1. Openness To, and Restrictions Upon, Foreign Investment
3. Legal Regime
4. Industrial Policies
5. Protection of Property Rights
8. Responsible Business Conduct
There is no unified set of standards defining responsible business conduct (RBC) in Pakistan. Though large companies, especially multi-national corporations, exhibit awareness of RBC standards, broader awareness is lacking. The Pakistani government has not established standards or strategic documents specifically defining RBC standards and goals. The Ministry of Human Rights published its most recent “Action Plan for Human Rights” in May 2017. Although it does not specifically address RBC or business and human rights, one of its six thematic areas of focus is implementation of international and UN treaties. Pakistan is signatory to nearly all International Labor Organization (ILO) conventions.
International organization, civil society, and labor union contacts all note that there is a lack of adequate implementation and enforcement of labor laws. Some NGOs, worker organizations, and business associations are working to promote RBC, but not on a wide scale.
According to NGOs, international organizations, and civil society contacts, children continued to work in conditions of forced and bonded labor. In rural areas, forced child labor appeared to occur most frequently in the agriculture and brick making industries. Pakistan does not have domestic measures which require supply chain due diligence for companies sourcing minerals originating from conflict-affected areas. In 2021, DOL started a pilot project to support tracing in supply chains for cotton in Punjab. It does not participate in the Extractive Industries Transparency Initiative (EITI) and/or the Voluntary Principles on Security and Human Rights.
Pakistan ranked 140 out of 180 countries on Transparency International’s 2021 Corruption Perceptions Index. The organization noted significant and persistent corruption within Pakistan due to gaps in accountability and enforcement of penalties, along with the lack of merit-based promotions and relatively low salaries.
Bribes are classified as criminal acts under the Pakistani legal code and are punishable by law, but are widespread across most levels of government. While higher courts are widely viewed as credible, lower courts are generally considered corrupt, inefficient, and subject to pressure from prominent wealthy, religious, political, and military figures. Political interference in judicial appointments increases the government’s influence over the court system.
The National Accountability Bureau (NAB), Pakistan’s anti-corruption body, suffers from insufficient funding and professionalism, and is viewed by many as politically biased. NAB prosecutions alleging bureaucratic malfeasance deter agencies from acting on legitimate regulatory concerns affecting the business sector.
10. Political and Security Environment
Despite improvements to the security situation in recent years, the presence of foreign and domestic terrorist groups within Pakistan continues to pose threats to U.S. interests and citizens. Many multinational companies operating in Pakistan employ private security and risk management firms to mitigate the significant threats to their business operations. Although the number of attacks by terrorist groups has declined over the last decade, increased activity since 2021 has renewed security concerns in some regions. Baloch militant groups continue to target the Pakistani military as well as PRC-affiliated installations in Balochistan, where Gwadar port is being developed under CPEC. There are greater security resources and infrastructure in the major cities, particularly Islamabad, and security forces in those areas may be better able to respond to emergencies.
The BOI, along with provincial investment promotion agencies, can coordinate airport-to-airport security and secure lodging for foreign investors. To inquire about this service, investors can contact the BOI for additional information –
Abductions/kidnappings of foreigners for ransom remains a concern.
While security challenges exist in Pakistan, the country has not grown increasingly politicized or insecure in the past year.
11. Labor Policies and Practices
According to Pakistan’s most recent labor force survey (conducted in 2017-2018), the civilian workforce consists of approximately 65.5 million workers. Women are far under-represented in the formal labor force. The survey estimated overall labor participation at approximately 45 percent, with male participation at 68 percent and females at 20 percent. The largest percentage of the labor force works in the agricultural sector (38.5 percent), followed by the services (37.84 percent), and industry/manufacturing (16 percent) sectors. Although the official unemployment rate hovered at roughly 6 percent pre-COVID-19, the figure is likely significantly higher. Additionally, there are as-yet no reliable unemployment statistics since the COVID-19 outbreak.
A large share of workers is in the informal sector, with over 32 percent of Pakistan’s GDP represented by the informal economy, according to estimates from the World Bank’s most recent Informal Economy Database. In 2019, the ILO reported informal workers have limited access to labor welfare services. A Labor Force Survey from 2017-18 cites higher rates of informal sector employment in rural areas than in urban areas. Occupational health and safety laws and inspections do not apply to the informal sector. In 2018, the UN Population Fund estimated that 29 percent of Pakistan’s population was between the ages of 10 and 24 and, according to 2017-18 labor force survey estimates, unemployment for those between the ages of 15 and 24 was 10.5 percent.
Pakistan has a complex system of labor laws. According to the 18th Amendment to the Constitution, jurisdiction over labor matters is managed by the provinces. Each province is in the process of developing its own labor law regime. They are currently at different stages of labor law development, but none have been finalized yet.
State administrators, workers in state-owned enterprises and export-processing zones, and public-sector workers are prohibited by federal law from engaging in collective bargaining or striking. Nevertheless, there have been numerous strikes at state-owned enterprises, typically opposing privatization. Provincial laws covering industrial relations also limit strikes and lockouts. Neither the federal or provincial governments effectively enforce applicable labor laws, and the penalties for violating those laws were not commensurate with laws involving the denial of civil rights.
Most unions functioned independently of government and political party influence. Labor leaders raised concerns regarding employers who sponsor management-friendly or only-on-paper worker unions – so-called yellow unions – to prevent effective unionization. There were no reported cases of the government dissolving a union without due process, however unions can be administratively “deregistered” without judicial review.
Although freedom of association is guaranteed under Article 17 of Pakistan’s Constitution, the ILO indicates that the Pakistani state and employers have used “disabling legislation and repressive tactics” to make union formation and collective bargaining “extremely difficult.” A report compiled by ILO in 2018 noted there were a total of 7,906 registered trade unions with a total membership of 1,414,160. However, this may underreport the actual figure because it pertains to the number of members declared at the time of union registration. As membership grows over time, provincial labor departments and the National Industrial Relations Commission (NIRC) do not regularly update their records. According to worker representative organizations, the estimated unionized workforce is approximately two million, which would represent roughly 3 percent of the total workforce in Pakistan. Provincial labor departments are responsible for managing trade union and industrial labor disputes. Each province has its own industrial relations legislation, and each has labor courts to adjudicate disputes. Recent strikes have been spearheaded by public sector workers such as teachers and public health workers.
Labor NGOs assisted workers by providing technical training and capacity-building workshops to strengthen labor unions and trade organizations. They also worked with established labor unions to organize workers in the informal sector and advocated policies and legislation to improve the rights, working conditions, and wellbeing of workers, including laborers in the informal sector.
The minimum wage as set by the federal government was 20,000 rupees (about $110) per month, which exceeded its definition of the poverty line income for an individual, which was 9,500 Pakistani rupees (about $52) per month. The minimum wage was also greater than the World Bank’s estimate for poverty level income. However, minimum wage laws did not cover significant sectors of the labor force, including workers in the informal sector, domestic servants, and agricultural workers. In addition, enforcement of minimum wage laws was uneven.
Legal protections for laborers are uneven across provinces, and implementation of labor laws is weak nationwide. Labor inspectorates have inadequate resources, which lead to inadequate frequency and quality of labor inspections. Some labor courts are reportedly corrupt and biased in favor of employers.
Pakistani labor laws generally do not cover domestic workers, including child domestic workers. In 2020, the Pakistani government amended the Employment of Children Act 1991 to include child domestic labor as hazardous work. While the decision applies only to the Islamabad Capital Territory, provinces can adopt the measure via a provincial assembly resolution. The federal government is currently conducting a child labor survey; the first results for Gilgit-Baltistan were published on October 27, 2021, and reported child labor prevalence in the province at 13.1 percent, with 1 in 7 children working. The remaining provincial survey reports are expected to be completed in 2022.
The ILO’s 2016-2020 Pakistan Decent Work Country Program states that “exploitative labor practices in the form of child and bonded labor remain pervasive…” and notes “the absence of reliable and comprehensive data to accurately assess the situation of hazardous child labor, worst forms of child labor, or forced labor.” The report also identifies weak compliance with, and enforcement of, labor laws and regulations as contributing to poor working conditions – including unhealthy and unsafe workplaces –and the erosion of worker rights. Nationwide, health and safety standards were poor in multiple sectors and failed to meet international standards.
In 2019, the Punjab Provincial Assembly passed the Punjab Domestic Workers Act 2019. The law prohibits the employment of children under age 15 as domestic workers and stipulates that children between 15 and 18 may only perform part-time, non-hazardous household work. The law also mandates a series of protections and benefits, including limits to the number of hours worked weekly, and paid sick and holiday leave.
In 2017 the Sindh Provincial Assembly passed the Sindh Prohibition of Employment of Children Act, 2017.
In April 2021, the Balochistan Assembly passed the Balochistan Forced and Bonded Labor System (Abolition) Act 2021 and the Balochistan Employment of Children (Prohibition & Regulation) Act 2021. The Abolition Act banned hazardous work for children below 14 years of age and established a Committee on the Rights of the Child to oversee its implementation. It also made it a punishable offense to employ adolescents above 14 years of age in hazardous work if they are not paid wages equal to adults. In 2019, pursuant to resolution adopted by the Balochistan Assembly aimed at eradicating child labor in coal mines, the Balochistan government banned employment of children under the age of 15 in coal mines via a notification to the provincial chief inspector of Mines.
In August 2021, the Khyber Pakhtunkhwa provincial assembly passed the Khyber Pakhtunkhwa Home Based Workers (Welfare and Protection) Act, 2021, which prohibits children under the age of 14 from engaging in domestic and forced labor.
Pakistan is a labor exporter, particularly to Gulf Cooperation Council (GCC) countries. According to Pakistan’s Bureau of Emigration and Overseas Employment’s 2020 “Export of Manpower Analysis,” (the latest report available) the bureau had registered more than 11 million Pakistanis going abroad for employment since 1971, with more than 96 percent traveling to GCC countries. Pakistanis working overseas have sent more than $20 billion in remittances each year since 2015. Despite the negative impacts of COVID-19, which resulted in many overseas Pakistanis returning to Pakistan since January 2021, formal remittances from overseas Pakistani workers increased by 24.9 percent during the first six months of FY 2021 compared to the corresponding period of 2020.
Overall, Pakistan’s workforce is insufficiently skilled. Federal and provincial government initiatives such as the National Vocational and Technical Training Commission and the Punjab government’s Technical Education and Vocational Training Authority aim to increase the employability of the Pakistani workforce. However, the ILO’s most recent 2016-2020 Pakistan Decent Work Country Program finds that neither national nor provincial policies for skills and entrepreneurship development are consistently applied. The ILO report notes that “a small fraction of vulnerable workers are covered by social security in one form or another, while access to comprehensive social protection systems is also limited.” The ILO’s 2016 Decent Work Country Profile, the latest data available, states that in 2015, only 9.4 percent of the economically active population – excluding public sector employees – were contributing to formal social security systems such as old age, survivors’, and disability pensions.
Pakistan remains a beneficiary of the U.S. Generalized System of Preferences (GSP) program as well as the EU’s GSP+ program, both of which require labor standards to be upheld.