Dr. Ikramul Haq & Abdul Rauf Shakoori
The persistence failure of economic managers of Pakistan to attract any worthwhile foreign direct investment (FDI) with technology transfer to boost exports, is one of the most serious concerns. With population exceeding 240 million and strategic geographic positioning connecting South Asia, Central Asia and the Middle East, Pakistan possesses all the necessary prerequisites to become an investment hotspot. However, decades of inconsistent policies, lack of infrastructure, bureaucratic hurdles, and protectionist measures have created an environment that vigorously deters rather than welcomes foreign capital with cutting edge technology.
The failure to create conducive environment for FDI and local foreign joint ventures carries severe consequences as Pakistan faces mounting debt obligations and dwindling foreign exchange reserves. Prevailing circumstances necessitate FDI, not just desirable but essential for economic survival. The situation has become particularly critical with the United States investors facing an array of barriers. It makes doing business in Pakistan unreasonably difficult and unpredictable.
The structural problems begin with our complicated and excessive tariff regime, which maintains an average applied rate of 10.3% but spikes much higher for specific sectors like automobiles and agricultural goods. More damaging than high tariff rates is their unpredictability— Revenuecracy frequently imposes sudden import bans through Statutory Regulatory Orders (SROs) with no prior consultation or transition period for businesses. The taxation through SROs by Executive is patently against Article 162 of the Constitution of Islamic Republic of Pakistan but none cares about the rule of law and supreme law of the land.
In July 2024, Pakistan abruptly banned wheat imports through SROs 1021 and 1022, disrupting supply chains and demonstrating the arbitrary nature of trade policymaking. Such measures directly contradicted Pakistan’s commitments under the World Trade Organization and its Trade and Investment Framework Agreement (TIFA) with the United States.
American companies have been reporting about additional duties on finished goods that are specifically levied to protect domestic industries rather than serve any legitimate policy purpose. This protectionist approach might shield local businesses in the short term but ultimately makes Pakistan less competitive in global markets. The prevalent Customs procedures of Pakistan present formidable barrier to foreign investors. The U.S. exporters consistently report facing arbitrary customs valuations where officials reject declared transaction values in favour of higher assessments that increase duty payments.
The Federal Board of Revenue’s Customs Rules 389 and 391 impose particularly burdensome documentation requirements, mandating physical invoices and packing lists inside shipping containers—a requirement that runs counter to modern digital trade practices and creates unnecessary complications for companies using complex global supply chains.
The outdated rules of FBR force businesses to maintain parallel paper-based systems simply to comply with Pakistani regulations, increasing costs and creating compliance risks. While Pakistani officials have acknowledged these problems in discussions with U.S. trade representatives, reforms to this effcet have failed to materialize, leaving the problematic rules in place and subject to unpredictable enforcement.
Technical barriers to trade compound these difficulties, particularly for U.S. agricultural and pharmaceutical exporters. Pakistan’s SRO 237, issued in February 2019, imposed stringent halal certification requirements on all edible products while prohibiting interim solutions like stickering or overprinting to achieve compliance. The measure also mandates that imported food products must have at least 66% of their shelf life remaining upon arrival—a requirement that creates significant logistical challenges and increases waste.
While Pakistan eventually notified this measure to the WTO’s Technical Barriers to Trade Committee after U.S. pressure, the underlying restrictions remain in place. The country’s continued ban on U.S. beef imports, maintained despite years of negotiations, exemplifies the non-scientific barriers that frustrate American exporters.
Similarly, Pakistan’s hesitation to approve imports of genetically engineered agricultural products, including a two-year delay in approving GE soybeans, demonstrates a reluctance to align with international standards even when no legitimate safety concerns exist.
Government procurement processes reveal another dimension of Pakistan’s investment challenges. U.S. companies report as highlighted in 2025 National Trade Estimate Report, consistent patterns of losing contracts despite submitting superior technical bids at competitive prices. Procurement agencies frequently use American bids as benchmarks to negotiate lower prices from other suppliers, particularly Chinese firms, rather than awarding contracts based on established evaluation criteria.
This practice not only disadvantages U.S. businesses but undermines the integrity of Pakistan’s procurement system. While the country has made some progress in developing electronic procurement platforms with World Bank support, fundamental issues of transparency and fair competition persist.
Pakistan’s status as an observer rather than a party to the WTO Agreement on Government Procurement reflects its reluctance to commit to international standards in this critical area.
Intellectual property protection remains woefully inadequate, keeping Pakistan on the U.S. Trade Representative’s Special 301 Watch List year after year. Counterfeiting and piracy run rampant across multiple sectors, from pharmaceuticals to software to consumer goods.
The establishment of specialized IP tribunals in major cities represented a positive step, but these courts suffer from inexperienced judges, inconsistent rulings, and penalties too low to deter infringement.
American pharmaceutical companies face challenges from counterfeit medicines that not only harm their business interests but endanger public health. Pakistan’s recent accession to the Madrid Protocol for trademark protection and the Marrakesh Treaty for visually impaired persons shows some progress, but the country’s failure to join more substantive agreements like the Patent Cooperation Treaty reflects lingering gaps in its IP regime.
Financial and taxation policies create additional hurdles for foreign investors. Pakistan maintains equity caps that limit foreign ownership in key sectors including banking (49%), agriculture (60%), and media (49%). The State Bank of Pakistan (SBP) frequently imposes informal restrictions on profit repatriation during periods of foreign exchange scarcity, as occurred during the 2022-2023 balance of payments crisis. Even when remittances are permitted, bureaucratic delays make the process unpredictable.
The tax system presents its own challenges, with a narrow tax base that places disproportionate burdens on compliant foreign entities. Recent amendments limiting tax deductions for royalty payments appear specifically designed to target multinational corporations. With Pakistan’s tax-to-GDP ratio languishing around 10%, the government continues to rely on squeezing existing taxpayers with high tax rates rather than expanding the tax base to include under-taxed sectors like retail and agriculture.
Corruption and weak contract enforcement represent perhaps the most fundamental barriers to foreign investment. The National Accountability Bureau (NAB), Pakistan’s primary anti-corruption agency, is widely perceived as politicized and unpredictable in its enforcement actions. Lengthy judicial delays and poor enforcement of court judgments make it difficult for foreign investors to resolve disputes or protect their rights. These systemic governance issues create an environment of uncertainty that discourages long-term investment commitments. American businesses must factor in these institutional weaknesses when assessing potential investments in Pakistan, often concluding that the risks outweigh the potential rewards.
The consequences of these accumulated barriers are becoming increasingly severe as global economic conditions tighten. The United States has shown growing impatience with trading partners that maintain unfair trade practices, implementing a universal 10% tariff in April 2025 with higher rates for countries imposing disproportionate barriers on U.S. goods.
Pakistan’s restrictive policies make it particularly vulnerable to such measures. The potential loss of Generalized System of Preferences (GSP+) benefits, which currently allow duty-free access to the U.S. market for 3,500 Pakistani products, could devastate key export industries. With the U.S. running a US$1.27 trillion trade deficit with 105 countries, Washington has made clear its determination to enforce reciprocity in trade relationships.
Pakistan must urgently implement reforms to avoid further economic isolation. First and foremost, the government should rationalize its tariff structure and commit to transparent, predictable trade policies. Eliminating arbitrary SROs and establishing clear timelines for policy changes would provide much-needed stability for foreign investors.
Customs procedures require immediate modernization to align with international best practices, including accepting digital documentation and training officials on proper valuation methods. Technical barriers like the halal certification requirements and shelf-life restrictions should be revised based on scientific evidence and practical business considerations.
The government procurement system needs comprehensive reform to ensure genuine transparency and fair competition. Pakistan should accelerate its adoption of electronic procurement platforms while working toward eventual accession to the WTO Government Procurement Agreement. Intellectual property protections require strengthening through more effective enforcement, higher penalties for infringement, and consideration of joining additional international IP treaties.
Financial and tax policies must become more investor-friendly, removing arbitrary equity caps and ensuring reliable profit repatriation processes. Most fundamentally, Pakistan needs to address its governance challenges by depoliticizing anti-corruption efforts and reforming its judicial system to provide timely, impartial resolution of commercial disputes.
The path forward is clear but requires political will that has been lacking so far. Pakistan stands at a critical juncture where continued inaction will lead to further economic decline, while meaningful reforms could unlock significant growth potential. The choice rests with Pakistan’s leadership—either embrace the changes needed to attract foreign investment or face the consequences of increasing isolation in the global economy. With competitors like Bangladesh and Vietnam racing ahead, Pakistan cannot afford to delay these essential reforms any longer.
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Dr. Ikramul Haq, Advocate Supreme Court, specializes in constitutional, corporate, media, and cyber laws, ML/CFT, IT, intellectual property, arbitration, and international taxation. He studied journalism, English literature, and law. He holds an LLD in tax law with a specialization in transfer pricing. He was a full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner.
He is the Chief Editor of Taxation. He is the country editor and correspondent of the International Bureau of Fiscal Documentation (IBFD) and a member of the International Fiscal Association (IFA). He is a Visiting Faculty at the Lahore University of Management Sciences (LUMS) and member Advisory Board and a Visiting Senior Fellow of the Pakistan Institute of Development Economics (PIDE).
He has co-authored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (Revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law, Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is the author of Commentary on Avoidance of Double Taxation Agreements, Pakistan: From Hash to Heroin, and its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal).
He regularly writes columns for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines, and newspapers at home and abroad.
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Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime, and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies, and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, and cross-border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career, he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and has also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study-driven scenarios and exams to ensure knowledge transfer.
His notable publications are Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan Rauf’s Research on Labour Laws and Income Tax, and others.
His articles include Revenue Collection: Contemporary Targets vs. Orthodox Approach, It is Time to say goodbye to Our Past, US Double Standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly listed Pakistan, Corruption is No Excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF Secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge.
The recent publication, coauthored with Huzaima Bukhari, is
Pakistan Tackling FATF: Challenges & Solutions
available at:
https://aacp.com.pk/book-detail/pakistan-tackling-fatf-challenges-and-solutions-35