Pakistan is still stuck in primary school on its economy

How a 1962 Delhi trading house became the Lucky Group

The episode opens with Muzamil walking the audience through the sheer surface area of the Lucky Group — the largest cement manufacturer in Pakistan, Kia and Peugeot assembly, Samsung mobile assembly, a top-five textile exporter, Lucky One Mall in Karachi, wind and hydel and coal power, food and dairy — and then asking the obvious question: how does one family end up in all of that.

Muhammad Ali Tabba pulls the timeline back further than most accounts. The business actually starts in 1962, founded by his grandfather, father and uncle as a trading house. Third-party trading came first — textile exports, rice exports, sourcing from mills and shipping to Africa, Europe and the rest of Asia. The group was known, and is still known, as Yunus Brothers Group. The “Lucky” name only enters the story in 1981, when the family decides to set up Lucky Textiles, a weaving mill. That single decision creates the brand the group has been compounding ever since.

Cement, the business that made the name famous, comes much later. The foundation is laid in 1994. Production begins in 1996 at roughly 1.2 to 1.3 million tons. Today, Tabba says, Lucky’s cement production in Pakistan alone is around fifteen and a half million tons. He notes — almost in passing — that it has been close to twenty-eight years.

A subtle but important point in this section is that the group never split. “It’s an undivided structure,” he explains, with cousins and family members participating equally as partners across every business inside Pakistan and outside it. The next generation — what he calls G3 — is now coming in, and the family is in the middle of a deliberate rebranding exercise to consolidate the two identities, Yunus Brothers Group and Lucky Group, under a single name so that the brand the next generation inherits is one brand, not two.

Why dividing a family business kills the compounding

Muzamil presses on a pattern he has seen repeatedly in Karachi business families — particularly Memon families — where the next generation splits the holdings, one cousin takes a factory, another takes another, and the unified front dissolves. He asks Tabba directly why Lucky has managed to stay together where so many others have not.

Tabba’s answer is structural, not sentimental. The friction, he argues, is highest when many cousins are crammed into a single company arguing over power. The Lucky model is the opposite: as the group grew, each cousin or family member was given his own company to run, with his own identity, his own brand, and the space to make decisions without interference. Strategic decisions land at the board. “No one interferes in anyone else’s business,” he says. “Whoever is running a company runs it. That gives them space to create their own identity, their own brand.”

He links this to the 2014 family constitution — a written ethos the family put in place to formalise how they would operate together going forward. Unlisted group companies are now run with the same governance architecture as the listed ones: independent directors, an independent chairman of the audit committee, an HR committee. The idea, he says, is to give every family member running a company a “third eye” — independent input from ex-bankers and industry hands who can support and challenge in equal measure. By the time the businesses fully devolve to the next generation, the tools to secure and grow them should already be in the room.

The diagnosis: Pakistan’s economy is a primary-school problem we keep failing

Later in the discussion Muzamil shifts the conversation to the macro picture. Tabba’s answer is one of the sharpest passages of the conversation and worth following closely.

He frames Pakistan’s problem as two recurring deficits — fiscal and current account — sitting on top of a debt-servicing cost that eats most of the revenue before defence, salaries and social protection are even funded. The cycle is well known: borrow, hit a wall, run to the IMF, contract, kill growth, repeat. “Pakistan loves the status quo,” he says. “We do something, then we repeat it, then we repeat it a third time, and we keep repeating.”

The countries around Pakistan — China, Indonesia, Bangladesh — manage six to seven percent growth. Pakistan reaches for that number, blows the current account out, and then has to slam the brakes. There is no accountability, he argues, for the policymaker who reached six percent and then handed the next government a wreckage to manage.

His prescription is striking in how unglamorous it is. Five problems, he says: energy, taxation, the current-account deficit, the fiscal deficit, and social protection for the genuinely vulnerable. None of them are intellectually hard. All of them are politically uncomfortable. “We are still stuck in primary school looking at our basic problems,” he tells Muzamil. “Forget masters.”

A flat tax, a flat tariff, and the end of carve-outs

On taxation Tabba is direct. Manufacturing contributes around fifteen percent of GDP and pays roughly fifty-five percent of the tax. Agriculture, services and the rest of the economy do not contribute proportionately. The result is that nobody in their right mind wants to put up a factory.

His fix is uniform rates across the board — the same income tax rate for manufacturing, for services, for professionals, with the rate itself lowered because the base is finally wide. He estimates that if the parallel cash economy and the official economy were combined at even twelve percent of GDP, fifteen to sixteen trillion rupees of revenue is on the table.

Energy is the same argument applied to gas and electricity. Today, he points out, gas in Pakistan has a different tariff for domestic users, fertilizer, industry, cement — a maze of carve-outs that makes no sense. His proposal: one tariff for everyone outside a clearly defined protected segment (say, residential users under two hundred units). If fertilizer needs to be subsidised, subsidise the farmer directly, not the input. The same logic applies to electricity. The carve-outs, he argues, are the reason the headline rate has to keep rising on everyone else.

He extends the diagnosis to the broader tax code. “Super tax, income tax, dividend tax, WPPF, WWF — we have made this country so complex that no foreign investor wants to come and no local investor wants to invest.” The fix, in his telling, is not new incentives stacked on top of the old maze. The fix is to demolish the maze.

The FTAs that quietly broke local industry

One of the more pointed moments in the conversation is Tabba’s read on the free trade agreements Pakistan has signed — with China, Sri Lanka and others. He argues those agreements, combined with smuggling, under-invoicing and misdeclaration, have hollowed out the SME base. “They dumped into this market and broke industry’s back,” he says.

The asymmetry, he points out, is that the trading partner’s industry receives subsidies, cheaper gas, lower tax rates and a lower cost of doing business at home. Pakistani industry is then told to compete on a level playing field that isn’t level. “Only large businesses can survive that. Smaller ones cannot.”

Why no Pakistani businessman builds the bottom of the pyramid

Muzamil presses Tabba on a question that visibly bothers him: why is it that Pakistan’s big industrial families do the top of the value chain — assembly, packaging, finished goods — but never go down to the basic petrochemicals, the resins, the plastics, the flat steel that everything else depends on. He brings up that in the sixties some families did build these, before nationalisation broke them. Why is no one rebuilding them now.

Tabba identifies three reasons. The first is capital scale. A petrochemical plant is a five-to-six-billion-dollar commitment, and no individual Pakistani business has that on its own balance sheet. The second is debt. Pakistan’s interest rate cycle swings from six percent to twenty-two percent and back, and any business carrying serious debt through that cycle gets crushed — the power sector, he notes, is the textbook example. The third is cultural. Bankruptcy in Pakistan is not the recoverable corporate event it is in America. It is a stigma that sticks to the person and the family. “The boy is useless,” he says, summarising the social verdict. “There are so many stigmas attached. It is a very complex environment.”

Localising a car when eighty percent of the part is dollarised

The auto section is where Tabba is most concrete. Muzamil raises the standard critique — that Pakistan is a dumping ground for one-generation-old models, that the Sportage is always a generation behind, that we never seem to localise.

Tabba’s reply reframes localisation as an accounting problem. Each model change demands seven to ten million dollars of fresh investment in jigs and tooling to re-localise. To absorb that, you need to sell thirty to fifty thousand cars over the model’s lifetime. With six or seven manufacturers now in the market instead of three, per-model volumes have collapsed, and the cost cannot be recovered. The deeper trap, though, is that even where localisation happens, eighty percent of the cost of a part is still raw material — steel, plastic, resin, glass — and all of that is imported. “Even if you fully localise the car, eighty percent of the cost is still imported and dollarised,” he says. Until Pakistan has its own petrochemical industry, its own flat-steel capacity, its own iron-ore mining feeding a working steel mill, true value addition will not happen. The currency devalues, and car prices climb, and the cycle repeats.

On electric vehicles his view is patient rather than enthusiastic. The technology matters for Pakistan eventually, but battery cost is sixty to sixty-five percent of the vehicle and is fully imported, so localisation collapses further. Charging infrastructure does not exist. Affordability sits at thirty-five to forty lakh rupees for the typical family, and Suzuki dominates volume because its cars are cheap. Until EV prices fall to petrol parity — which he thinks is two to three years away as battery raw materials normalise — penetration will stay low. After that, he agrees with Muzamil, it becomes a no-brainer.

Exports, mindset, and the sectors government should pick up the phone for

Muzamil returns to the macro: if Pakistan’s principal problem is exports, how does it actually get solved. Tabba’s answer is uncharacteristically simple. The Chinese model, he says, was to capture the domestic market, make profit at home, and export at variable cost — even if fixed cost is not fully recovered, the home market subsidises the outward push. Pakistani businesses, by contrast, are wired for domestic. “Their thinking is not toward export at all,” he says. Lucky’s cement business, he points out, exports at variable cost — and does it anyway, because the industry, the competitive mix and the scale are already there.

His specific proposal to government is to pick fifteen sectors that already export — footwear, seafood, meat, surgical instruments, cement, livestock, pharmaceuticals — sit down with them, and target each to add a billion dollars in additional exports over five years. Africa, in his reading, is the under-exploited market. FMCG, confectionery, surgical, tractors (already going to Tanzania), pharmaceuticals — the regulatory bar is lower than Europe or the US, the competition is thinner, and Pakistani exporters have ignored it.

But — and this is the line Muzamil keeps coming back to — exports will not happen on the businessman’s initiative. “If the government does not make it a compulsion, the businessman will keep selling at home.” His proposal: a regulatory policy that mandates a rising export share — ten percent in year one, twenty in year two, twenty-five in year three. Industry will complain, he says, and that is fine. “Businessmen are comfortable in their comfort zone. You have to put them at task.”

Mining, captive power, and an IMF prescription he calls wrong

Tabba is unambiguous about the IMF push to shut down captive power plants. Captive plants at Lucky and elsewhere, he says, are highly efficient — sixty to eighty percent thermal efficiency once you count steam and hot water recovered for process. The grid is not stable enough for modern, sensor-driven plant and machinery; voltage variation alone damages cards and software. “IMF is multilateral. They do not know how businesses are run, how industries are run,” he tells Muzamil. The right answer, in his view, is to lower the grid tariff to a level where switching is voluntary — not to ban captive outright.

On mining he flags Reko Diq as a private-sector-led resolution — Lucky was part of the consortium that helped settle the Antofagasta-Barrick dispute — and confirms the group now holds a separate lease in Eastern Chagai for a copper prospect, currently in the drilling and sampling phase. By next year, he says, they should know whether it is feasible to develop.

His one frustration with mining policy is the export of slurry. In Congo, where Lucky set up a factory two years ago, every mine has a smelter; copper leaves at 99.99 purity, gold leaves eighty percent refined. Pakistan, he says, should never have allowed unprocessed export from Reko Diq. “I do not understand why the government allowed slurry to leave.”

Twenty-six years out: seven percent if the basics get fixed

By the end of the conversation, Muzamil asks Tabba where he thinks Pakistan can be by 2050 if even a handful of these reforms land. The answer is grounded. Fix agriculture and manufacturing, he says, and seven to eight percent GDP growth is not a hard target. Compound that across twenty-six years and the economy is several times its current size.

He believes the parallel cash economy is at least fifty to a hundred percent the size of the official one — putting the real economy somewhere around five to six hundred billion dollars — and that the productive deployment of that capital is what changes the country. The constraint at the top end, he argues, is that the billion-dollar-plus industries — the petrochemicals, the steel, the heavy capital plays — are beyond any single Pakistani family. The future of large industry in Pakistan, in his view, is consortiums of like-minded business houses pooling capital. Lucky has already done it in mining. Real estate is doing it. The two-to-three-hundred-million-dollar plays a single business can still handle alone. Anything bigger has to be built together.

Muzamil closes the conversation by thanking Tabba for what the family has built and framing it as a service to the country — the kind of compliment Tabba accepts without elaborating. The episode ends there.