Decline in Investment and Absence of SME Zones Hindering Pakistan’s Economic Growth: LCCI Chief

LAHORE, PAKISTAN: The Lahore Chamber of Commerce & Industry (LCCI) highlighted serious structural challenges in Pakistan’s economy, including the heavy tax burden on large-scale manufacturing, declining investment, and the absence of dedicated SME zones, which collectively impede economic growth.

Former Federal Finance Minister Dr. Hafiz A. Pasha noted that 60 percent of Pakistan’s total tax revenue comes from the large-scale manufacturing sector, creating a disproportionate burden that is four times higher than on other sectors. This imbalance leaves the sector struggling, with growth stagnating rather than improving year by year.

Dr. Pasha emphasized that other high-potential sectors, such as agriculture, contribute minimally to tax revenue despite their economic significance. For instance, only one percent of landowners control 22 percent of the best agricultural land, yet the government projects just PKR 4 billion in tax collection from agriculture next year, compared to PKR 4,500 billion from manufacturing.

Investment in large-scale manufacturing has sharply declined over the last 25 years, and the depreciating capital stock is not being replenished, further hampering sustainable growth.

LCCI President Faheem ur Rehman Saigol stressed that Pakistan has not fully utilized its economic potential. He noted that while countries like China and India achieved growth by implementing industrial policies from the 1960s onward, Pakistan lagged behind. Over the past four months, the country’s trade deficit exceeded USD 10 billion.

Saigol also pointed out that Pakistan has yet to establish a single SME zone, despite SMEs being the backbone of growth in developed countries. Millions of young graduates enter the job market annually but remain unemployed. Providing them with skills and facilitating overseas employment could significantly boost remittances.

Dr. Pasha added that the export sector and large-scale manufacturing form the backbone of Pakistan’s economy, whereas non-productive sectors like real estate continue to attract the highest investment. Property revenue collection is only 0.2 percent, twelve times lower than industrial revenue.

He warned that Pakistan currently faces 2.1 million unemployed youth, 2.6 million out-of-school children, and 22 percent of the workforce without employment, the highest unemployment rate in the country’s history. Moreover, only six percent of bank credit is available to three million small enterprises, while banks provide 80 percent of credit to the government.