Karachi Chamber warns high energy costs, taxation and policy uncertainty are weakening Pakistan’s global textile competitiveness
KARACHI: The Karachi Chamber of Commerce and Industry (KCCI) has sounded alarm over the deteriorating competitiveness of Pakistan’s textile sector, warning that rising production costs, inconsistent policies and stronger regional competition are threatening the country’s largest export industry.
In its budget proposals for FY2026-27, KCCI said Pakistan risks losing further market share to regional competitors such as Bangladesh, Vietnam, India and Cambodia unless urgent reforms are implemented to reduce the cost of doing business and support export-oriented industries.
Regional Competitors Surge Ahead
The chamber noted that the textile sector accounted for nearly 54 percent of Pakistan’s merchandise exports in 2024. However, export growth has remained modest over the past two decades.
According to KCCI, Pakistan’s textile exports increased from approximately $10.26 billion in 2005 to $17.51 billion in 2024, reflecting growth of 70.71 percent.
By comparison, Bangladesh’s textile exports expanded from $7.68 billion to $54.28 billion during the same period, representing growth of 606.4 percent. Vietnam recorded even stronger performance, with exports rising from $5.31 billion to $44.46 billion, an increase of 737.63 percent.
India’s textile exports also posted substantial growth, increasing from $17.03 billion in 2005 to $36.71 billion in 2024, up 115.48 percent.
KCCI said the widening gap demonstrates Pakistan’s declining competitiveness in global textile markets, where efficiency, lower production costs and stable policies increasingly determine export success.
High Production Costs Remain Key Challenge
The chamber identified energy costs as one of the most significant obstacles facing exporters.
According to KCCI, captive power gas tariffs in Pakistan stand at $14.13 per MMBTU, compared with $9.82 in Bangladesh, $12.18 in Vietnam, $6.75 in India and $6.50 in Indonesia.
Electricity tariffs also remain considerably higher. Industrial consumers in Pakistan pay approximately 14 cents per kilowatt-hour compared with 9 cents in Bangladesh, 8 cents in Vietnam, 7.2 cents in India and 5 cents in Sri Lanka.
The chamber further highlighted financing costs as a major concern. While exporters can access refinance facilities at around 8 percent, Pakistan’s benchmark interest rate remains substantially higher than financing costs available in competing economies.
In addition, KCCI argued that the combined impact of super tax and income tax surcharge has increased the effective tax burden on businesses to around 45 percent, reducing profitability and competitiveness.
Employment and Investment Concerns
The chamber warned that weaker export growth could have broader economic implications, including reduced industrial employment and lower investment activity.
KCCI expressed concern that prolonged industrial stagnation could discourage both domestic and foreign investors, resulting in capital flight, reduced technological development, lower export capacity and fewer job opportunities.
The chamber also cautioned that continued weakness in manufacturing activity could contribute to rising informal employment and wider socioeconomic challenges.
KCCI’s Recommendations
To restore competitiveness and support export growth, KCCI urged the government to adopt a comprehensive policy package in the upcoming budget, including:
• Rationalisation of electricity and gas tariffs for export industries;
• Reduction in financing costs to single-digit levels;
• Introduction of competitive export incentive schemes;
• Greater policy consistency and predictability;
• Improvements in the ease of doing business; and
• Enhanced support for industrial expansion and investment.
KCCI stressed that timely reforms are essential to protect Pakistan’s export base, attract investment and safeguard millions of jobs linked to the textile value chain.
