You want competition. Fine. Please tell me if Pakistan allows Emirates to operate domestically what does UAE has to offer in return? Nothing. They will invest initially and get more than double the amount in profits and viz-a-viz giving very hard blow to Pakistani airlines, most of which may even go bankrupt, thus generating more connecting passengers for ME3 and Pakistani aviation sector totally in foreign hands like everything else.
UAE doesn't need to offer anything in return. Pakistan is getting FDI just like the huge investment in Telecom sector back in mid 2000's. How many telecom companies actually went bust? competition resulted in better product, more choice and over all better job prospects for everyone. It is not government's job to run an airline. Again why PIA gets state subsidy while Air blue and Shaheen don't. Is it a fair for Shaheen and Air blue.
On a side note, domestic airline will fly domestically. Emirates already have plenty of international flights to Pakistan. So the point of acting as a feeder for ME3 is moot. Again, no one has actually provided a valid argument why Emirates or any other foreign entity should not be allowed to enter the aviation sector.
On a further side note, Emirates has clarified that they are not starting a domestic operation in Pakistan so the whole debate is a bit pointless.
So far all arguments of not allowing Emirates operate domestic flights just revolve around sentiments and emotions.