It is believed that multinational companies (MNCs) are extremely important for developing countries/economies.
Why MNCs are important and the Benefits They Provide: Foreign Direct Investment (FDI): First and foremost, these MNCs bring FDI, which is always welcomed and needed by developing countries.
Employment and Poverty Eradication: Secondly, and most importantly, they create employment. This often guarantees an unmatched salary package compared to local companies for the newly employed. Hence, they assist in eradicating poverty and improving the living standards of the people.
Skill and Technology Transfer: Another important, rather the most important, aspect is the training acquired by local employees from multinational employers is incomparable. It is actually the transfer of skills that local employees get trained in.
Economic Growth via Taxes and Exports: These also support economic growth by contributing to the local economy in terms of taxes MNCs pay to the government. With the increase in production, the government earns foreign exchange by exporting and often reinvests.
Competition and Local Development: According to one research study, results reveal that MNCs also invite local companies to produce and compete with them. Some accept the challenge and get the technology transfer to their employees, while some hesitate.
Prerequisites for Attracting FDI: It is important that in order to attract FDI, a country must have certain prerequisite conditions, such as economic and political stability, considered to be a must.
Pakistan’s Experience with FDI: Positive Period: Pakistan witnessed a decent amount of inflow of FDI during and after 2000 when its GDP growth rate was showing an increasing trend. A number of multinational companies invested in Pakistan and helped in generating employment, poverty elevation, and raising the GDP growth rate of the country.
Recent Economic Indicators: During FY 2022, Pakistan’s GDP growth rate was 6.18% which fell to -0.21% in FY 2023.
It then recovered to 2.5% during FY 2024.
For the current year 2025, the projected growth rate calculated is between 2.6% and 3.04%. (Important to note the recovery signal.)
The Outflow of MNCs: A Serious Concern: Now, for a few years, Pakistan is witnessing the opposite of it. One by one MNCs are exiting.
The latest being Procter & Gamble (P&G), a large one famous for its consumer items, initially survived the shocks. It seems they have tried all options to stay before taking this extreme action.
On October 1st, we heard the devastating news that P&G has announced its decision to exit Pakistan. In this regard, company operations will fully cease by May 2026. This is a deeply concerning development, as such multinationals often anticipate turbulence in the country’s near future long before it becomes visible to the public. (The above is confirmed by my niece and a few other persons working for it.)
This is not the first one but happens to be a huge one. P&G has announced that it will adopt a third-party distribution system, avoiding direct assets structures, adopting a way to reduce risk, increase efficiency, as well as their profit margin.
The exiting of multinationals started in 2022. These include:
Eli Lilly – November 2022 (ceased manufacturing)
Sanofi-Aventis – April 2023
Shell Pakistan (Energy) – Mid 2023
Bayer – June-July 2023
Telenor – December 2023
Pfizer – May 2024 (asset sales)
Total Energies – 2024 (stake sale)
Microsoft – July 2025
Careem – July 2025
Procter & Gamble – October 2025
And now ICI is also on the verge of quitting its operations from Pakistan.
Why Pakistan Fails to Retain FDI: At present, the serious concern is why Pakistan failed to retain foreign direct investment (FDI)?
There is a slight divide among analysts’ consensus as to why FDI is exiting:
The first argument has more weight as it is well supported by data:
Historical Data: Historically, it is witnessed and data also verified that during the years 2004-05 when the economy was growing at the rate of 7 to 8 percent of GDP, showing progressive stabilization, FDI inflow was greater.
Recent Data: On the contrary, in the later years when the economy started showing a downward trend, during the years 2021 onwards, with even a negative growth rate in one year, FDI started showing decline. It is observed that the outflow of FDI started after sensing a serious blow to the GDP growth rate.
Impact of MNC Exits: Major blow is and will be caused by P&G, the huge supplier of consumer goods since 1991. The time when it started supplying a large variety of consumer goods such as soaps, washing detergents and more, was a period when MNCs had a mushroomed growth as the Government of Pakistan formulated an investment policy to create an investment-friendly environment, facilitated by introducing significant macroeconomic reforms. There has been a manifold increase in FDI during that period.
Now, starting from 2022, the shutdown of these MNCs will have a huge impact:
1. Decline in Government Revenue: Will have a huge impact on taxes the government used to generate from these, hence government’s revenue will decline at an alarming rate.
2. Unemployment and Poverty: Another serious issue would be unemployment, which will certainly cause poverty. It may lead to street crime and take it to the next level.
Unfriendly Business Policies: The unfriendly business policies adopted by the government are.
Continuous increase in energy and gas prices with interrupted supply, shortages, and frequent power outages.
Imposition of additional taxes.
Fluctuating exchange rate, certainly causing a high-price differential, implying unbelievably high cost of production.
All the above-mentioned, when accumulated, affected their profits, which forced them to think beyond and exit.
Economic Sector Performance:
Industrial sector grew by 5.26% in the 4th Quarter of the FY.
Services sector grew by 3.72% in the 4th Quarter of the FY.
Agricultural sector shows warning signs: Pakistan being an agricultural economy and historically more than 60% of the population engaged in agricultural farming, but growth figures show a decline as minimal as 0.56%. This downward trend is attributed to the decline in the production of major crops, contributed by factors like urban migration and farming lands being converted into residential societies. Pakistan had an agro-based economy earlier, which has now shifted to the service sector.
Local Giants are also affected: The story does not end here. Our local giants such as Gul Ahmed announced to shut down its export section. Unfortunately, at the time when one should be thinking of increasing exports in order to generate more foreign exchange.
The Way Forward: These are significantly important for the economy. At the moment, when foreign companies are shutting down their operations, it is the time to seriously sit down with the business community and reframe the unfriendly policies to business-friendly. The only way to reinvite/attract FDI and motivate to bring back the local businesses once again in the mainstream.
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