Red tape, not bad luck, hits capital

Imagine a country sitting at the crossroads of South Asia and Central Asia, with a population of 250 million, abundant natural resources, and a GDP exceeding $450 billion, yet struggling to convince even its own businesspeople to invest at home.

That is Pakistan's continued uncomfortable reality in 2026, and the way things are going, the business community believes that even after elevating higher, in the past one year due to perfect diplomacy, the government needs to take strict action against those civil servants and state officials, who still try to slow the pace of overseas and local investment as well as development work, which has jeopardised the growth of the country.

"Foreign direct investment (FDI) in Pakistan fell 31% during the first 10 months of financial year 2025-26, with total inflows coming in at $1.409 billion against $2.035 billion during the same period a year earlier," said Mian Shafqat Ali, Founder of the Pakistan Industrial and Traders Association Front. He raised alarm over what he calls a deepening investment crisis, warning that both local and foreign investment has dipped to one of its lowest levels in recent memory.

He added that the root cause of this decline is not a lack of opportunity, but a system that actively discourages investors at every step. "The real obstacle in the way of investment is the layers upon layers of bureaucratic hurdles. Without removing these barriers, the dream of increasing investment cannot be realised."

He noted that investors, both domestic and foreign, are deeply sensitive to the environment they operate in, and Pakistan's current legal and regulatory framework, unpredictable energy policies, fluctuating exchange rates, and ad hoc government decisions have created an atmosphere of uncertainty that keeps capital away.

The business community by and large thinks that once the US-Israel-Iran conflict is settled fully, Pakistan can have better opportunities; however they simultaneously say that to grab those opportunities, "we need to settle our systems, which are dominated by anti-investment and anti-business culture".

There are systems, which welcome and protect overseas as well as local investment; those societies belong to the first world or second world; "unfortunately here in Pakistan we are still unable to manage the smooth flow of Chinese investments, whom we call 'iron brothers'," said Bilal Hanif, a Lahore-based businessman.

"We keep building new institutions and launching new investment windows, but nothing changes on the ground because the real problem is structural. A foreign investor does not just look at your pitch; he looks at your court system, your tax regime, and whether rules will be the same two years from now. On all these counts, we are falling short," he said.

Pakistan has averaged barely $2 billion in annual FDI over the past 26 years; a figure that expert bodies like the Pakistan Business Council say should be at least $12 billion per year, or roughly 3% of GDP, to meet basic development benchmarks. Meanwhile, regional competitors such as India, Vietnam, Indonesia, and even smaller economies like Bangladesh have consistently attracted far greater inflows, benefiting from predictable regulations, stronger investor protection, and long-term policy continuity.

Mian Shafqat Ali was clear that the failure does not rest with any single institution. He said the problem is not the fault of the Special Investment Facilitation Council (SIFC) or any other body, but rather the deeply entrenched systems that make doing business in Pakistan unnecessarily complicated.

"Until policymakers are willing to make difficult structural and political decisions, investment will remain weak, no matter how many new institutions are created," he warned.

What investors consistently ask for is not complicated; it is political stability, simple regulations, and confidence that policies of today will not be reversed tomorrow. Pakistan, unfortunately, has struggled to offer any of these in a reliable manner. Frequent political disruptions, leadership changes, and policy discontinuity have created uncertainty that discourages long-term capital, and the capital does not avoid Pakistan because of a lack of opportunity, it avoids uncertainty.

"Government should move beyond announcements and focus on real structural reforms, overhauling the regulatory framework, simplifying business registration processes, ensuring energy availability at competitive rates and most importantly, providing a stable and consistent policy environment as without fixing the foundation, everything else is meaningless," Ali added.