ISLAMABAD: The Pakistan Business Council (PBC) has urged Prime Minister Shehbaz Sharif to tackle the issue of black money that is tied up in real estate and to create a fairer competitive environment between the informal and formal sectors.
In a letter addressed to the prime minister, Ehsan Malik, the chief executive of PBC, emphasised that the “Dialogue on the Economy,” which included more than 100 key members from local and multinational companies generating 40 per cent of the country’s exports and contributing a third of direct taxes, highlighted crucial economic concerns.
Malik acknowledged the prime minister’s efforts in restoring economic stability but warned that this achievement should not be jeopardized by hastily triggering growth before addressing underlying economic issues through necessary reforms.
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The PBC pointed out Pakistan’s past experience where import-driven demand created imbalances in the external account, leading to frequent reliance on the IMF. Members of the formal sector, including the PBC, have played a disproportionate role in achieving challenging tax revenue targets.
“We hope that premature attempts at stimulating growth will not undermine our collective efforts,” Malik said, referencing the “Uraan Pakistan” initiative, which is largely supported by PBC members.
However, he noted that the implementation of this initiative has been hindered by fragmentation between federal ministries and between the federation and provinces.
He emphasised that exports represent the most sustainable method to balance the external account.
While the prime minister has set an ambitious target of $60 billion in exports within three years, Malik warned that high regional energy costs, excessive taxation, and the cash flow burden of withholding taxes remain significant obstacles.
“We are encouraged by the government’s plans to reduce energy costs, but these adjustments may still leave Pakistan at a disadvantage compared to neighboring south Asian countries,” he added. “The recent hike in gas prices for captive plants will not help either. We recommend a thorough benchmarking of export incentives against our competitors in the region.”
On trade policy, the PBC argued that existing trade agreements, particularly with China, should be revisited. Pakistan’s access to markets and trade representation in African countries, they pointed out, lags behind that of India. The PBC has already shared its insights on past trade agreements with the Ministry of Commerce.
Regarding fiscal policy, the PBC supported efforts to increase the tax-to-GDP ratio, but argued that this should be achieved by fostering business growth, encouraging exports, formalising the economy, and broadening the tax base to include under-taxed and untaxed sectors.
Malik cautioned against increasing taxes on already taxed sectors, like in the current budget, as it could hinder business expansion instead of supporting it.
The PBC has also proposed a phased plan to boost exports, support new exporters, and incentivise companies currently reliant on imports to localise production. They have called for a more favourable tax regime to encourage investment in private equity, venture capital funds, and broader shareholding in listed companies, as well as incentives for companies to list on the Pakistan Stock Exchange (PSX) and hold shares longer.
On import substitution, the PBC reiterated its opposition to indefinite tariff protection for sectors where Pakistan does not have a comparative advantage. They pointed out that many production facilities are outdated and inefficient, making it impossible for domestic industries to offer competitive prices for consumers or provide affordable inputs for exporters.
However, they acknowledged that limited protection could be justified for sectors that rely on indigenous inputs, such as soda ash used in manufacturing glass and detergents.
The PBC also raised concerns over the impact of GST on local supplies to exporters, which has led many to opt for imports to avoid delays in receiving tax refunds, threatening the survival of domestic industries.
Malik expressed satisfaction with the government’s increasing focus on export-oriented foreign direct investment (FDI), an issue the PBC has long advocated. However, he noted that Pakistan’s current investment policies do not sufficiently prioritize export-oriented FDI over market-seeking FDI.
Regarding real estate, the PBC supported a differentiated approach that favors the formal construction and development sectors, including Real Estate Investment Trusts (REITs). The chairman of the Federal Board of Revenue (FBR) had acknowledged high transaction costs in undeveloped land and mentioned that the government is reviewing these costs.
“We would like to remind the government that the formal sector also faces high transaction costs, such as the 18 per cent GST. Therefore, we strongly recommend efforts to uncover black money tied up in real estate and to ensure a more level playing field between the formal and informal sectors,” Malik concluded.
Copyright Business Recorder, 2025
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