EDITORIAL: The Pakistan Business Council’s (PBC’s) warning on industrial competitiveness, set out in an urgent letter to the prime minister, comes at a moment when policy rhetoric and official numbers are drifting apart. While the government is publicly projecting stabilisation and renewed confidence, the country’s largest industrial body is pointing to a basic constraint: at prevailing energy prices, tax burdens and financing costs, large segments of domestic industry can no longer produce at prices that are commercially viable, either in local markets or for export. This is not a plea for incentives or protection. It is an arithmetic problem. When input costs exceed what markets can absorb, output contracts regardless of intent. PBC is flagging that constraint precisely because it sits at the centre of employment, exports, fiscal revenues and external stability. Industry is not a peripheral sector. It is the engine through which growth, foreign exchange and jobs are generated. When margins are crushed, the damage spreads quickly and predictably. The multiplier works in reverse. Production slows, employment weakens, tax receipts shrink, imports rise to substitute domestic output, and pressure returns to the balance of payments. This is not theoretical. It is the pattern already visible across manufacturing, particularly in energy-intensive and export-facing sectors. Treating these outcomes as temporary stress rather than structural failure risks locking the economy into a cycle of managed contraction. What sharpens the concern is the widening credibility gap between official optimism and the government’s own data. Claims of rising investor confidence sit uneasily alongside finance ministry figures showing a 26 percent decline in foreign direct investment during July to October, a portfolio outflow of around $540 million, and an 82.5 percent drop in overall foreign investment over the same period. These numbers are not external critiques. They are official statistics. When public narratives are contradicted by state data, policy credibility erodes at home and abroad. Stock market performance has been used to reinforce the confidence story, but this too reflects a misreading of signals. Equity markets price liquidity, expectations and short-term positioning. Factories price energy, credit and demand. A rising index does not compensate for declining capacity utilisation or weak export volumes. Confusing financial momentum with industrial recovery encourages complacency precisely when adjustment is most urgent. Cost structure lies at the heart of the problem. Electricity and gas tariffs, layered with surcharges, cross-subsidies and taxes, are now well above regional benchmarks. Financing costs remain high relative to competing economies. Compliance burdens add friction without delivering productivity gains. None of this is disputed within government. Yet policy continues to prioritise short-term fiscal extraction over competitiveness, using energy pricing as a revenue tool rather than treating it as a production input. The result is a chain of knock-on effects that PBC is cautioning against. Short-term fiscal gains are offset by medium-term losses in output, exports and revenues. Once firms shut down or shift activity elsewhere, the damage is not easily reversible. Skilled labour disperses, supply chains weaken, and market share is surrendered to competitors operating under lower and more predictable cost regimes. Consultation failures compound the problem. PBC is complaining again, very rightly, that industry input is often sought after decisions are taken, not before costs are imposed. Policies are then revised through exemptions and ad hoc adjustments, deepening uncertainty rather than reducing it. Investors interpret this not as flexibility but as unpredictability. Capital does not wait for clarity. It moves to jurisdictions where it already exists. None of this requires radical experimentation. Competing economies have demonstrated that industrial viability rests on three fundamentals: affordable and reliable energy, predictable taxation, and financing aligned with production cycles. Pakistan has debated these for years. What has been missing is execution and sequencing. Taking PBC seriously would mean acknowledging that current pricing structures are self-defeating. It would mean rationalising surcharges, ring-fencing energy for export and employment-intensive sectors, and committing to transparent roadmaps rather than improvised fixes. It would also require recognising that stabilisation without a competitiveness strategy produces compliance without growth. The economy cannot be balanced indefinitely by shrinking activity. Pricing industry out of the market is not discipline. It is attrition. And if attrition continues unchecked, it eventually reaches the state itself. Copyright Business Recorder, 2025