Why global giants pulling out

Outflow poses serious challenge to economic narrative, efforts to woo investors

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ISLAMABAD:

The announcement in July 2025 that Microsoft had closed its local office in Pakistan after 25 years sent ripples through a country already struggling to attract foreign investment. The tech giant, which had established its Pakistani presence in the early 2000s and had since played a vital role in licensing, software partnerships, and capacity building, quietly wound down operations and laid off its remaining staff.

While Microsoft stated the move was part of a broader global restructuring towards artificial intelligence and regional consolidation, the local business community viewed the decision as a reflection of Pakistan's deteriorating appeal for international firms.

But Microsoft's exit is not an isolated case. It is part of a broader trend involving more than two dozen multinational companies (MNCs) that have either exited or substantially scaled down operations in Pakistan over the last three years. These include some of the world's most recognised names across sectors – Shell, Procter & Gamble, Lotte, Siemens Energy, Unilever's Lipton division, and Reckitt Benckiser's health portfolio among them. This steady outflow represents a serious challenge to Pakistan's economic narrative and its efforts to attract and retain foreign direct investment.

These multinationals were more than just sources of foreign capital – they introduced global standards in corporate governance, technology, and management. Their presence helped modernise local industries and provided the Pakistani workforce with valuable exposure to international business practices, enhancing skills and integrating local talent into global professional networks.

In fact, many executives currently serving in the C-suites and boards of local companies began their professional development within these global firms, where they gained the skills, training, and exposure that prepared them for leadership roles. So, this exodus represents not only a loss of investment but also a setback to institutional learning and workforce development.

One of the major contributing factors behind this trend has been the persistent depreciation of the Pakistani rupee, which has lost over 50% of its value since 2021. For foreign companies reporting earnings in their home currencies, the sharp devaluation has rendered local operations financially unviable.

Equally critical are the severe restrictions on profit repatriation. Due to Pakistan's chronic balance-of-payments crisis, the State Bank of Pakistan (SBP) imposed strict capital controls that prevented companies from sending profits abroad. At its peak in 2023, over $1 billion in blocked dividends were awaiting clearance, forcing some companies to absorb mounting currency losses on their balance sheets.

This fiscal fragility is compounded by an unpredictable policy environment. Political instability, frequent changes in taxation policy, arbitrary regulatory enforcement, and minimal stakeholder engagement have all undermined business confidence. Foreign investors have frequently cited the absence of a consistent economic direction and the growing influence of non-elected institutions in economic decision-making as major deterrents. In some cases, companies reported being blindsided by retrospective tax demands or abrupt changes in import rules, disrupting years of business planning and operations.

The government's decision to implement sweeping import restrictions in 2022-2024 in an effort to conserve foreign exchange reserves proved especially damaging. These restrictions severely impacted firms dependent on imported raw materials and machinery. Entire production lines were halted for weeks or even months, with companies unable to procure the necessary inputs.

Local assemblers in the automobile sector and multinational consumer goods manufacturers were among the hardest hit. The inability to meet market demand, maintain brand standards, or even retain employment levels pushed many companies to re-evaluate their long-term presence in Pakistan.

The consumer market, once considered a growth engine for MNCs in Pakistan, has also weakened. Persistent inflation, which remained above 25% for much of 2023, eroded household purchasing power. The middle class, which had fuelled expansion in sectors like fast-moving consumer goods, health, and retail, saw their consumption shrink dramatically. As a result, demand for higher-end or branded products collapsed, leaving many multinational portfolios unable to meet volume targets necessary for sustainable operations.

Further compounding the problem are operational inefficiencies tied to infrastructure and energy. Despite increased electricity generation capacity, power distribution remains unreliable and expensive. Load shedding, inconsistent gas supply, and high industrial tariffs have significantly raised the cost of doing business. Many manufacturing operations have had to rely on backup power generation, adding further to their expenses and reducing competitiveness compared to regional peers.

Externally, shifts in global investment flows have not favoured Pakistan. In the aftermath of the Covid-19 pandemic, multinational corporations have increasingly turned to markets offering more regulatory certainty, proximity to supply chains, and lower operational risk.

Countries like Vietnam, India, Bangladesh, and Mexico have benefited from this realignment. Pakistan, in contrast, continues to grapple with geopolitical risks, compliance issues with international financial institutions, and governance concerns. The perception of being a volatile and high-risk jurisdiction has driven many boardrooms to favour exit over perseverance.

As stated by the SBP, the cumulative effect of these exits is significant. Foreign direct investment fell to a mere $1.2 billion in FY2023, the lowest in over a decade. The country not only loses capital inflow, jobs, and technology transfer, but also suffers a reputational blow. It becomes harder to attract new investors when existing players are heading for the exit. The departure of long-term multinationals like Shell and Siemens, who had operated in Pakistan for decades, sends a particularly discouraging signal to potential entrants.

The growing exodus of MNCs from Pakistan casts a long shadow over the government's initiatives to promote the country's image as an attractive destination for foreign investment. Chief among these is the establishment of the Special Investment Facilitation Council (SIFC), launched with the aim of streamlining approvals, accelerating project timelines, and showcasing Pakistan as an investment-ready destination.

While the SIFC has been positioned as a one-window solution to attract foreign capital in sectors such as agriculture, energy, and IT, the sustained flight of established global firms sends a contradictory message to the international business community. The perception that existing investors are being neglected or obstructed undercuts the credibility of new investment outreach. Restoring Pakistan's credibility as an investment destination requires urgent and targeted reforms. A stable macroeconomic framework, unambiguous profit repatriation policies, and transparent regulatory mechanisms are essential. Structural reforms in taxation, energy pricing, and trade policy must be implemented to lower the cost of doing business.

Beyond economics, the state must ensure political and legal stability to reassure global investors that their capital will be protected and allowed to grow.

THE WRITER IS A FINANCIAL MARKET ENTHUSIAST AND IS ASSOCIATED WITH PAKISTAN'S STOCKS, COMMODITIES AND EMERGING TECHNOLOGY