PAKISTAN cannot build a competitive industry by protecting it indefinitely. Nor can reducing protection, by itself, turn domestic manufacturers into exporters. Tariffs shape investment decisions, but competitiveness also depends on energy, technology, scale, supply chains, market access, and security.
A credible industrial strategy must address them together. Unconditional protection raises prices, blunts incentives to innovate, and rewards selling to a captive home market. Consumers finance inefficiency, and capital chases protected returns rather than export opportunities. Where there is no credible prospect of competitiveness, protection merely postpones adjustment at public expense.
The National Tariff Policy 2025-30, therefore, points broadly in the right direction. Fewer tariff slabs, cheaper imported inputs, and phased elimination of additional customs and regulatory duties can lower costs and reduce the bias against exports. But these are instruments of competitiveness, not substitutes for the conditions that make exports possible.
The essential complement is a measurable programme to cut the costs the state imposes on production. If manufacturers face a timetable for lower protection, the government should face one for affordable, reliable energy, prompt tax refunds, simpler regulation, and efficient logistics. Otherwise, industry is asked to adjust while the state’s own contribution to uncompetitiveness goes unaddressed.
This is not an argument for waiting until every domestic problem is solved; that would make protection permanent. It is a case for distinguishing activities with little prospect of competitiveness, those capable of achieving it, and a narrow set of strategic capabilities.
The polyester chain shows the cost of failing to draw these distinctions. The textile industry association, APTMA, argues that protection on polyester staple fibre and its key input, purified terephthalic acid, raises costs for downstream textiles, while the country’s sole PTA plant, commissioned in 1998, lags newer plants in China and India. These claims by interested users warrant independent examination.
The test is straightforward. Has prolonged support delivered globally competitive costs, technological upgrading, and lower energy use per tonne? Has it helped downstream producers compete in synthetic and blended textiles? Protection that preserves an inefficient input supplier while handicapping a much larger export opportunity defeats its own purpose.
Energy illustrates the shared responsibility. High electricity tariffs and excessive electricity consumption are different problems: the government must fix the first; manufacturers must invest to reduce the second. Consumers and downstream exporters should not indefinitely finance either failure.
Protection that preserves an inefficient input supplier while handicapping a much larger export opportunity defeats its own purpose.
Yet an equally indiscriminate withdrawal of support could destroy capabilities with a viable future. Auto parts deserve assessment on this basis. Complaints about expensive vehicles and meagre exports obscure engineering skills within the supplier base.
Toolmaking, casting, machining, moulding, process control, and quality assurance are not tied to one vehicle. Partnerships with foreign manufacturers can develop capabilities serving replacement markets, other engineering industries, and, where specifications permit, defence production.
These capabilities justify scrutiny and selective development, not permanent protection for every assembler or component. The right unit of assessment is often the product or process, not the entire sector.
Scale is crucial. Investment in moulds, testing or automated lines must be recovered over sufficient output; short runs make each unit expensive. Too many models fragment demand in a small market, while differing specifications prevent vendors from supplying the same part to several assemblers.
Policy should encourage viable specialisation, common components where feasible, supplier consolidation, and access to replacement and export markets. A vendor serving several customers can reach volumes that no single low-volume model offers. Competition policy must accompany consolidation, so that scale raises productivity rather than market power.
Upstream supply matters too. Reliable access to automotive-grade steel, engineering plastics and specialised chemicals affects quality, cost, lead times, and working capital. A competitive local supplier can shorten delivery and support joint development, but domestic steel or petrochemical production alone guarantees neither.
Pakistan need not make every input before it can export. Where domestic production lacks scale or technology, predictable access to competitively priced imports is essential; forcing manufacturers to buy costly local inputs shifts protection upstream and erodes downstream competitiveness. The goal is an efficient supply chain combining viable domestic capabilities with dependable imports, not local-content targets.
Market access is the next missing piece. Cutting Pakistan’s import tariffs does nothing to lower the duties its exporters face abroad. Preferential trade agreements can open larger markets, but their value depends on product coverage, rules of origin, and real commercial opportunities. They should be negotiated around what Pakistan can competitively supply and what investors could realistically produce.
Buyers also weigh security. Export relationships depend on plant visits, technical assistance, audits, and dependable delivery. Insecurity, transport disruptions or barriers to foreign experts can cancel out a competitive price. Buyers pay for reliability, and investors need confidence that people, equipment and goods can travel safely.
How, then, should protection be withdrawn?
Activities with no credible route to competitiveness should have a clear exit timetable. Those with demonstrable potential should receive temporary support tied to investment, productivity, quality, energy efficiency, and a narrowing price gap with imports.
Government should accept published obligations on costs and business conditions. An independent review should distinguish policy failures from outdated equipment, inadequate scale, or poor management. Verified government failures could justify limited adjustments to the tariff timetable, each with a firm expiry. Industry must not gain a permanent veto over reform.
Strategic exceptions should remain narrow. Food security can justify agricultural resilience without self-sufficiency in every crop. Defence can justify selected domestic capabilities despite higher costs, subject to periodic review of their security value and expense.
Lower tariffs on inputs remove one obstacle to exports. They cannot supply scale, modern technology, efficiency, market access, or security. Pakistan needs a reciprocal bargain: industry must earn support through performance, and the government must deliver conditions for competition. Neither should hand consumers an indefinite bill for its failures.
The writeris a former CEO of Unilever Pakistan and of the Pakistan Business Council.
Published in Dawn, October 24th, 2026