complain of making bribe-like payments to speed up procedures, particularly when obtaining land acquisition, customs clearance, and regulatory inspections. Not only does this destroy the credibility of public institutions, but it also discourages the formalization of the economy.

Additionally, political uncertainty and sudden policy changes usually undermine investor confidence. For example, unexpected alterations in import/export tax rates, absence of policy continuity, and vague investment protection frameworks have resulted in most investors using a ‘wait and see’ strategy instead of undertaking long-term commitments.

All the same, Pakistan’s private sector continues to be resilient. Whether it is tech startups in Karachi or textile exporters in Faisalabad, entrepreneurs keep innovating, reinventing, and expanding. The recent arrival of fintech businesses, e-commerce sites, and freelance platforms is a testament to the spirit of entrepreneurship thriving despite systemic issues.

To make doing business easier in the long run, Pakistan must institutionalize change and not depend on short-term cosmetic efforts. That involves enhanced training of public officials, real-time tracking of implementation of reforms, and regular interaction with businesses to learn about their issues. It also involves enhancing mechanisms of dispute resolution—judicial as well as administrative—such that businesses can conduct operations with legal certainty and contractual safety.

In addition, digital governance integration in all departments is a must. One integrated digital platform for all services related to business—taxes, licenses, labor compliance, customs, and land records—could greatly reduce delays and enhance transparency. Estonia and Singapore are world leaders on this front, and Pakistan can definitely draw lessons from them.

Pakistan’s Ease of Doing Business policy has gone in the right direction, but there is still a long way to go. Rankings are not the only goal; it’s about fostering an ecosystem where entrepreneurship is promoted, risk-taking is rewarded, and growth is inclusive. Pakistan’s economy’s future depends significantly on how it allows its businesses, small and large, to grow without fear, friction, or favoritism. With continued reforms, political will, and public-private partnerships, Pakistan can realize its full economic potential and emerge as a genuinely competitive investment destination.