The Economic Chokehold of Over-Regulation
Regulations in Pakistan create economic frictions, resulting in a loss of approximately 45% of GDP due to decreased economic activity.

Pakistan’s economy contracted by around 0.17% last year while that of India and Bangladesh bloomed by 7.2% and 6% respectively. Since the economy and businesses are involved in a mutually influential relationship, it is safe to assume that facilitating the market is the key to a growing economy. Contrarily, in Pakistan, the situation is quite different, with unnecessary regulations costing approximately 45% of the GDP. Instead of utilizing regulatory frameworks to ensure fair entry into the markets and increase productivity, regulations in Pakistan function to increase the government’s control of the markets. The Federal Government has around 118 regulatory bodies, whose regulations are yet to improve manufacturing, or service delivery in any sector.
Are we responsible for stifling our economy through overregulation?
Globally, developing countries have harsher regulatory environments whereas taxes are more heavily regulated in the developed world. This view of the world has especially emerged as a result of neoliberal economic policies initiated in the 1970s, and more specifically liberalization in Pakistan. It is crucial to understand that markets require regulation; the determining factor, however, is the quality of that regulation. Regulations affect how companies and the economy perform, and they depend on the rules and systems in place. In countries with good systems, regulations aim to help businesses overall and prevent unfair advantages for a few. Otherwise, rent-seeking may take over the economy instead of value-addition.
What Pakistan needs is modernization of its regulatory framework and not deregulation altogether. The cost of overregulation is manifold; including the cost of implementation and the cost of lost business. Therefore, Pakistan needs to reconfigure its regulatory framework and orient it to boost economic activity while ensuring efficiency and fairness.
GRAPHIC
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