New Delhi, Jan 25 (IANS) The tariff data in Pakistan in FY25-FY26 reflects a government caught between reformist intent and protectionist reflex, suffering from a lack of policy discipline, a report has said.
The report in The News International reveals that Pakistan’s tariff schedule tells a story far more consequential than the routine annual adjustment of customs duties.
“Embedded in the data is a clear collision between two competing economic philosophies, unfolding in real time,” it adds.
For decades, Pakistan’s manufacturing sector has been suffocated not by a lack of entrepreneurial talent or industrial ambition, but by the sheer cost of inputs.
The report further states that raw materials, intermediate goods and industrial components were routinely taxed at rates that made local production more expensive than importing finished products.
This inverted tariff structure penalised value addition and rewarded trading over manufacturing.
The FY25–FY26 data suggests a welcome break from that legacy.
However, “this is only half the story and unfortunately, the less problematic half”.
“While the base of the tariff pyramid is being liberalised, the peak is becoming stickier, higher and more distortive. In several high-value sectors, such as automobiles (particularly CBU imports), ceramics, home appliances and rubber products such as tyres, the tariff burden has not declined. In some cases, it has increased,” the article states.
The data suggests that effective protection on auto CBUs, for instance, has moved from roughly 81 per cent to nearly 88 per cent.
According to the report, this is not a marginal adjustment but a “reinforcement of one of the most protectionist regimes in the region”.
Moreover, the export implications of this policy mix are particularly troubling.
“Protected domestic markets create a powerful disincentive to export. Why should a firm struggle to earn a 5.0 per cent margin in Europe, subject to stringent standards and fierce competition, when it can enjoy a comfortable 25 or 30 per cent margin in Lahore under tariff shelter?” Argues the report.
This logic has played out repeatedly in Pakistan’s industrial history.
Sectors that were meant to be ‘infant industries’ decades ago have grown old behind protection, yet never matured into globally competitive players.
The central structural flaw is, says the article, that Pakistan continues to use tariff policy as a substitute for industrial policy.
Countries that successfully navigated the infant industry phase did so with discipline, not indulgence.
“In Pakistan, by contrast, protection has been open-ended and unconditional. Industries are protected not because they are becoming competitive, but because they are politically entrenched,” the report further states.
—IANS
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