The Supreme Court of Pakistan has called upon the government to create incentives through appropriate policies to lower the cost of doing business and the cost of producing and supplying goods, thereby facilitating lower prices for consumers. “It is the constitutional obligation of the government, as provided in Article 38 of the Constitution, to promote the economic and social well-being of the people,” emphasised Justice Jamal Khan Mandokhail.
This judicial reminder arrives at a moment when Pakistan’s business climate remains one of the more challenging environments in the region. In the World Bank’s Doing Business report of 2020, Pakistan ranked 108th out of 190 economies. Although that flagship index was later discontinued, subsequent assessments by the Heritage Foundation have placed the country’s business freedom score at a modest 54 out of 100—well below the global average and reflective of persistent structural obstacles that continue to discourage entrepreneurship, investment and expansion.
For entrepreneurs and investors, the hurdles begin at the starting gate. Registering a company still involves dealing with multiple agencies, overlapping documentation and unpredictable delays. Obtaining construction permits, securing electricity connections and navigating land registration remain time-consuming and costly processes. Once operations begin, the regulatory load intensifies. Businesses confront a complex web of federal and provincial taxes, frequent changes in rates and levies, and a compliance burden that can consume a substantial share of profits. Energy costs are high and supplies can be unreliable; access to finance is constrained by high interest rates and collateral requirements; and contract enforcement through the courts remains slow and uncertain. Intellectual property protection is weak, the informal sector creates uneven competition, and profit repatriation for foreign firms has at times been delayed by foreign-exchange shortages and bureaucratic friction.
These difficulties have exacted a visible toll. Over the past several years, a string of major multinationals have scaled back or exited the Pakistani market. Shell sold a majority stake in its local operations. Procter & Gamble announced the wind-down of its manufacturing and commercial activities. Microsoft reduced its footprint after decades in Islamabad. Uber, Yamaha, Eli Lilly and TotalEnergies have also withdrawn or significantly downsized their operations. Industry bodies and company executives have repeatedly cited inconsistent tax policies, the imposition and repeated extension of super taxes that push effective corporate rates above 40 percent, unpredictable regulatory changes, high energy tariffs and difficulties in repatriating earnings as decisive factors. Political and macroeconomic volatility have further compounded the perception of elevated sovereign risk, discouraging long-term capital commitments and making investors increasingly cautious about expanding their presence in Pakistan.
The contrast with successful business environments elsewhere is stark. Singapore consistently ranks among the world’s easiest places to do business. A company can be incorporated in roughly a day and a half through fully digitised processes. Corporate income tax stands at 17 percent, with no capital gains tax and extensive treaty networks. The government maintains transparent and predictable regulations, invests heavily in infrastructure and talent, and offers targeted support for research, innovation and market expansion. Regulatory approvals carry published service standards, while licence validity periods have been lengthened to reduce recurring administrative costs. The result is an ecosystem that attracts global firms and enables them to establish operations, invest with confidence and scale efficiently.
Several European countries offer instructive models as well. Estonia has pioneered digital governance: nearly all new companies are registered online, often in minutes, while its e-residency programme allows non-residents to establish and manage businesses remotely while accessing the European single market. Corporate tax is levied only on distributed profits, encouraging reinvestment and supporting business expansion. The Netherlands combines a sophisticated logistics hub with practical incentives—including R&D tax relief, entrepreneur allowances and streamlined support schemes—while participating in the European Union’s Points of Single Contact system, which consolidates information and formalities for cross-border operators. Across the European Union, systematic efforts to cut red tape, digitalise procedures and apply “one-in, one-out” principles for new regulations have helped lower the administrative burden on firms of all sizes and made regulatory compliance more predictable.
Pakistan is not without reform efforts. The Easy Business Act 2025, the Business Facilitation Centre and the Special Investment Facilitation Council represent attempts to streamline approvals, reduce paperwork and improve the investment environment. Yet the gap between announced measures and the lived experience of most businesses remains wide. High effective taxation, policy unpredictability, fragmented federal-provincial regulations and weak institutional coordination continue to raise the cost of formal enterprise. When the cost of compliance exceeds the cost of operating informally, capital and talent migrate—either to the informal economy or abroad. This ultimately weakens the formal tax base, reduces productive investment and limits the economy’s capacity to generate sustainable employment.
Lowering the cost of doing business is not merely a technical exercise in regulatory simplification. It is both a constitutional and economic imperative. Consumers ultimately pay the price of inefficiency through higher costs of goods and services, while businesses pass on excessive taxation, energy costs, compliance expenses and regulatory uncertainty wherever possible. Investors, meanwhile, respond to environments that offer predictability, reasonable tax burdens, efficient administration and confidence that rules will not change arbitrarily.
Singapore and Estonia did not achieve their reputations as business-friendly economies overnight. They pursued sustained and coherent policies that treated enterprise as a partner in economic development rather than simply as a revenue source to be maximised. Pakistan needs a similar long-term approach. The objective should not merely be to announce another package of incentives or establish another facilitation centre, but to create an environment in which businesses can start, operate, invest and expand without excessive bureaucratic and financial obstacles.
Pakistan’s Supreme Court has correctly identified the state’s duty. The real test now lies in translating that constitutional obligation into tangible reductions in the cost of starting, operating and expanding a business. If the government can provide stable policies, rational taxation, reliable energy, faster approvals, stronger institutions and predictable regulations, it can help restore investor confidence and encourage businesses to expand rather than retreat. Whether Pakistan can reverse the outflow of capital and talent—or continue to watch economic opportunity leave its shores—will depend largely on how seriously this imperative is addressed.