Guidance

Doing business in Pakistan: Pakistan trade and export guide

Updated 16 August 2018

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Find out how UK companies can control risks when doing business in Pakistan.

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1. Pakistan export overview

Pakistan is an emerging market with a young and growing population of around 200 million, according to the World Bank.

Pakistan is the second largest economy in South Asia after India. With a growing middle class, and an affinity for UK expertise, products and brands, there are good opportunities to increase UK exports of goods and services in this unsaturated and rapidly growing market.

UK-Pakistan bilateral trade in 2017 was £2.9 billion. The UK exported £1.1 billion of goods and services to Pakistan. The UK is currently Pakistan’s third largest source of foreign direct investment, after China and the Netherlands.

There are opportunities for British businesses to benefit by integrating Pakistani firms into their supply chains. Pakistan is keen to expand and diversify its export base and is already competitive in products such as textiles, garments, surgical instruments, steel, and sporting goods.

Important sectors for UK businesses in Pakistan include:

• professional services
• energy
• infrastructure
• healthcare
• education
• defence
• security
• consumer goods

Contact a Department for Business and Trade (DBT) Pakistan export adviser for a free consultation if you are interested in exporting to Pakistan.

UK Export Finance (UKEF), the UK’s export credit agency, has doubled support for Pakistan to £400 million. This additional capacity is to help UK exporters win, fulfil and get paid for export contracts, and to help Pakistan’s buyers access finance to source high-quality UK goods and services.

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.

Benefits for UK businesses exporting to Pakistan include:

• common business language
• location on the crossroads of Asia and the Middle East, bordering China in its north-most area, India in the east and Iran and Afghanistan in the west
• similar legal practices
• affinity for and familiarity with UK companies and brands
• growing middle class

Strengths of the Pakistan market include:

• highly populous country with a young population
• strong business and consumer base
• large English speaking nation
• strong people to people links with Pakistani migrant communities in the UK
• educated workforce
• low production and labour costs

2. Challenges in Pakistan

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

• regulatory barriers shown by its low ranking in the World Bank’s Ease of Doing Business Index (147 out of 190 countries)
• corruption (ranked 117 out of 180 countries in Transparency International’s 2017 Corruption Perceptions Index)
• bureaucracy with government officials can be costly and time consuming
• poor commercial dispute resolution
• lack of transparency and unclear tender processes
• sectarian violence and terrorism threats brings security risks to foreign nationals

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 in Pakistan

3.1 Economic growth in Pakistan

According to the World Bank, Pakistan’s growth continues to accelerate but macroeconomic imbalances are widening. Macroeconomic stability is a major concern for the near-term economic outlook.

World Bank data states that in 2017, Pakistan’s GDP growth increased by 0.8% over the previous year to reach 5.3%. Major impetus came from improved performance of services and agriculture sector. Industrial sector also saw some recovery. Low interest rate environment contributed to the growth in private sector credit, which supported businesses.

According to the International Monetary Fund (IMF), GDP growth is projected at 5.6% for 2018. This is amidst rising infrastructure spending and the implementation of structural and economic reforms.

Under China’s Belt and Road Initiative, the China-Pakistan economic corridor (CPEC) is currently under development. CPEC is a collection of modern infrastructure projects including roads, rails and power plants for improving geographical connectivity in the region.

GSP+ in Pakistan

The EU award of the Generalised System of Preferences Plus (GSP+) status came into effect on 1 January 2014. Pakistan currently receives preferential market access on goods to the EU under GSP+, eliminating tariffs on two thirds of its product lines. This has supported an increase in trade and foreign investment with the EU.

From 1 January 2021, the UK government aims to maintain the levels of access Pakistan receives to UK markets under the EU GSP+ scheme. The UK government also wants to explore options to expand the UK’s trade relationship with Pakistan in the future.

3.2 Enhanced Strategic Dialogue

The Enhanced Strategic Dialogue includes a 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.

4. Trade between UK and Pakistan

According to the ONS Pink Book 2018 total trade in goods and services (i.e. exports plus imports) between the UK and Pakistan was £2.9 billion in 2017, a 7% increase from 2016.

In 2017, UK exports to Pakistan amounted to £1.1 billion (a 10% increase from 2016) while UK imports from Pakistan were £1.8 billion (an 5.1% increase from 2016).This means the UK reported a trade deficit with Pakistan of £656 million, compared to a trade deficit of £672 million in 2016.

Of all UK exports to Pakistan in 2017, £669 million (59.2%) were goods and £461 million (40.8%) were services. Of all UK imports from Pakistan in 2017, £1.2 billion (68.0%) were goods and £571 million (32.0%) were services.

In 2017, the UK had a trade in goods deficit of £546 million and a trade in services deficit of £110 million with Pakistan.

In 2017 (latest available rankings), Pakistan was the UK’s:

• 53rd largest trading partner (accounting for 0.2% of total UK trade)
• 54th largest export market (accounting for 0.2% of all UK exports)
• 46th largest import market (accounting for 0.3% of all UK imports)

4.1 Foreign Direct Investment

According to ONS data on foreign direct investment (FDI) involving UK companies 2016, the stock of UK FDI in Pakistan was £1.4 billion in 2016, 34.1% higher than in 2015. In 2016, Pakistan accounted for 0.1% of total UK outward FDI stock.

5. Opportunities for UK businesses in Pakistan

Department for Business and Trade (DBT) provides free international export sales leads from its worldwide network. Search for export opportunities.

5.1 Infrastructure sector in Pakistan

Modernising transportation infrastructure and greater regional connectivity is an important element of Pakistan’s plans for economic development.

Pakistan needs new municipal infrastructure. The Government of Sindh is working on improving the state of public transport in Karachi. Karachi, Pakistan’s biggest city, has no official public transit system.

The bulk of Pakistan’s trade is conducted via the sea. Pakistan currently has 2 fully functional ports: Karachi port and Port Qasim. A third port, Gwadar is being upgraded in Baluchistan.

Opportunities for UK companies include:

• infrastructure planning and development
• expertise in Intelligent Transport Systems (ITS)
• logistics technology for the expected growth in road infrastructure
• automated payment systems in cities
• solid waste management
• expertise in road and rail infrastructure
• inexpensive warehousing options such as temperature controlled warehousing, bonded warehouses and freeport warehousing
• automation, such as new handling equipment

Other opportunities are available via the Asian Development Bank (ADB) and World Bank who are major stakeholders in Pakistan’s infrastructure development. They include:

• investment in Pakistan’s hydro and renewable energy
• consultancy services for energy and related infrastructure projects
• urban transport, railway rehabilitation, roads, road safety and asset management, mass transport infrastructure
• agriculture, natural resources and rural development
• upgrading of airports, sea and dry ports
• urban planning and water and sanitation infrastructure

Find out more about aid funded business

Contact DIT.Pakistan@fco.gov.uk for more information on industrial and infrastructure opportunities.

5.2 Energy sector in Pakistan

According to the Government of Pakistan’s economic survey 2017 to 2018, energy is an important sector of Pakistan’s economy and plays a vital role in the country’s economic development. Pakistan faces energy shortages resulting in power outages in both urban and rural areas. The sector is marred by transmission and distribution losses, which has constrained its growth and development.

Being a developing economy, Pakistan energy requirements are increasing rapidly. Energy generation is top priority for the government of Pakistan which is trying to ensure availability and security of sustainable supply of energy. The Government of Pakistan has encouraged local and foreign investment for establishing power projects and related infrastructure including developing transmission lines.

Over $33 billion is expected to be invested in this sector under the CPEC initiative. It’s hoped that over 10,400MW of energy generating capacity is brought online by the end of 2018.

The electricity from these projects will be primarily generated from fossil fuels, though hydroelectricity and wind-power projects are also included. The Liquefied Natural Gas (LNG) sector is gaining prominence is Pakistan’s energy mix with further LNG import terminal and related infrastructure planned.

Opportunities for UK companies exist in:

• importation of LNG and investment in related infrastructure
• coal mining technology
• oil and gas exploration and exploitation
• power generation via wind, solar and other renewable sources such as hydroelectricity
• development of transmission lines and related infrastructure

Contact DIT.Pakistan@fco.gov.uk for more information on energy opportunities.

5.3 China-Pakistan Economic Corridor (CPEC)

CPEC is a set of massive government to government deals between China and Pakistan worth at least $54 billion over the next 15 years.

Two thirds of this is for energy projects. The other third is for road projects between China’s Western border and a port on the Arabian Sea – Gwadar, west of Karachi

CPEC presents huge opportunities for Pakistan and the wider region, bringing economic development, greater connectivity and regional security.

UK companies are well placed to play a role in CPEC projects through provision of:

• infrastructure development services
• financial and legal services
• delivery of contracts

Contact DIT.Pakistan@fco.gov.uk for more information on CPEC opportunities or visit the Government of Pakistan’s China-Pakistan Economic Corridor (CPEC) official website.

5.4 Healthcare sector in Pakistan

Pakistan has a mixed health care system, comprising of public and private, formal and informal sectors. All health responsibilities (mainly planning and fund allocation) are devolved to provincial health departments.

Main opportunities in healthcare sector include:

• design, building, operation of 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 programmes
• kidney and liver treatment
• mobile health units to provide healthcare facilities in rural areas
• medical educational institution linkages
• hospital upgrades
• provision of facilities management
• provision of back office services ie all non-medical services
• provision of a medical insurance cards system

Contact DIT.Pakistan@fco.gov.uk for more information on opportunities in Pakistan’s healthcare sector.

5.5 Education sector in Pakistan

According to the Government of Pakistan’s Economic Survey 2017 to 2018, Pakistan’s literacy rate is 58%. The education sector consists of:

• more than 150,000 public education institutions, serving over 21 million students
• a private sector serving 12 million students

Opportunities exist in:

• professional development and training for teachers and staff
• new educational material
• basic laboratory equipment with 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 DIT.Pakistan@fco.gov.uk for more information on opportunities in the education sector.

5.6 Retail and leisure sector in Pakistan

Pakistan is seeing an increasing growth in shopping centres and availability of retail space.

Potential opportunities exist in:

• branded goods sector (clothing, footwear and accessories)
• luxury products like cosmetics
• growing number of suitable franchise operators recognition of foreign brands
• facility management
• toys

Contact DIT.Pakistan@fco.gov.uk for more information on opportunities in Pakistan’s retail and leisure sector.

5.7 Security and defence sector in Pakistan

The general law and order situation throughout the country remains a challenge. The Pakistan security sector is well established and connected to suppliers based in Europe, the US and China. It is a price conscious market, but there are opportunities for high quality products and services.

UK capabilities of interest to Pakistan include:

• equipment for Pakistan armed forces
• maritime, land and air domains
• expertise and equipment for internal and border security, intelligence, surveillance and reconnaissance (ISR) and counter-IEDs
• equipment for law enforcement agencies
• safe city projects
• counter terrorism training for both the military and Police
• skills and technology for forensic laboratories and equipment
• equipment and training for disaster management and relief management

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

Contact DIT.Pakistan@fco.gov.uk for more information on opportunities in the security and defence sector.

5.8 Financial services sector in Pakistan

Opportunities exist in:

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

Contact DIT.Pakistan@fco.gov.uk for more information on opportunities in the financial services sector.

5.9 Consultancy services sector in Pakistan

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

• economic and urban planning
• infrastructure project management
• financial analysis
• education consultancy
• healthcare consultancy
• architectural services
• interior design services
• water and sewerage management
• policy reforms

Contact DIT.Pakistan@fco.gov.uk for more information on opportunities in the consultancy services sector.

6. Start-up considerations in Pakistan

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 by:

• exporting directly from the UK
• setting up an agency
• appointing a distributor
• using a franchising model
• forming a joint venture, or manufacturing under a licence agreement with a Pakistani company

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

Pakistan is a market in which can require an investment 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.

7. Legal considerations in Pakistan

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 the Department for Business and Trade (DBT) team in Pakistan to help find tax and legal advisers before entering into agreements.

7.1 Standards and technical regulations in Pakistan

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 brand name
• an ingredient list
• manufacturer details (address)
• importer’s name and address
• the date of manufacturing
• a date of expiry
• a batch number
• contents marked in grams and millilitres

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.

Contact DIT.Pakistan@fco.gov.uk for more information on standards and technical regulations.

7.2 Intellectual property in Pakistan

The government of Pakistan took measures in 2005 to ensure more effective protection of intellectual property in Pakistan.

Register your brands with the Intellectual Property Organization of 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 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 in Pakistan

8.1 Double taxation agreement with Pakistan

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

8.2 Corporate taxation in Pakistan

The corporate tax rate in Pakistan, set by the Federal Board of Revenue, stands at 30%.

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 in Pakistan

The sales tax rate in Pakistan stands at 17%, 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 in Pakistan

Tariffs change annually.

In the 2017 budget the Government of Pakistan reduced the maximum general tariff rate from 25% to 20% (except on vehicles).

Port charges, clearance charges, transportation and the additional duties charged for certain products in addition to the customs tariff.

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

8.5 Import controls in Pakistan

There is a list of banned items that cannot be exported to Pakistan. The list is available on in the Import Policy Order 2015 to 2018

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 for Pakistan

A clearing agent requires:

• shipment invoice
• packing list
• bill of lading (a document issued by a carrier (or their agent) to acknowledge receipt of cargo for shipment)
• copy of the letter of credit or contract
• copy of the Sales Tax Registration Certificate as an importer
• copy of the National Tax Number
• copy of the most recent sales tax return

9. Business behavior in Pakistan

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 for Pakistan

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.

If you need to visit a prohibited area you must apply for a ‘No Objection Certificate’ from the Ministry of Interior through your sponsors. There is a 4 to 6 week processing time.

9.2 Travel Advice for Pakistan

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

10. Contacts for Pakistan

Contact the Department for Business and Trade (DBT) Team in Pakistan for more information and advice on opportunities for doing business in Pakistan.