High costs—not weak demand—are hollowing out the country’s largest export industry.
Pakistan’s textile and apparel sector, the backbone of its export economy, is being squeezed by a cost structure that is fundamentally misaligned with regional competitors. The Pakistan Textile Council (PTC) warns that persistently high energy prices, expensive finance, punitive taxation, weak logistics and declining cotton output have eroded competitiveness and choked export growth.
The numbers are stark. Industrial electricity in Pakistan costs around 13.2 cents per kWh—well above Bangladesh (10.2), India (9.5), Vietnam (7.0) and China (5.3)—and is delivered unreliably. Exporters are effectively subsidising inefficiencies in the power sector, from line losses to circular debt. Financing is equally constraining: Pakistan’s 11% policy rate compares unfavourably with Bangladesh’s 10%, Vietnam’s 4.5% and China’s 3%, while the withdrawal of long-term SBP facilities has stalled investment, especially among MSMEs.
Taxation further weakens margins. A 29% corporate tax, layered with super tax, sales tax, turnover tax and delayed refunds, contrasts sharply with the preferential regimes offered by Bangladesh, Vietnam and China. Regulatory frictions—such as a 120-day export proceeds realisation rule versus 180 days elsewhere—reduce bargaining power with buyers and divert orders abroad.
Structural weaknesses compound the problem. Domestic cotton production has declined, logistics remain road-heavy and inefficient, and Pakistan lags peers in machinery investment, skills and productivity.
PTC’s prescription is blunt: benchmark energy tariffs and interest rates to the region, dismantle cascading taxes, restore cotton competitiveness, modernise logistics and stabilise policy. Without this reset, Pakistan risks hollowing out its most important source of jobs, exports and foreign exchange.
