Over the past several months, an alarming refrain has begun echoing across Pakistan’s economic and policy circles: “Multinationals on the Exit.” What once seemed inconceivable – leading global corporations scaling down, divesting, or altogether pulling operations from Pakistan – is no longer hypothetical. Recent exits and contractions by Procter & Gamble, Shell, Microsoft, Uber, Pfizer, Yamaha, Telenor, and others have signalled a deeper malaise afflicting Pakistan’s business climate.

This exodus should not be taken lightly. It is not about a few isolated corporate decisions or portfolio fine-tuning – it is a stark alarm about how foreign investors now view Pakistan’s future. In this op-ed, I examine the causes, consequences, and potential remedies to reverse this damaging trend.

What the Data Reveal: A Dismal Outlook

The strongest indictment lies in the numbers. According to the State Bank of Pakistan, net foreign direct investment (FDI) in FY25 stood at just USD 2.46 billion, a pale contrast to the tens of billions flowing into regional peer economies. Meanwhile, recent statistics show that FDI inflows for February 2025 fell by 45 per cent year-on-year, to approximately USD 95 million.

Such a precipitous decline in capital inflows must be read as more than cyclical – it signals structural deterioration in the investment climate. Foreign firms are voting with their feet.

Specific departures underscore this trend:

* Procter & Gamble recently decided to wind down local manufacturing and shift to third-party distribution for its operations in Pakistan – a retreat from direct investment.

* Shell relinquished its retail fuel operations, citing persistent losses, foreign exchange challenges, and regulatory hurdles.

* In technology, Microsoft announced closure of certain operations after 25 years in Pakistan, attributing the decision partly to global restructuring and a shift toward a partner-led model – but the local environment no doubt weighed heavily.

* Uber ceased operations in Pakistan in April 2024; Careem announced suspension from July 2025.

* Within pharmaceuticals, the retreat has been perhaps most dramatic: at one time 40 multinational pharmaceutical firms operated here; today, fewer than 20 remain.

These are not marginal players. Their downsizing or exit carries significant consequences: job losses, disruption of knowledge transfer, weakening of supply chains, and a dent in Pakistan’s credibility as an investment destination.

What is driving this exodus? While every company’s calculus is unique, several recurring themes emerge – and many are self-inflicted wounds.

1. Policy Inconsistency and Regulatory Volatility

Foreign investors crave predictability. In Pakistan, policies – tax laws, import regimes, energy tariffs – shift rapidly, often without adequate consultation. The state’s frequent renegotiation of power purchase agreements (PPAs) and unilateral contract re-opening has raised serious investor alarm.

Take the case of pharmaceutical firms: delayed approvals for price adjustments have squeezed margins. When governments impose price controls without considering production cost dynamics – especially in an environment of volatile foreign exchange rates – the result is a direct hit to profitability.

Moreover, overlapping jurisdictional controls (federal vs provincial), opaque tax dispute resolution, and ad-hoc regulatory enforcement undermine investor trust.

2. Taxation and Burden of Costs

Profit margins in Pakistan have long been under siege. Analysts note that a company generating “100 rupees” of revenue may end up with only ~35 rupees after taxes – a punishing tax burden.

Further, the inability or delay in remitting dividends abroad-due to foreign exchange curbs or regulatory inaction – acts as a silent tax on investors’ capital.

Indirect costs – energy, security, logistics, customs delays – further erode competitiveness. When local competitors (especially in the informal economy) sidestep these burdens, multinationals feel doubly squeezed.

3. Currency Volatility and Foreign Exchange Constraints

The Pakistani rupee’s chronic depreciation – often at double-digit annual rates – radically increases the cost of imported inputs. For many MNCs dependent on global supply chains, this introduces severe margin risk.

Coupled with that is the risk of import restrictions or delays in opening letters of credit (LCs). In several reported cases, spare parts or raw material inflows were delayed or blocked – crippling production lines.

4. Security, Governance, and Contract Risk

Persistent security challenges – particularly in certain provinces or along critical infrastructure corridors – raise the cost of doing business and increase operational risk. For companies with fixed capital investments, this is a major deterrent.

Furthermore, contract sanctity is under question: the state has shown a willingness to renegotiate or unilaterally change existing agreements. This erodes confidence that an investor can be assured that the rules won’t be shifted mid-course.

Finally, governance concerns – corruption, bureaucratic backlogs, weak enforcement of intellectual property rights – further tilt the balance against foreign firms attempting to operate by formal rules.

5. Macroeconomic Fragility and External Imbalances

Pakistan’s economic foundations are under strain. Recurrent balance-of-payments crises, soaring inflation, and reliance on external financing make the backdrop for business perilous.

In such an environment, foreign investors demand higher risk premiums – or simply conclude that prospective returns no longer justify exposure.

The exit of multinationals is not just a headline – it is a live wound in Pakistan’s economy. Its repercussions cascade across multiple dimensions:

* Job Losses, Direct and Indirect: Multinationals typically employ skilled workforce and anchor supply chains. Their contraction leads to layoffs among both the core workforce and the downstream vendors, logistics, maintenance service providers, and others tied to the ecosystem.

* Loss of Technology Transfer and Best Practices: These firms are carriers of managerial techniques, R&D, quality assurance, global supply networks, and standards. Their departure deprives the domestic ecosystem of learning spillovers.

* Weakening of Export Potential: Many foreign firms serve export markets. As they divest, export volumes may shrink, worsening Pakistan’s trade deficit and narrowing foreign exchange generation.

* Erosion of Credibility: Each exit undermines the message to future investors: if global brands can’t sustain in Pakistan, why should new ones try? It becomes harder for even genuinely pro-investment policy reforms to overcome the narrative of decline.

* Fiscal Strain: Apart from tax revenues, Pakistan loses potential revenue from corporate income, duties, and leverage in negotiating new investment terms. The state may also have to absorb unemployment pressures, pay social subsidies, or extend concessions to stem disinvestment.

* Deindustrialisation & Informalization: As large formal operations leave, segments of industry may shrink or move into the informal economy, reducing regulatory oversight, compliance, quality, and tax base.

The scope for course correction is not only real – it is urgent. But it requires a bold, credible, and consistent policy shift. The following steps should be central to any effort to reclaim investor confidence:

1. Institutionalising Policy Predictability and Sunset Clauses

* Policies, especially in taxation, energy, import regulation and public-private contracts, must be stable and resistant to arbitrary change.

* Use sunset clauses or phased reviews in contracts so that investors know changes cannot be imposed retroactively.

* Create independent, rule-based regulatory bodies insulated from political meddling.

2. Guaranteeing Remittance and Capital Exit

* Ensure that foreign investors can reliably remit profits, dividends, and repatriate capital. Any curbs or delays must be strictly time-limited and transparent.

* Streamline foreign exchange procedures so that LCs, import of inputs, and repatriation are not bottlenecked by bureaucratic or discretionary hurdles.

3. Rationalising the Tax Regime

* Reassess effective tax rates to align them with regional peers, especially for export- and capital-intensive sectors.

* Offer targeted tax holidays, relief on import duties for input-intensive production, and phased recovery of tax credits.

* Introduce dispute resolution mechanisms – an investment policy ombudsman or arbitration panel – that can credibly assure investors of recourse.

4. Safeguarding Contracts & Enforcing Rule of Law

* Reinforce legal frameworks for investment, especially honouring bilateral investment treaties (BITs), and ensure that disputes are predictably adjudicated.

* Cease the habit of renegotiating historically agreed contracts (e.g. in energy) without fair compensation or negotiation.

5. Security Assurance and Risk Mitigation

* Enhance security for investors’ staff and installations, particularly in risk-prone areas.

* Partner with global risk-insurers or multilateral institutions to underwrite parts of political or security risk – reducing burdens on individual firms.

6. Focus on Anchor Investments and Export Orientation

* Prioritise “anchor” investments in sectors with high linkages (e.g., advanced manufacturing, green energy, semiconductors) that can draw supplier ecosystems.

* Incentivise export-oriented FDI through rebates, guarantees, and logistic support.

* Leverage the Special Investment Facilitation Council (SIFC) to monitor real project implementation-not just MOUs.

7. Macro Stability & External Buffering

* Sustain the IMF and multilateral support programs, but align them with structural reforms that deliver confidence, not short-term fixes.

* Retain reserve buffers, manage external debt prudently, and maintain disciplined fiscal policy to reduce macro volatility.

8. Rebuild the Narrative & Investor Relations

* Launch a sustained investor outreach program (roadshows, sector-specific forums) that transparently acknowledges past failures and commits to measurable reforms.

* Provide regular, audited “reform scorecards” to the public and investor community so that Pakistan can rebuild trust through transparency.

The withdrawal of multinationals from Pakistan is not just an economic setback – it is a symbolic defeat. It reflects that in the battle for legitimacy, credibility, and investor confidence, the state has been losing ground. The consequences for jobs, growth, and competitiveness could last a generation.

Yet the remedy lies within reach. A decisive pivot toward rule-based governance, credible policy stability, open financial regimes, and enforcement of investor guarantees can shift the calculus. The clock is ticking: unless we act with urgency and resolve, Pakistan could lose not only multinational investors but also the faith of its own entrepreneurial class.

The question is not whether we can reverse the trend – it is whether we have the will.

The writer is Foreign Research Associate, Centre of Excellence, China Pakistan Economic Corridor, Islamabad.

Note: This article first appeared in the Daily Times on October 13, 2025.