Page 29 - CMA Journal (Sep-Oct 2025)

Focus Section

The EAG’s analysis suggests that
the high rates of customs duties
across several sectors, such as
textiles and automobiles, are
just the tip of the iceberg, as
regulatory duties and additional
customs duties contribute
significantly to the protection
awarded to these sectors. EAG
calls this a “tariff wall,” as the
presence of additional layers of
duties intensifies the total tax
burden on businesses and
consumers. Therefore, EAG
emphasizes the importance of the major goal of the NTP,
which is to simplify Pakistan’s tariff policies by removing goods, which are essential for transferring the latest
burdensome regulatory and additional customs duties production technologies. This will allow producers to
while ensuring a more predictable structure for customs move closer to global technology frontiers and achieve
duties. It is essential to ensure that the NTP is implement- minimum efficient scale in production. It will also
ed as proposed by the government, otherwise the uncer- encourage local industries to invest in various parts and
tainty and complexities of the tariff regime will continue components, enabling them to produce a greater variety
to inhibit business growth, leading to adverse economic of goods at lower average costs. Additionally, better
conditions. Further, a more efficient manufacturing integration into global markets will allow manufacturing
sector will not only attract more competitive businesses firms to obtain inputs from more efficient sources and
but also ensure that the current over-reliance on tariffs collaborate with producers abroad, establishing better
and duties is permanently reduced. value chains and production networks. In essence, firms
will benefit from technology and capability upgrades as
The EAG points to the high-value textile sector as a key
competition and innovation help them achieve more
area where tariffs and related regulations have hindered
efficient scales of production.
development. This sector can be a crucial driver of
economic growth in Pakistan, as it employs the largest In summary, Pakistan has long maintained a tariff maze
number of workers in manufacturing and allows the involving multiple layers of complex and unpredictable
accumulation of investor knowledge, which can create duties on imported goods, many of which are essential
significant agglomeration effects benefiting other raw materials and intermediate goods. This has burdened
sectors and exporters. However, protectionist policies businesses with high costs and reduced their
coupled with export subsidies have prevented exporters competitiveness. The NTP 2025-2030 provides a map to
from realizing their full potential, as they have become exit this maze, as it simplifies the tariff regime, lowers
dependent on government support, which often customs duties, and eliminates burdensome additional
diminishes during adverse economic conditions. duties, laying the foundation for a more competitive
Protection is not only awarded through customs duties business environment. Businesses will benefit from a
but also through additional instruments involving more level playing field and lower costs, while consumers
regulatory and additional customs duties. The negative will gain from more choices and affordability. National
consequences are clear, as regulatory duties on imports economic welfare will improve as the path toward
of raw materials and machinery increase costs for increased investment, exports, and growth becomes
exporters, making them less competitive compared to clearer. This represents a pivotal shift, moving Pakistan
exporters in other countries with access to cheaper away from inward-looking, outdated, and regressive
inputs. The structure of tariffs, especially cascading tariffs, policies toward a better-integrated, competitive, and
creates anti-export biases, encouraging potential open economic system that supports long-term
exporters to prefer selling in the domestic market. sustainable growth.
One of the major criticisms against the NTP is that it will
About the Author: Aadil Nakhoda is a faculty member at the
open the country to a flood of imported goods. However, Institute of Business Administration (IBA), Karachi and the chair
manufacturing entities are likely to benefit from reduced of the Economic Advisory Group (EAG).
costs of raw materials, intermediate goods, and capital

ICMA’s Chartered Management Accountant, Sep-Oct 2025 27