» Pakistan Business Guide

1. Pakistan export overview

Pakistan is a developing market with a young and growing population of around 186 million.

About 55 million live in urban areas. It’s estimated that Pakistan’s cities generate up to 78% of national Gross Domestic Product (GDP), with Karachi alone contributing about 20%. The growing / aspirational middle class has an appetite for creative, innovative and high quality goods and services.

Contact a UKTI Pakistan export adviser for a free consultation if you are interested in exporting to Pakistan.

Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for Pakistan.

Over 100 British businesses are currently doing business in Pakistan, including well-known companies such as Standard Chartered, GlaxoSmithkline, Shell, Toni and Guy, Debenhams and Unilever.

Pakistan is ranked 128th by the World Bank in its Ease of Doing Business Index, higher than India and Bangladesh.

Benefits for UK businesses exporting to Pakistan include:

  • common business language
  • location in the middle of Asia making Pakistan a gateway to northern India, Afghanistan, Tajikistan, Kyrgyzstan, Uzbekistan, Kazakhstan and western China
  • similar legal practices
  • familiarity with UK companies and brands
  • growing middle class

Strengths of the Pakistan market include:

  • sixth most populous country with over 50% population under the age of 25
  • strong business and consumer base
  • ninth largest English speaking nation
  • investor friendly
  • home to over 600 foreign companies
  • links with Pakistani migrant communities in the UK
  • educated workforce
  • low production and labour costs

2. Challenges

Challenges you may face when doing business in or with Pakistan include:

  • widespread sectarian violence and terrorism threats brings security risks to foreign nationals
  • bureaucracy with government officials can be costly and time consuming
  • ranks 126th out of 177 countries in Transparency International’s Corruption Index with corruption widespread and deeply entrenched in the system
  • weak infrastructure and power shortage problems may escalate the cost of doing business
  • weak labour law enforcement and lack of enforced IntelIectual Property Rights (IPR) standards might compromise your products or service quality

Read the Foreign and Commonwealth Office’s (FCO) Overseas Business Risk report for Pakistan.

You should ensure you take the necessary steps to comply with the requirements of the UK Bribery Act.

3. Growth potential

3.1 Economic growth

Despite its potential, Pakistan’s economy has not yet experienced the rapid expansion seen in Asia’s emerging markets. To revive growth, the government has implemented reforms supported by an International Monetary Fund (IMF) programme agreed in 2013.

Pakistan benefits from:

  • one of the world’s youngest populations
  • stable and growing domestic demand
  • proximity to fast growing Asia
  • wealth in natural resources – particularly coal

The IMF has revised upwards its growth estimate for this year to 4.3%, and expects it to rise to 5% in 3 years.

More than 50% of Pakistan’s economy is services based, with trade-related and communication services among the largest. Industry accounts for nearly a quarter of GDP, and includes an export-oriented textile sector, as well as chemicals and food processing.

Manufacturing activity has recently received a boost from the government’s moves to improve energy availability.

The European Union award of the Generalised System of Preferences Plus (GSP+) status came into effect on 1st January 2014. Increasing trade and foreign investment with the EU is expected to boost growth going forward.

3.2 Enhanced Strategic Dialogue

The Enhanced Strategic Dialogue includes a huge range of UK government cooperation with Pakistan. The governments of Pakistan and the UK are committed to co-operating where we have shared interests, including trade and investment, economic stability and development.

The Prime Ministers of the UK and Pakistan have agreed a ‘Trade and Investment Roadmap’ to promote trade and investment, support business and achieve a bilateral target of £3 billion in trade of goods and services by end of 2015.

3.3 Pakistan trade agreements

Pakistan currently has 7 bilateral trade agreements in place: Afghanistan, China, Iran Indonesia, Sri Lanka, Malaysia and Mauritius. These preferential and free trade agreements mean that parties enter into binding commitments to relax access to each others’ markets’ for goods, services, and investment.

Pakistan is also a member of the South Asian Free Trade Area (SAFTA), an agreement that aims to establish free trading between its members (a region home to around 1.6 billion people) by 2016.

Pakistan and India are currently discussing a Non-Discriminatory Market Access Agreement. When agreed, this will open up trade between Pakistan and the vast Indian market.

3.4 Afghanistan

Under the Afghan-Pakistan Transit Trade Agreement (APTTA) signed in 2010, Pakistan serves as a gateway to landlocked Afghanistan. This means that goods destined for the Afghan market use Pakistan’s seaports to transit through the country. In turn, it allows exporters from Pakistan access to central Asian markets via Afghanistan.

4. Trade between UK and Pakistan

The UK is amongst the largest exporters to Pakistan with over 100 British companies physically operating in Pakistan.

In 2014, UK goods exported to Pakistan were worth £618 million. Bilateral trade in goods and services increased from £1.9 billion in 2009 to 2.2 billion in 2013.

To achieve the Prime Minister’s agreed target of £3 billion by 2015, growth needs to achieve 17.6% year on year.

Major exports from the UK to Pakistan are:

  • specialised industrial machinery
  • power generation machinery
  • telecom and broadcasting equipment
  • chemicals, pharmaceutical and medical products
  • metal ores and scrap metal

5. Opportunities for UK businesses in Pakistan

UK Trade and Investment (UKTI) provides free international export sales leads from its worldwide network. Search for export opportunities.

5.1 Industrial and infrastructure

Pakistan’s industrial sector now accounts for 25% of GDP. As urbanisation develops Karachi alone will need half a million new housing units every year. There are opportunities for the construction of:

  • bridges
  • water works
  • power plants
  • ports
  • other mass transport infrastructure

Contact enquiries@bbcpk.org for more information on industrial and infrastructure opportunities.

5.2 Energy

Pakistan faces a 10,000 MW shortage of power and currently is too reliant on imported oil.

Many of the independent private power projects in operation since 1994 are heavily dependent on fuel oil. As a result, many power plants are now being converted to coal. Pakistan has the third largest coal reserves in the world, an estimated 185 billion tonnes, equivalent to 400 billion barrels of oil. Plans are also in place to increase power production through recently initiated imports of Liquefied Natural Gas (LNG).

Opportunities for UK companies exist in:

  • importation of LNG and related infrastructure
  • coal mining technology
  • oil and gas exploration and exploitation
  • power generation via wind, solar and other renewable sources such as hydroelectricity (hydel)

Contact enquiries@bbcpk.org for more information on energy opportunities.

5.3 Healthcare

Pakistan has a mixed health care system, comprising of public and private formal / informal sectors. The public sector makes up to 38.5% of health expenditure with the remainder from the private sector.

The healthcare sector is expected to grow by over 13% in the period 2013 to 2018. 70% of product demand is met through local manufacturing, 30% through imports. 25 multinational corporations have 48% of the market share.

The sector includes a market for:

  • pharmaceuticals worth over £1.3 billion, one of the largest in developing markets
  • diagnostic and scientific equipment estimated at £1.2 billion
  • medical devices valued at £205 million

Main opportunities in healthcare sector include:

  • design / build / operate hospitals and clinics
  • pharmaceuticals
  • hospital, clinical and laboratory equipment
  • laboratory, clinical and paramedic training
  • certification, Good Manufacturing Practice (GMP), compliance and quality control training for surgical goods and other industries
  • cancer treatment programme
  • kidney and liver treatment
  • mobile health units to provide healthcare facilities in rural areas
  • medical educational institution linkages

Contact enquiries@bbcpk.org for more information on opportunities in Pakistan’s healthcare sector.

5.4 Education

Pakistan’s literacy rate is about 58.5%. The education sector consists of:

  • 150,000+ public education institutions serving over 21 million students
  • private sector serving 12 million students

Opportunities exist in:

  • professional development and training for teachers / staff
  • new educational material
  • basic laboratory equipment to modern and innovative technologies and techniques
  • e-coaching and web design
  • Information and Communications Technology (ICT) in Higher Education (science and technology) and public sector institutions

Contact enquiries@bbcpk.org for more information on opportunities in the education sector.

5.5 Retail and leisure

The retail sector is one of the fastest growing sectors of Pakistan, worth over £42 billion in 2012. It’s been growing at around 7% per annum, faster than overall economic growth. The hypermarket segment is growing at a steady rate of 13.5%.

Potential opportunities exist in:

  • luxury branded goods sector (clothing, footwear and accessories)
  • luxury products like cosmetics
  • increasing growth of shopping centres and availability of retail space
  • growing number of suitable franchise operators in both the luxury and non-luxury segments
  • recognition of foreign brands
  • e-commerce
  • facility management
  • toys

Contact enquiries@bbcpk.org for more information on opportunities in Pakistan’s retail and leisure sector.

5.6 Security and defence

The general law and order situation throughout the country is a major challenge. The Pakistan security sector is well-established and connected to suppliers based in Europe, north America and the Far East. Pakistan is a price conscious market, but there are opportunities for high quality products and services.

Opportunities in this sector include:

  • CCTV systems for local authorities and businesses
  • equipment for law enforcement agencies
  • equipment for Pakistan armed forces
  • armoured personal vehicles
  • safe city projects
  • Command, Control and Communication (C3) systems
  • counter terrorism training for both the Police and the Sindh judiciary / prosecution services
  • skills and technology for forensic laboratories and equipment
  • equipment and training for disaster management and relief management

The Export Control Organisation (ECO) issues licences for the export of strategic goods. You must check your goods are meeting legal requirements for export.

Contact enquiries@bbcpk.org for more information on opportunities in the security and defence sector.

5.7 Financial services

The services sector in Pakistan made an estimated 53.1% contribution towards GDP in 2013. Financial, professional and business services were a major contributor to this figure.

Opportunities exist in:

  • Islamic banking services
  • reinsurance and personal insurance (telephone and web-based services)
  • retail and commercial banking
  • capital investments

Contact enquiries@bbcpk.org for more information on opportunities in the financial services sector.

5.8 Consultancy services

Opportunities occur across many sectors, including privatisation of state-owned enterprises. They include a need for:

  • financial analysis
  • architectural services
  • interior design services
  • policy reforms

Contact enquiries@bbcpk.org for more information on opportunities in the consultancy services sector.

5.9 Creatives industries

The creative industries economy in Pakistan made a 4.5% contribution towards the national GDP in recent years and as much as 3.71% to national employment. Crafts, publishing, music, visual and performing arts are well represented nationally.

There are opportunities in:

  • architecture – residential and commercial
  • product design – furniture, lighting, and home accessories.
  • design (product, graphic and fashion)
  • publishing – e-commerce book-selling at discounted prices.
  • Information Technology (IT), software and computer services including development of games, apps and mobile content to use with smart phones

Contact enquiries@bbcpk.org for more information on opportunities in the consultancy services sector.

6. Start-up considerations

If you are looking to do business in Pakistan you can set up a company, normally a local subsidiary.

This is a fairly easy process using:

  • a local consultancy company (UK companies operate in this field in Pakistan)
  • local lawyers

You can also enter the market in one of the following ways:

  • export directly from home country
  • set up an agency
  • appoint a distributor
  • through franchising
  • form a joint venture or manufacture under license agreement with a Pakistani company

For direct exports you should appoint a local representative, either on a commission basis or as an importer/distributor.

6.1 Family businesses

Pakistan is a market in which family structures predominate in the business environment, and where personal relationships are important.

This requires an investment primarily of time and personal presence. Likewise, product training for the agent’s workforce is essential. Therefore, you should regularly visit Pakistan, especially during the early phase of your set up.

The main government agencies involved in the regulation of companies in Pakistan are:

  • the Securities and Exchange Commission of Pakistan (SECP) which was set up following 1997 Securities and Exchange Commission of Pakistan Act and has responsibility for the incorporation and registration of companies
  • the Board Of Investment (BOI) promotes investment opportunities in all sectors of the economy, and provides investment facilitation services to local and foreign investors

You are advised to seek legal and taxation advice before entering into a joint venture or similar type of partnership with a local company in Pakistan.

Contact enquiries@bbcpk.org to help find tax and legal advisers before entering into agreements.

7.1 Standards and technical regulations

The Pakistan Standards and Quality Control Authority has responsibility for standards and quality requirements.

The Ministry of Health is concerned with labelling requirements of drugs, cigarettes etc. The Ministry of Food Agriculture and Livestock (MINFAL) is responsible for labelling on food items.

In general, labelling in English and Urdu is required on all consumer products and needs to be approved by the relevant ministry or department. At the minimum, labels need to provide the following:

  • brand name
  • ingredient list
  • manufacturer details (address)
  • importer’s name and address
  • date of manufacturing
  • date of expiry
  • batch number
  • contents marked in grams (GMS) and milliliters (MLS)

Packaging requirements include:

  • an original packing list signed in blue ink and stamped with a company seal
  • exact contents of each package should be clearly identified
  • at least 3 copies of the packing list as part of the shipping documents sent to the consignee or agent
  • net weight and gross weight must match weights on commercial invoice and bill of lading

You should use a packing list for all shipments containing more than one shipping unit of packaged cargo.

Most countries require packing lists to be provided together with the commercial invoice. The information must be consistent with all information shown on the commercial invoice.

7.2 Intellectual property

Intellectual Property (IP) has been mainstreamed in Pakistan since 2005. Since then the government of Pakistan has taken measures to ensure effective protection of intellectual property in Pakistan.

Register your brands with the Intellectual Property Organization on Pakistan.

7.3 Investment Promotion and Protection Agreement (IPPA)

IPPAs are designed to encourage investor confidence by setting high standards of investor protection applicable in international law. Main elements include:

  • provisions for equal and non-discriminatory treatment of investors and their investments
  • compensation for expropriation, transfer of capital and returns
  • access to independent settlement of disputes

Main features of Pakistan’s foreign investment policy are:

  • all economic sectors are open to foreign direct investment (FDI)
  • 100% foreign equity is allowed on repatriation basis
  • tax and tariff incentives packages are available
  • remittance of royalty, technical and franchise fee, capita, profits, dividends are allowed

A UK-Pakistan IPPA came into effect on 30 November 1994.

8. Tax and customs considerations

8.1 Double taxation agreement

Pakistan and the UK have a Double Taxation Agreement in force. Taxes and duties paid in Pakistan can be claimed back in the UK.

8.2 Corporate taxation

The corporate tax rate in Pakistan, set by the Federal Board of Revenue, stands at 35%.

The corporate income tax rate is a tax collected from companies. Its amount is based on the net income companies get while doing business, normally during one business year.

8.3 Sales tax

The sales tax rate in Pakistan stands at 16%, and is set by the Federal Board of Revenue. The sales tax rate is a tax charged to consumers based on the purchase price of certain goods and services.

8.4 Customs duties

Tariffs change annually.

The maximum import tariff rate is currently 35%. This applies to a few products that the government is actively discouraging the importation of.

You are currently expected to pay:

  • 16% sales tax
  • 1% excise duty

Port charges, clearance charges, transportation and the additional duties charged for certain products are extra on top of the customs tariff.

You can find more about import tariffs in the Market Access Database.

8.5 Import controls

There is a list of banned items that cannot be exported to Pakistan. You can find the list on in the Import Policy Order 2012-15

Visitors are not permitted to import alcoholic beverages, except for non-Muslims, who can import enough for their own consumption.

Exports and imports to and from Israel are prohibited.

8.6 Documentation

Two copies of the commercial invoice should be included. The invoice should provide exact details of the shipment including:

  • number of packages
  • marks, prices and description of goods
  • quantity
  • place of origin
  • freight and insurance
  • any other information to facilitate customs clearance

You need to get insurance certificates and Letters of Credit (LoC). A Bill of Lading is required to allow cargo clearance.

Certificates of Origin are only required if the imports require additional processing in Pakistan.

Facsimile signatures are not acceptable and will be rejected by Pakistan Customs.

Permit applications under the Dutiable Commodities Ordinance require one additional copy of invoice and Bill of Lading.

9. Business behavior

English is the official business language in Pakistan. People speak reasonably good English and have a good level of understanding.

Pakistan is an Islamic state. Women are expected to dress modestly when attending meetings or visiting some parts of the country. Western attire is acceptable.

Pork is banned in the country. Alcohol is officially banned for Pakistanis, but overseas visitors can buy alcohol at some leading hotels. This can only be consumed on the premises.

Muslims observe the month of Ramadan where they fast from sunrise to sunset. It’s recommended not to plan a business trip during this month as productivity decreases.

Photography of sensitive installations such as bridges, ports and airports is prohibited.

9.1 Entry requirements

If you are travelling to Pakistan on a British passport, you’ll need to get a visa before you travel. Visa violations can be treated as a criminal offence and could result in a fine or detention.

Details of the types of visa and how to apply can be found at the Pakistan High Commission website.

9.2 Travel Advice

If you’re travelling to Pakistan for business, check the FCO travel advice beforehand.

10. Contacts

Contact  enquiries@bbcpk.org for more information and advice on opportunities for doing business in Pakistan.

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