Pakistan Country Profile

Snapshot of the Pakistan Country Profile


Pakistan has suffered from substantial political instability since the assassination of the Pakistani People's Party leader Benazir Bhutto in 2007. Companies mention this instability as the most serious problem to doing business, followed by endemic corruption at every level of government. The fight against corruption is reportedly not a priority of the government and sporadic allegations of bribe-taking are used as political weapons. The political elite is regarded as corrupt by Pakistanis and current President Zardari is sometimes referred to as 'Mr. 10%', due to several allegations of corruption. Lower levels of administration are also rife with corruption, from police service to procurement to the provision of basic public services. The army's influence on the political and economic scene is huge and opens the way for many conflicts of interest.

Positive developments in relation to corruption and investment:

  • Pakistani legislation contains strong penalties for both public and private corruption. In the case of a civil servant with private assets disproportionate to his/her income, the burden of proof rests on the civil servant to prove that the assets were legally acquired.
  • Since 2002, Pakistan has been working to strengthen the preventive side of the fight against corruption. The National Anti-Corruption Strategy (NACS) project is structured around the pillars of the National Integrity System, a concept borrowed from Transparency International and adapted to local conditions.
  • In December 2009, the Supreme Court of Pakistan annulled the National Reconciliation Ordinance, which was initiated by President Musharraf in October 2007 and granted immunity to nearly 8,000 corrupt officials, including President Zardari and other politicians, civil servants and military personnel. This has initiated a new wave of legal actions against corrupt officials by the National Accountability Bureau, such as the issuance of travel bans on 253 people and the suspension of some top officials.

Risks of corruption:

  • The military involvement in virtually every sector of the economy makes the awarding of public contracts unfair, as companies with ties to the military elite are awarded preferential bidder status.
  • Protection of property rights and fair resolution of commercial disputes are hampered by an inefficient and corrupt judiciary. Bribes are reportedly extorted by judges and lawyers.
  • Encounters with tax authorities are reportedly often used by officials as an opportunity to extort bribes and by companies as an opportunity to pay less tax in exchange for undue payments. The situation is worsened by complex and non-transparent regulations that create space for bribery to occur. Tax evasion is also a huge problem, distorting competition between companies that comply with tax regulations and those which do not.
  • Public servants enjoy a wide margin of discretion, which often results in laws being unevenly and unpredictably applied and opportunities for extortion, bribery and favouritism to occur.