PRIME Minister Shehbaz Sharif recently reaffirmed his government’s ‘commitment’ to improving the ease of doing business in the country. He told top executives of an Asia-focused venture capital firm, before the conclusion of his Malaysian visit last week, that the SIFC was endeavouring to provide foreign investors with all possible facilities. He also repeated his resolve to mobilise investment at home and abroad to build a sustainable startup environment. His remarks have come at a time when MNCs are pulling back from Pakistan. Very recently, global consumer goods firm Procter & Gamble announced it was shutting down its manufacturing businesses in Pakistan after nearly 45 years. P&G’s decision was preceded by the exit of several other MNCs including Shell, Pfizer, Telenor, Eni and Total in recent years. Until only a few years ago, P&G had been confident about its growth prospects in Pakistan, whose large young population offered enormous business potential. What changed to compel it to wind up?

Indeed, P&G’s decision has been driven mostly by its global strategy, like that of some other foreign investors, to restructure its global operations. But the fact remains that foreign investors enter or exit a market based on their assessment of the local business clime and growth opportunities. Whatever their global strategies, had they viewed the business environment in the country in a positive light, many would not have exited within just a few years. Unfortunately, Pakistan’s already challenging business environment has worsened sharply in recent years, undermining investor confidence. Unfair tax policies that disproportionately burden compliant firms, excessive and overlapping regulations, unaffordable energy and recurring balance-of-payments crises top the list. These factors have tilted the playing field against documented companies when compared to the informal sector, rendered manufacturing unviable, drastically reduced profits — in some cases pushing companies into losses — and made it difficult for foreign entities to repatriate profits. More troubling for foreign investors is the diminishing hope of any real improvement.

Pakistan has long struggled to attract foreign investment, particularly in export-oriented sectors. Now that even market-seeking investors are exiting, there should be a realisation that all is not well. The situation will not improve merely by making declarations of commitment to an improved business climate. Nor will the creation of investment bodies change this reality as is evident from stagnating investment inflows and the exit of foreign companies. Even new foreign entrants have not brought any significant amount of investment, created jobs or increased productivity and exports. In most cases, these have only bought out existing businesses. The political leadership must realise that the time for speeches and pledges has passed, and that the government must now walk the talk.

Published in Dawn, October 14th, 2025