Pakistan's government unveils AI and tax reforms to boost SME exports and green industry

Special Assistant to the Prime Minister on Industries and Production Haroon Akhtar Khan reiterated government plans to ease the operating environment for Pakistan’s small and medium enterprises (SMEs), while announcing a parallel push to modernise industrial skills and machinery through expanded Artificial Intelligence (AI) capabilities.

According to the original report, Mr Haroon Akhtar met representatives of the Sialkot SME cluster alongside officials from SMEDA, the Trade Development Authority of Pakistan and the Sialkot Chamber of Commerce & Industry to discuss sectoral constraints. The meeting focused on tax unpredictability, energy costs, constrained bank credit and gaps in quality assurance that limit export access for precision sectors such as surgical instruments. Industry delegates warned that “Non-accred­ited surgical instruments are not accepted in global markets,” and urged urgent laboratory accreditation and upgraded testing infrastructure.

The government, the report says, is “actively working on introducing a regime for SMEs” intended to simplify and make taxation more predictable for smaller firms. That commitment echoes wider policy work introduced earlier in 2025 proposing a phased corporate tax reduction to stimulate manufacturing and exports; industry-level reform committees were formed to deliver rapid, measurable outcomes, according to government briefings. Business groups have also been vocal: chambers and trade bodies have repeatedly sought tax relief, soft loans and a stable, fixed tax framework to support investment and job creation.

Energy policy measures were flagged as immediately actionable. The SAPM announced an incentive package tying electricity tariffs to consumption such that tariffs fall as industrial units scale usage , a move intended to lower unit costs for export‑oriented manufacturers. He also directed SMEDA and the State Bank of Pakistan to prioritise resolving lines‑of‑credit shortages, and asked SMEDA to present a comprehensive plan with concrete results for transforming SMEs into dollar‑earning enterprises.

On quality and standards, Mr Haroon Akhtar instructed SMEDA and TDAP to jointly craft a strategy to establish accreditation capability and to upgrade existing laboratories to meet international certification standards. Industry officials had emphasised that accreditation shortfalls are a direct barrier to penetration of sophisticated export markets, particularly for surgical instruments manufactured in Sialkot.

Separately, during a visit to the Pakistan Industrial Technical Assistance Centre (PITAC) in Lahore, the SAPM announced the establishment of a state‑of‑the‑art AI Centre at PITAC, to be expanded across provinces under the National Industrial Policy. According to the announcement, PITAC, the Pakistan Industrial Development Corporation and TUSDEC will create a dedicated financing mechanism to support AI development and machinery upgradation, and PITAC has formally requested increased grants to meet modernisation needs. The report noted that PITAC’s existing capabilities in industrial automation, PLCs, dies and moulds and related domains will be strengthened to deepen industry–academia linkages and raise export‑readiness.

Context from related policy developments underscores why these interventions matter for industrial decarbonisation and competitiveness. Government proposals in mid‑2025 to reduce corporate tax rates and simplify tax administration were framed to revive manufacturing’s share of GDP and encourage capital investment. At the same time, business associations across sectors , from regional chambers to IT exporters , have pressed for a predictable, fixed tax regime and continuation of preferential withholding arrangements to protect export margins and incentivise formalisation. The finance ministry’s simplified tax return initiative for salaried taxpayers signals a broader push toward streamlined, predictable tax processes that could reduce compliance costs for employers and suppliers across manufacturing value chains.

For industrial decarbonisation professionals, the combined agenda has three practical implications. First, tariff incentives linked to increased electricity consumption should be designed to reward investments in energy‑efficient plant and demand‑side management so that lower unit prices do not simply encourage higher carbon intensity. Second, PITAC’s AI and machinery upgradation plans offer a route for SMEs to adopt automation and process control technologies that can reduce material waste and energy use. Third, improved access to finance and international accreditation will be essential to scale low‑carbon export projects, including adoption of cleaner inputs and compliance with environmental and social procurement standards demanded by overseas buyers.

The government framed these measures as supportive of Prime Minister Shehbaz Sharif’s industrial revival objectives and tasked implementation bodies with producing tangible results quickly. Industry stakeholders have conditioned their support on the delivery of predictable tax arrangements, accessible credit and credible technical support for certification and digital upskilling. As one meeting note put it, SMEs remain “the engine of Pakistan’s economy.”

If implemented with clear timelines, measurable KPIs and alignment to decarbonisation incentives, the combined tax, credit, quality‑assurance and skills measures could strengthen the export competitiveness of Pakistani SMEs while enabling lower‑carbon industrial growth.