Stunted Seth-State Owned Companies
In Pakistan, the business milieu is retarded owing to multiple factors. Among various factors like institutional and structural barriers, political unrest, government footprints etc., the stagnancy of the business landscape in Pakistan can equally be attributed to a longstanding family centric control of the wealthy business magnates normally called “Seths” and their families. This Seth culture has eroded the business landscape in Pakistan. With roots embedded in the colonial system, the dominance of seths and their families in Pakistan’s business sector is deeply embedded in the social stricture. Partition (1947) has consolidated power in the hands of a few influential business families. Wealth and opportunities are concentrated within a small group of the population, thus exacerbating income and social inequalities. When the economic prowess of the nation concentrates in the hands of a few families, it results in monopolistic or oligopolistic practices in the market, thus slowing down the economic growth. This oligopoly offers friction to new entrepreneurs, particularly those without the family or political influence. Some 22 families were controlling 66% of industrial assets in Pakistan in the 1960s. Now, this control is in the hands of 31 families constituting a small “elite club” (Haque & Husain, 2023). In Pakistan, the corporate culture has the dominance of Seth mindset, which puts bars to innovation and expansion. This Seth mindset does not let the owners to think beyond the box and venture into new avenues to grow and expand. The lack of innovative ideas stalls efficient management of resources, impeding the investment in research and development (Mukhtar, 2021, PIDE Webinar, 2023). The supremacy of Seth mindset slays innovation and growth, efficient management of resources, and effective use of human resources in a country (Haque et al., 2023; Mukhtar, 2021).
The prevalent stagnation in the Pakistani market is primarily due to this lack of competition, which restricts the prospects of innovation and new ideas and business models to emerge. Unlike its regional counterparts, Pakistan could not achieve competitiveness and growth targets owing to market stagnation and other factors like political upheavals, regulatory burdens, limited human capital development and financial constraints etc. (Sattar & Urooj, 2023). The fate of business milieu in the hands of the elite club has hampered the country’s productivity and competitiveness. The rein of economic power in their hands limits the economic opportunities for others, making entrepreneurialism hard to grow. The low number of high-growth firms and superstars in terms of exports (top exporters) signifies Pakistan’s inability to compete in the global market and attract foreign investment (PIDE Webinar, 2020; Sattar & Urooj, 2023). Pakistan’s average GDP signifies a miserable rate of economic growth leaving Pakistani consumers with less disposable income to spend. This subsequently adversely affects the business environment by decreasing the overall market demand. Besides, the tendency of local businesses to avoid risks and low prioritization of R&D has resulted in limited innovation and product development, underscoring the absence of an entrepreneurial culture in Pakistan—an element integral to trailblazing innovations (Haque et al., 2023; Abbas, 2024). The presence of platforms like “Shark Tank” is pivotal to promote entrepreneurship in a country[1], which is non-existent in Pakistan. In nature, the economy of Pakistan is cyclic. The authority centered within a small hub of people allows them to influence the policy making in their favor to dispense the national resources for their self-interests, limiting competition in markets, thus, retarding entrepreneurship. This in turn, restricts economic growth of the people, thus, lowering their purchasing power and limiting the demand. The need is to break this cycle.
[1] https://yourstory.com/2024/02/shark-tank-india-startup-impact
