Zafar Iqbal
For the past several months, the government of Pakistan has been crafting a new industrial policy that, according to Finance Minister Muhammad Aurangzeb, is aimed at creating a more pro-business environment to accelerate the pace of industrialisation. Addressing a workshop organised by the Securities and Exchange Commission of Pakistan and the Pakistan Banks Association in Karachi, the finance minister stated that the draft policy will soon be presented before the federal cabinet for approval.
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The motivation behind this initiative is clear. Pakistan’s economy has endured years of painful macroeconomic adjustments that saw industrial production decline, factories shuttered, jobs lost, and growth stagnate. Recently, however, the economy has shown early signs of stabilisation. Inflationary pressures have begun to ease, foreign exchange reserves have improved under a more stable rupee and balance-of-payments position, interest rates — though still high — are trending downward, and fiscal discipline is slowly narrowing the deficit. These improvements have restored some confidence, with Pakistan’s credit rating moving upward (despite remaining in the speculative grade) and the stock market enjoying bullish momentum.
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This modest but hard-earned stability has given the government confidence to shift from fire-fighting mode toward long-term economic planning. The new industrial policy, therefore, is being positioned as a tool to stimulate fresh investments, generate employment, and embed Pakistan into regional and global supply chains. Global experiences demonstrate that fiscal incentives, regulatory reforms, and a supportive business climate are proven instruments to strengthen industrial competitiveness, enhance exports, and expand manufacturing capacity.
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Yet, Pakistan’s own history with industrial and export development strategies serves as a sobering reminder. Successive governments have unveiled ambitious frameworks, but poor execution, institutional weaknesses, and an unreformed economic ecosystem have consistently undermined their impact. Instead of fostering genuine competitiveness, past policies have too often relied on subsidies, protectionist measures, and regulatory perks. These short-term fixes shielded inefficiencies, discouraged innovation, and prevented integration into global value chains.
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To avoid repeating these mistakes, the forthcoming policy must not be treated as a standalone framework. Industrial growth cannot be divorced from the parallel advancement of agriculture and services, which together form the backbone of Pakistan’s economy. A siloed approach risks imbalance and will not yield the intended outcomes. Any meaningful industrialisation strategy must be embedded in a broader reform agenda addressing the structural impediments that have stunted Pakistan’s competitiveness for decades.
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These impediments are deeply entrenched: high and unstable energy costs, chronic shortages, distortive and unpredictable taxation, insufficient domestic savings, inadequate technological adoption, and the looming threats of climate change. Without simultaneously addressing these fundamentals, even the most carefully crafted policy will struggle to deliver. It is not merely a matter of incentives and regulatory tweaks but of re-engineering the entire ecosystem to enable innovation, reduce costs, and promote sustainability.
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Reform, therefore, must go hand in hand with industrial policy. Agriculture requires modernisation and productivity enhancements to support raw material supply chains. Services, especially finance and logistics, must be reformed to support industrial expansion. Energy reforms are critical to ensure affordable and reliable supply. Without such integration, the new industrial policy risks becoming another document that gathers dust in official archives.
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In conclusion, Pakistan stands at a delicate but promising moment. The economy, though fragile, is regaining balance, providing a rare opportunity to chart a path toward sustained industrial growth. The government’s intentions are well placed, but history teaches us that ambition alone is insufficient. For this policy to succeed, it must be coupled with broad structural reforms, executed with transparency and consistency, and insulated from short-term populist pressures. Only then can Pakistan hope to transform industrialisation into a durable engine of growth and prosperity.
