'Regulatory maze blocks investment'

Experts say 'regulatory DNA' must shift from controlling to facilitating markets

KARACHI:

Pakistan's efforts to attract investment and encourage innovation will remain constrained unless businesses can navigate a simpler, faster and more predictable regulatory system, experts warned at a seminar held at the Institute of Business Administration (IBA) Karachi on Thursday.

Titled "Transforming the Regulatory State: Pathways to a Dynamic and Competitive Economy", the seminar provided a platform for representatives from international regulatory reform practice, business and government to examine how overlapping rules, outdated procedures and complex licensing requirements affect the country's competitiveness.

Pakistan had approved 557 reforms across multiple sectors, Scott Jacobs, managing director of Jacobs, Cordova and Associates and recipient of the Prime Minister's Regulatory Reform Champion award, said, outlining the country's reform journey under the Regulatory Guillotine and SMART initiative led by the Board of Investment. He said the approvals marked progress in efforts to simplify the regulatory environment.

However, he stressed that the next phase required a fundamental change in the approach of regulators, from controlling markets to facilitating them. This would mean moving beyond the simplification of individual licences and permits towards a broader system of regulatory governance that enables businesses to operate and expand more efficiently. "The next phase must change the 'regulatory DNA' of Pakistan's regulators, from controlling markets to facilitating them," Jacobs commented.

He noted that Pakistan's transition towards wider regulatory reform reflected international good practice, although the programme was being pursued at a much faster pace and with potentially greater impact. Ultimately, the success of these measures would depend on whether they changed investors' perceptions of the returns and risks associated with investing in Pakistan. He also highlighted the limited financial depth available to venture capitalists in Pakistan compared with regional counterparts, which restricts funding for new and innovative firms. Without adequate access to capital and a supportive regulatory environment, entrepreneurs may find it difficult to develop new ideas into viable businesses.

Jacobs explained, using battery manufacturing as an example, that entrepreneurs seeking to establish innovative businesses must navigate multiple layers of regulations, certifications and licences. Such requirements can turn the process of setting up a business into a prolonged administrative challenge. He said the system needed to be transformed from an obstacle course into a fast-moving highway for entrepreneurs.

The Pakistan Business Council's CEO, Javed Kureishi, highlighted the burden that numerous and complex rules impose on businesses. He cited the foreign exchange manual as a case in point, describing it as badly outdated and a significant deterrent for foreign investors. Outdated regulations can create uncertainty for investors assessing whether to enter or expand in Pakistan, while complicated procedures increase the time and effort required to conduct business. Simplifying such rules is therefore an important part of making the country a more attractive investment destination.

Federal Board of Revenue Member Ambreen Iftikhar said the government needed to play a more constructive role in enabling businesses. She pointed to the duplication of regulatory requirements by different agencies across Pakistan that had been established for similar purposes.

Such overlapping oversight creates additional hurdles for businesses, particularly innovative firms that must comply with multiple requirements while trying to develop and scale their operations. Better coordination among public-sector agencies could help reduce duplication and make regulatory processes more effective, she said.

The panellists also emphasised the need for stronger engagement between academia, policymakers and the business community. They said universities and researchers should contribute evidence-based analysis, examine the effects of existing regulations and engage directly with those responsible for designing and implementing reforms.

Academia's role should extend beyond studying policy issues in isolation to helping identify practical solutions that reflect the needs of businesses and the wider economy. Regular exchanges among government, industry and academic institutions could help ensure that reforms are informed by evidence and address problems faced by businesses in practice.

The speakers stressed that Pakistan's ability to improve its competitiveness and create better opportunities for the next generation would depend on fundamentally transforming its regulatory framework. A simpler and more responsive system, they said, would help businesses innovate, encourage investment and support a more dynamic economy.

The seminar was followed by an interactive question-and-answer session with the participants.