Halt corporate exodus before Pakistan’s economy suffers further

By Mubashir Akram

A quiet but troubling trend is unfolding in Pakistan’s economy: the steady exit of multinational corporations that once symbolised confidence in the country’s market potential.

Procter & Gamble’s recent decision to wind down local operations and shift to third-party distribution is the latest in a series of corporate departures that point to deep structural issues. Over the past two years alone, Sanofi-Aventis has been sold, Eli Lilly has ceased manufacturing, Bayer has wound down operations, Shell has sold its business, TotalEnergies has exited a major stake, Telenor has divested its mobile operations, and Pfizer has sold local assets. In 2025, Microsoft shut its domestic offices, while Careem suspended its services altogether.

These departures are not isolated events. They span sectors as diverse as energy, pharmaceuticals, technology, and telecommunications, suggesting a systemic problem rather than individual misfortune. When blue-chip names retreat, global capital takes notice. Each exit is not merely a business decision but a signal — and the signal is that Pakistan has become a difficult environment for rule-bound, globally regulated firms.

The departure of P&G is more than a loss of one brand; it is a warning about the state of policy in Pakistan. For many investors, the country’s unpredictable policy environment now represents a greater risk than market demand. Abrupt tax shifts, regulatory reversals, and ad hoc import controls have undermined planning horizons and raised the cost of doing business. If the investment climate were truly improving, global companies would be lining up to enter, not to leave.

Taxation has become one of the most persistent grievances. Large corporations currently face a 29 percent corporate income tax, an 18 percent general sales tax, and a super tax of up to 10 percent. The combined burden pushes Pakistan’s effective tax rate well beyond that of regional competitors, discouraging fresh investment and leading to more legal disputes and trapped capital.

Even more damaging are the sudden reversals that undermine business confidence. In one notable case, a planned refinery project became unviable overnight after a last-minute tax change. Such decisions are not market failures but policy failures — and they send a chilling message to anyone considering long-term investment in the country.

While legitimate businesses face heavy taxation and uncertain regulation, the informal economy continues to flourish. According to the Pakistan Business Council, smuggling, counterfeiting, and tax evasion were estimated at around 68 billion US dollars annually in 2023 — roughly one-fifth of the formal economy. The tax losses amount to trillions of rupees each year. This vast shadow economy distorts competition, allowing noncompliant firms to undercut legitimate ones with untaxed and often unsafe products.

The equation is simple: when high taxes meet uneven enforcement, the incentive to go informal grows. Each new layer of complexity pushes more activity off the books, shrinking the tax base and reducing productivity. In such an environment, raising the cost of compliance without increasing the certainty of enforcement ensures that the informal economy becomes the default setting.

Pakistan’s macroeconomic pressures — from a depreciating currency to inflation and import restrictions — are not unique in the developing world. What truly alarms investors, however, is the way policy responds to these challenges. Decisions often appear arbitrary, enforcement uneven, and reforms subject to capture by special interests. Global capital can tolerate risk, but it cannot tolerate roulette.

Every corporate exit chips away at confidence in Pakistan’s fundamentals — its vast population, skilled workforce, and growing consumer base. Each departure signals that policy instability, inconsistent taxation, and a thriving parallel economy now outweigh the potential rewards of investing in the country. The costs are measurable: jobs lost, technology transfers foregone, supplier networks weakened, and the country’s reputation as a predictable business destination eroded.

The solutions to this crisis are neither new nor complex. What is missing is consistent execution and credibility. Policymakers must commit to stable, multi-year tax and regulatory frameworks that survive political cycles. They must bring statutory tax rates closer to regional averages while broadening the base through better documentation and enforcement. The fight against the informal economy must move from slogans to visible action: real border controls, supply-chain monitoring, and functional track-and-trace systems. Equally important, Pakistan needs swift, transparent, and rules-based dispute resolution to ensure that commercial conflicts do not drag on for years.

The reform agenda is well known; what remains uncertain is the political will to act. Each new corporate exit adds another data point to an increasingly troubling trend. The government can dismiss these as isolated cases or recognise them as the market’s verdict on its policy direction.

Procter & Gamble’s withdrawal should not be seen as an ending, but as a warning shot — a moment to choose predictability over improvisation, discipline over drift, and enforcement over theatre. Global investors have made their position clear. The question now is whether Pakistan is ready to listen.