Business location Pakistan
With a population of more than 220 million, Pakistan is one of the most populous countries in the world and has witnessed many economic and political upheavals over the years. The Islamic Republic offers a variety of business opportunities in vast areas. With an estimated 60 million middle-class consumers, the country is a fast-growing, potentially attractive market. Many sectors are still underdeveloped, but the potential for growth is correspondingly large.
Despite major advances in industrialization and the development of the service sector, the national economy is still heavily influenced and dependent on agriculture. The share of this sector in the gross domestic product was 22.7 percent (2021). By far the most important sector of the processing industry is traditionally the textile and cotton industry. Pakistan is one of the world's largest producers of cotton yarn and tree comforts. The service sector employs around 38.2 percent of the population and generates 52.8 percent of the gross domestic product.
In the World Bank's Ease-of-Doing Business Index, Pakistan has risen from 147th to 108th since Prime Minister Imran Khan took office in 2018. When it comes to specific practical business set up issues, such as the number of steps and days required to set up a business, the South Asian country ranks 72nd, well ahead of Bangladesh (131) and even ahead of its large neighbor India (136).
The establishment of EU-Pakistan preferential trade relations (GSP+) has boosted Pakistani exports to the European market. Germany and Pakistan maintain close and diverse economic relations. German-Pakistani trade amounts to over 2.3 billion euros (2021) and makes Germany Pakistan's fourth largest trading partner.
Foreign direct investment (FDI) plays an important role in government deliberations. A number of initiatives have been announced to improve the investment climate. Almost 300 reforms have been implemented since 2016. FDI flow has increased by 57 percent between 2011 and 2020. Designated support measures of the Pakistani government include: 100 percent equity in all sectors with full rights to repatriate capital and profits.
As of September 2012, a law to create special economic zones (“Special Economic Zones (SEZ) Bill 2012”) came into force. As of 2021, there are more than 20 SEZs nationwide. According to the SEZ Bill, foreign investors are exempted from import duties and taxes for the first 5 to 10 years. This exemption relates to all goods that are necessary for the establishment, operation and maintenance of a business in the SEZ and is available to both companies that want to participate in the establishment of such zones and companies that want to settle in such areas.
The German-Emirati Joint Council of Industry and Commerce (AHK) has an excellent network of local government agencies in Pakistan, such as the Ministry of Economic Affairs and other institutions for investment and export initiatives, as well as the Pakistani private sector, represented by the leading trade and industry associations. Furthermore, the AHK is in close contact with Germany's diplomatic missions in Pakistan.