Reviving foreign investment in Pakistan – Pakistan & Gulf Economist

• Pakistan needs stability, better regulations, skilled workforce and incentives to attract strong foreign investment

Recently, many multinational corporations (MNCs) are exiting Pakistan due to a combination of factors, including:

• Economic Instability: The country’s economic landscape is marred by high inflation, currency depreciation, and a lack of foreign exchange reserves.
• Regulatory Uncertainty: Frequent policy changes, bureaucratic hurdles, and unpredictable regulations are deterring investors.
• Political Turmoil: Pakistan’s political instability is making it challenging for businesses to operate.
• High Taxes: The tax environment is considered unfavorable, with high tax rates and complex procedures.
• Energy Crisis: Frequent power outages and high energy costs are affecting production.
• Security Concerns: Safety and security issues are also a major concern for MNCs.

Some notable companies that have exited Pakistan include:

• Shell Oil: Sold its 77.42% stake in Shell Pakistan to Saudi firm Wafi Energy.
• Telenor: Divested its local unit to Pakistan Telecommunication Company for $388 million.
• Procter & Gamble: Winding down manufacturing and commercial activities in Pakistan.
• Eli Lilly: Shut down manufacturing operations.
• Sanofi: Sold its stake in Sanofi-Aventis Pakistan Limited.
• Uber: Suspended ride-hailing services.
• Microsoft: Exited the market.

These exits are a significant blow to Pakistan’s economy, highlighting the need for reforms to attract and retain foreign investment. Attracting FDI (Foreign Direct Investment) to Pakistan requires a mix of strategies. Here are some ideas:

1. Improve Business Environment: Streamline regulations, reduce bureaucracy, and make it easy for foreigners to set up businesses.
2. Infrastructure Development: Invest in roads, ports, and energy projects to support businesses.
3. Incentives: Offer tax breaks, subsidies, or other benefits to attract investors.
4. Skilled Workforce: Develop a skilled and educated workforce to meet industry needs.
5. Stability and Security: Ensure a stable political and security environment.
6. Promote Tourism and Culture: Showcase Pakistan’s rich culture and tourism potential.
7. Digital Pakistan: Improve digital infrastructure and promote e-governance.
8. Special Economic Zones (SEZs) : Establish SEZs with attractive incentives and infrastructure.

Some sectors with potential for FDI in Pakistan include:

• Energy
• Infrastructure
• Manufacturing (textiles, automotive, etc.)
• IT and IT-enabled services
• Tourism

Pakistan received $2.457 billion in Foreign Direct Investment (FDI) during the fiscal year 2025, marking a 5% increase from the previous year. This growth is attributed to Chinese investments, which rose by 91% to $1.227 billion. The power industry led the way with $551 million in FDI, followed by financial services with $414 million.

Key FDI Contributors:

• China: $1.227 billion (50% of total FDI)
• Hong Kong: $155 million
• United Kingdom: $148 million
• Switzerland: $116 million
• France: $82 million

Sector-wise Breakdown:

• Power Industry: $551 million
• Financial Services: $414 million
• Oil and Gas Exploration: $187 million
• Electronics: $105 million

This surge in FDI is a positive sign for Pakistan’s economic growth, with the government implementing reforms to attract foreign investment.