Why Pakistan is growing as a market, not as a producer

Pakistan has spent years trying to bring in foreign investment, yet the economic benefits remain limited. Factories are closing, exports are struggling, and the country keeps importing more than it produces. A recent economic study on foreign investment published in Lahore Journal of Economics on 'Impact of efficiency-seeking FDI on economy' reveals that the problem is not the amount of money coming into Pakistan but the kind of investment the country is receiving. The research shows that most foreign companies enter Pakistan simply to sell to its growing consumer market rather than to help the country expand its industrial and export capacity. As a result, Pakistan becomes a bigger marketplace for foreign goods instead of a stronger production hub.

The study explains that foreign companies investing in sectors like banking, telecom, retail networks and communication services do help their own markets grow, but they do not significantly add to Pakistan's ability to produce goods or compete globally. These businesses rely heavily on imported technology, machines and services. So as they expand, they increase the country's import bill. This may make certain industries profitable, but the nation loses more dollars than it earns. The country becomes a profitable market for global corporations, not a global competitor in manufacturing and exports.

In contrast, the research highlights that Pakistan would benefit far more from investments aimed at increasing efficiency, improving technology and raising productivity in the industrial sector. The study shows that if foreign investment focused on manufacturing, such as textiles, food processing, metals, chemicals and engineering, Pakistan's exports and GDP would grow significantly. These sectors already have a base in Pakistan and are linked to many other industries. When technology improves in such industries, it doesn't just help one business, it strengthens an entire chain of suppliers, workers and related sectors. The study finds that upgraded technology in these productive sectors could dramatically boost exports and reduce reliance on imported goods, helping Pakistan grow through production instead of consumption.

The key message of the research is that Pakistan must choose foreign investment more wisely. Investment should support sectors that build factories, create skilled jobs and make Pakistan capable of selling more to the world not just sectors that sell more products within Pakistan. Instead of encouraging companies that only target local customers, the government should attract firms that bring new technology, improve the quality of local production and help local industries integrate into global supply chains. This requires better incentives for export-oriented industries, clear regulations, lower business costs and a fair playing field where foreign companies compete and collaborate with local producers rather than dominate them.

Pakistan stands at an important economic crossroads. If it continues to welcome investment mainly in consumer services, it will keep expanding its market for foreign goods instead of building its own industrial strength. But if it encourages investment that enhances production and exports, Pakistan could move toward a more sustainable and resilient economy. The study's findings make one thing clear: what Pakistan needs is not just foreign money but foreign investment that helps Pakistan stand on its own feet through stronger industries and smarter growth. Pakistan must shift its economic strategy from being a consumer market to a global production hub. The study shows that smart, efficiency-driven foreign investment can transform Pakistan's economy and reduce its reliance on imports. But this requires deliberate policy choices. If we keep welcoming the wrong kind of investment, we'll continue paying the price in lost dollars, lost industries and lost opportunities. The choice is simple: invest in local capacity or remain dependent on others.