As some long-established companies leave, new players enter, lured by signs of economic recovery and growth
It is also likely to impose an income tax on companies suffering mixed losses. PHOTO: NASDAQ
Islamabad:
“All happy families are the same; every unhappy family is unhappy in its own way.” Leo Tolstoy
Procter & Gamble’s exit from Pakistan has reignited the debate over the country’s business climate. Many see it as part of a wider trend of multinational companies exiting amid growing economic challenges. Analysts have pointed to high corporate taxes, restrictions on profit repatriation and a cumbersome regulatory environment as key reasons. But the story is more complex.
In the last four years, nine multinational companies have exited or divested their operations in Pakistan. Four of them were manufacturers – three pharmaceutical companies (Pfizer, Sanofi-Aventis and Eli Lilly) and one consumer goods company (P&G). The rest were service sector players such as Shell, Total, Telenor and Uber/Careem. The pharmaceutical sector saw the biggest exodus. although this is not new. Three decades ago, 48 multinational pharmaceutical companies were operating in Pakistan. Today less than half remain. Most were gradually sold off, transferring operations or product listings to local companies that now own over two-thirds of the domestic market.
Price controls and strict regulations have made it harder for global companies to operate profitably, while local players have become stronger, more flexible and more competitive.
P&G’s decision appears to reflect its global priorities more than Pakistan’s domestic circumstances. Its strategy now focuses on manufacturing in large markets such as the United States, Europe, Greater China and India, while exiting relatively smaller markets such as Nigeria, Argentina, Bangladesh, Kenya and others in Latin America.
In the services sector, the departures also reflect a broader global restructuring despite a loss of investor confidence. Shell’s sale of its Pakistan operations to Saudi Arabia-based Wafi Energy is in line with its strategy to exit the retail fuel business in several countries. Telenor’s decision, made in 2022, is part of a move to focus on a smaller set of core markets. Uber and Careem have ceded market share to more affordable competitors like InDrive and Yango. As some long-established companies leave, new players enter, lured by signs of economic recovery and growth. China’s Challenge Group is investing $150 million in Punjab to develop a high-tech textile zone expected to create 18,000 jobs and an estimated $100 million in apparel exports.
Multinational consumer healthcare company Haleon is expanding its facilities in Jamshoro, positioning Pakistan as a regional manufacturing hub and targeting a significant portion of production for export. Belarus plans to set up a tractor manufacturing joint venture in Balochistan.
In the financial sector, the sale of First Women Bank Limited marks the first successful privatization in two decades. Although a small transaction, the acquisition by a multi-billion UAE portfolio investment firm signals growing investor interest as it explores more opportunities in Pakistan. UAE’s Mashreq Bank is also investing $100 million, aiming to expand financial access for the unbanked and establish Pakistan as a support center for its global operations.
The biggest new wave of investment is expected from China as both countries continue to work on the long-delayed second phase of the CPEC. It recently completed $8.5 billion in new investments, including $1.5 billion in joint ventures, targeting key sectors such as agriculture, renewable energy, electric vehicles, healthcare, steel and other emerging industries.
It is important that these new investments do not repeat the old model of import substitution followed by many existing companies. Instead, they should emulate the example of the China-Pakistan joint venture Service Long March (SLM) Tires, which has successfully captured most of the domestic market once dominated by contraband and now exports tires worth $100 million a year, mainly to the United States.
The real challenge for policy makers is to identify and replicate such success stories. Pakistan is home to more than 200 multinational companies that play a vital role in promoting trade and industry and contribute more than one-third of the FBR’s total tax collection. However, despite this significant presence, their export footprint remains negligible, even though they repatriate profits of over $1.5 billion annually.
In contrast, MNCs operating in other developing countries are much more outward-looking, focus on global markets, earn significant foreign exchange, and contribute to export growth rather than relying primarily on domestic sales.
Recent reforms in Pakistan’s trade and tariff policies offer an opportunity for a shift towards export-led growth, and multinationals can and should play a central role in this transition, as elsewhere.
The era of special concessions through SROs and high tariff protection is coming to an end. Companies can no longer afford to depend on importing parts at low tariffs, assembling them and selling them locally at high margins in a highly protected market.
To remain relevant and competitive, they must break this cycle of dependency and adopt an export-oriented strategy, one that rewards efficiency, innovation and global competitiveness. This is precisely how East Asian economies have transformed their industrial landscapes and achieved lasting prosperity. Following similar policies, Pakistan can do the same.
The author is a member of the steering committee overseeing the implementation of the National Tariff Policy 2025-30. He has previously served as Pakistan’s Ambassador to the WTO and FAO Representative to the United Nations
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