Why Pakistan Keeps Falling Behind

Opinion leaders in Pakistan have spent a quarter of a century discussing the advantages that should have made it more prosperous. Its agricultural resources, industrial experience, young population and geographical location remain familiar features in their speeches. So why have development and prosperity been so slow to reaching the people of Pakistan?

The development gap with our immediate neighbours has widened over this generation. An IMF study has found that real GDP per person growth averaged 1.9 percent during 2000-2022, against 4.5 percent in Bangladesh, 4.9 percent in India and 5 percent in Vietnam.

A Pakistan Bureau of Statistics report released on October 19 estimated growth in FY2025-26 to be 3.65 percent. It said per capita income stood at $1,896. IMF projections in October suggested a growth rate of 7 percent for India and 8.4 percent for Vietnam.

Ignoring what has been achieved so far will not be fair. In its October 2026 report, the World Bank acknowledged that macroeconomic stabilisation and reform in the area of trade and energy had taken place. This will form the basis for future growth. But stability needs to be followed by smart investments and greater productivity for the people to benefit in the long run.

According to the June Economic Survey, investments stood at 14.38 percent of the GDP in FY2025-26. Insufficient investment results in inadequate provision for machinery and infrastructure for the growing labour force. An enterprise planning to expand needs to assess its future cost and benefits. Any doubt regarding the process can turn the venture into a gamble.

Think of an investor willing to launch a food processing factory. The permission is granted but there is no electric connection or a road leading to the factory. Separate offices deal with these issues and they go about their work independently.

Businesses have to be prepared for the challenge of competition and performance. An exporter may get a client, but the deal may fall through on account of delays for testing or refunds or availability of raw materials. Lack of funds to purchase equipment and lack of qualified personnel, too, limit efficiency. Where protection and exemptions are more profitable than operational efficiency, there is little incentive for competing abroad as long as existing companies have an edge over new ones. It is important both at the governmental and private levels to understand how regulations affect business practices.

Insecurity and terrorism cause loss of life, hinder production, destroy infrastructure and increase the cost of doing business. These factors also hamper the entry of workers, professionals and buyers in an area that could have been very productive. Higher prices of fuel imports and disruption of transport further aggravate the situation.

Human resources constitute the other component of productive capacity. The education workers are provided is irrelevant if it is not required by their employers. Insufficient learning and health problems can impede the earning capacity of the employees.

Increasing population makes these problems more complicated. According to the Economic Survey published in 2026, the population reached 252.09 million in 2025 with 2.07 percent annual growth. A 3.65 percent growth in economy with a 2.1 percent increase in population leaves only a 1.5 percent increase per head. It also necessitates more schools, health facilities and employment opportunities.

The fact that Pakistan is unable to sustain its investments and produce enough to improve individual and family incomes is a major issue.

The authorities must work to provide a predictable investment climate: the criteria for approvals, costs, timelines and early warning of any policy shifts where feasible. The government should form a task force to implement and manage the process of taking forward promising projects and ironing out departmental hurdles. Progress should be assessed in terms of capital deployed, production initiated and jobs generated.

In the export sector, the governments should favour the industries that have proven demand and scope for growth. These include processed food products, engineering products and software.

A pilot project should be launched to achieve a 25 percent reduction in customs clearance and refund times within a year. The benefits should be analysed in terms of improved deliveries and access to new markets. Demand-driven investments should be supported through appropriate finance and quality standards. Successful projects should be replicated and scaled up.

Economic activity is security-sensitive. The governments should ensure that workers, businesses, and transport links are protected through policing, intelligence, counter-terrorism, proper investigations and involvement of communities. Infrastructure and essential services, as well as viable businesses in the affected regions should be repaired and restored.

The same principles should apply to public expenditure. Public-private partnerships must deliver value for money. Risks should be accounted for in the public finance.

Potential employers should be consulted in the design of skill development courses. Skills training should be coordinated with international qualifications in order to facilitate the movement of labour into well paid jobs abroad. Basic education and health care should be preserved. The test is whether individual workers’ wages become better, locally or internationally.

Population policies need to focus on promoting voluntary family planning, reproductive health services and female education. Specific targets related to availability of supplies, counselling and referral systems should be set achieved. The benefit will be immediate although the demographic impact will come later.

Policy implementation should be ensured through current organisations, with quarterly updates on progress, problems faced and issues pending. Those responsible to resolve problems must be empowered. Achievements should be validated independently. Duplication of effort and wasteful compromises should be eliminated.

All investments have to be productive, enterprises competitive and citizens capable of reaping the benefits of success. By 2030, progress should entail a safer environment and a more stable climate for doing business.

In Bangladesh, India and Vietnam, these changes have occurred in one generation. Pakistan, too, can ensure that its future is more prosperous.

The writer is an independent investment and project management consultant with expertise in public-private partnerships, sustainable development, infrastructure and investment facilitation. He can be reached at [email protected] and watproconsultants.com

Source: The News on Sunday