Pakistan is witnessing an unprecedented exodus of multinational companies, signalling a grave crisis of confidence in its economy.
Despite Pakistan’s promising market, rich in consumer potential and natural resources, the failure to uphold stable and predictable regulatory frameworks has deterred numerous global giants from maintaining their presence.
Data from the Overseas Investors Chamber of Commerce and Industry (OICCI) paints a concerning picture: over 20 multinational corporations either downsized or completely withdrew from Pakistan in 2020 alone.
“One of the foremost reasons behind the MNC exodus is the erratic nature of Pakistan’s policies. Inconsistent regulations and sudden policy shifts create an environment of uncertainty, making it difficult for businesses to plan for the long term,” said an expert.
“This lack of stability not only hampers investment decisions but also undermines investor confidence. MNCs rely on predictability and consistency to thrive, and when these elements are lacking, they often opt to withdraw from the market altogether,” he added.
The challenge is compounded by the complexity and opacity of the regulatory landscape. Navigating bureaucratic hurdles and dealing with lengthy approval processes can be daunting tasks for multinational corporations.
Furthermore, rampant illicit trade and smuggling practices create an uneven playing field for legitimate businesses. MNCs, which operate under stricter regulations, struggle to compete with companies that circumvent legal channels. This not only undermines their profitability but also discourages further investment. As a result, many MNCs find it easier to allocate their resources to more conducive business environments where regulatory frameworks are transparent and streamlined.
Giants like Shell, which operated in Pakistan for 75 years, have offloaded their stakes due to mounting losses. Pharmaceutical giant Eli Lilly exited in 2022, citing difficulties in repatriating profits. This trend reflects a crisis of confidence in Pakistan’s economic environment, fuelled primarily by the issue of inconsistent policies.
Shanghai Electric’s high-profile pullout from a major deal with K-Electric underscores the growing concerns among foreign investors. Adding to the worries, established companies like British American Tobacco have recently threatened to exit Pakistan due to policy inconsistencies.
“As these key investors depart, it becomes imperative to scrutinize what went wrong and address the underlying issues plaguing the investment climate in Pakistan,” added the expert, adding that the chronic policy inconsistency, coupled with bureaucratic hurdles, rampant illicit trade, and a volatile security situation, is eroding investor confidence.
“To foster sustainable economic growth, Pakistan must create a conducive environment for businesses to thrive and contribute to the country’s development by prioritizing stability, transparency, and consistency in regulatory frameworks,” he concluded.
