COMPANIES often have ‘their own reasons’ to exit a market. Yet when a consumer products group like Procter & Gamble decides to shut down its manufacturing operations in a 250m-strong market like Pakistan “as part of its global restructuring strategy”, it inevitably reflects negatively on the host country’s business climate. P&G’s departure follows a steady stream of exits by MNCs such as Shell, Telenor, Uber, Yamaha, Eni, several foreign banks and pharmaceutical firms in recent years. The question then is: has Pakistan become more inhospitable for foreign investors than it traditionally was? Sadly, the answer is yes. Several factors, including policy uncertainty, tax policy distortions, overregulation, rising costs of doing business, weak contract enforcement, shrinking profits and exchange rate volatility appear to be driving these departures. More recently, macroeconomic challenges leading to profit repatriation restrictions, import curbs and political instability have forced some to quit this market. The same conditions have also kept fresh private foreign investment from flowing in. The departure of foreign firms and stagnant new private foreign investment underscore that the risks far outweigh the country’s business potential for any investor.

Though P&G has committed to serve the Pakistani market through third-party distributors, this cannot compensate for the advantages of local manufacturing to the economy and people. The exit of a foreign company, especially in the manufacturing sector, always means loss of jobs and tax revenues, with informal trade filling the vacuum. In recent years, the country’s business and investment climate has severely been affected by a worsening economic and political environment. On top of that, the lack of a coherent industrial policy identifying priority sectors for development, policy inconsistency, violation of rules and use of force to change contracts with power companies, overlapping provincial and federal regulations, etc, have turned this country into a headache for manufacturers. No wonder even friendly Arab countries are reluctant to fulfil their investment commitments in spite of the guarantees offered through the SIFC, the civil-military body created to attract foreign investment. China, too, does not appear keen to invest here until its concerns over the security of its personnel working in the country are taken care of. If we are to stop the exodus of foreign investors, the government must address the deep-seated structural imbalances in the economy.

Published in Dawn, October 6th, 2025