Regulation Debate Misplaced; Pakistan Needs Evidence-Based Approach

Decades of experience demonstrate that the ideological divide between regulation and deregulation is largely misguided, according to an analysis. Governments and regulators must adapt their roles based on varying market structures and circumstances, actively regulating in some areas while overseeing market forces in others. The evidence of outcomes, not ideology, should dictate the state's involvement.

In Pakistan, the formal sector is frequently burdened by excessive regulation, cumbersome procedures, and discretionary powers that actively discourage innovation, investment, and technological adoption. Compounding these issues, regulatory enforcement remains weak, allowing unregistered businesses, unsafe buildings, and counterfeit drugs to evade oversight.

This imbalance, overregulation in the formal sector coupled with lax enforcement in others, creates a fertile ground for informality. Consequently, thousands of enterprises opt to remain outside the documented economy. Had these businesses not faced such needless constraints, many could have potentially grown into medium-sized firms, thereby increasing output, employment, tax revenues, and overall efficiency, while simultaneously reducing the prevalence of unregulated activities.