By Mubashir Akram
A new wave of exits is signaling trouble for the economy.
Procter & Gamble will wind down local operations and shift to third-party distribution. In the last two years, Sanofi-Aventis was sold out, Eli Lilly ceased manufacturing, Bayer wound down operations, Shell sold its business, TotalEnergies exited a significant stake, Telenor sold its mobile operations, Pfizer divested local assets, and in 2025, Microsoft shut down its domestic offices, while Careem suspended services.
The pattern spans sectors and business models, which is precisely why it matters. Each firm offers its own rationale, yet the aggregate signal to global boards is clear: Pakistan has become a difficult venue for large, rule-bound companies. Reputation is a leading indicator. When blue-chip names retreat, capital listens.
Markets vote every day; boards vote with exits.
P&G’s decision is another warning about an investment climate that discourages rather than protects capital. If the trajectory were genuinely improving, global brands would be queuing for entry, not looking for the door. The core complaint is policy unpredictability. Overseas investors have warned for years that abrupt shifts and reversals destroy planning horizons and push up risk premia, even when demand exists.
Tax policy has become a drag rather than a fix. Over the past year, large companies faced a 29 percent corporate income tax, an 18 percent general sales tax, and a super tax of up to 10 percent. Business leaders argue that Pakistan’s effective burden now exceeds that of regional competitors and requires rationalization to restore parity. The result is more litigation, more cash trapped in disputes, and fewer long-horizon bets on production.
Policy reversals magnify the damage. Sudden tariff and tax changes in energy and industry can flip projects from viable to unviable overnight. In one recent case reported by a business daily, a planned refinery became uneconomic after a last-minute tax change. That is less a market failure than a policy failure.
Macro strain compounds the problem, but it is not the whole story. A weaker rupee, import restrictions during dollar shortages, and high inflation have all hurt. What alarms investors is the reaction: rules that change without notice, enforcement that targets the visible rather than the violators, and decisions that appear hostage to special interests. Political uncertainty matters, but policy clarity matters more.
Alongside this sits a parallel economy. The Pakistan Business Council estimated in 2023 that illegal trade, smuggling, counterfeiting, and tax evasion total roughly $68 billion annually, approximately 20 percent of the formal economy, with tax losses in the trillions of rupees. For compliant firms, this represents a daily competitive disadvantage compared to untaxed goods that cross borders or originate from noncompliant plants.
The mechanics are not complicated. When high rates, abrupt controls, and uneven enforcement collide with a price-sensitive market, activity migrates off the books, compliance is penalized, and the treasury collects less, not more. Regulatory whiplash and complex exemptions invite arbitrage, with the consequence visible in reduced formal volumes, delayed projects, lower capacity utilization, and cash diverted to litigation rather than investment.
Raise the cost of compliance without raising the certainty of enforcement, and the informal economy becomes the default setting.
This is not only an enforcement challenge, but also an architectural challenge. Policy is too often designed and overseen with diffuse accountability and weak conflict-of-interest safeguards, which blur the line between public purpose and private advantage. Oversight should function as a searchlight, not a shield. Transparent consultation, published impact
analyses, and time-bound review clauses can restore credibility and reduce the space for discretion.
The presence of global companies has long conveyed confidence in Pakistan’s market size and talent. Their departures are more than operational choices; they are reputational signals. The message to international boards is that policy instability, heavy and inconsistent taxation, and a large illegal economy now outweigh the opportunity. The costs are concrete: jobs foregone, technology transfers missed, supplier ecosystems thinned, and a diminished perception of rules-based commerce.
Official narratives often claim stabilization and the return of investors, but the recent exits suggest that those investors did not receive the memo. One can say the business environment is thriving, except in the areas where firms must operate.
If investors are returning, many are also returning their keys!
The reform agenda is not mysterious. First, restore credibility by committing to multi-year tax and regulatory frameworks that endure political cycles, with a clear commitment to avoiding retroactive or surprise changes. Second, shift from tax overreach to tax breadth by bringing statutory rates closer to regional norms while broadening the base through documentation and predictable enforcement. Third, make illegal activity high-risk and low-reward; sustain border enforcement; tighten supply-chain controls; prosecute visibly; and implement track-and-trace systems that actually track and trace. Fourth, institutionalize swift, rules-based dispute resolution so commercial conflicts do not fester for years.
None of this requires a grand reinvention; only disciplined execution is needed. Publish the rules, keep them steady, enforce them evenly, and measure the results. Each new exit adds another data point to an unflattering trend. Policymakers can dismiss it as noise, or they can read it as the market’s message. P&G’s decision is a warning. Whether it becomes a turning point depends on whether policy finally chooses predictability over improvisation, discipline over drift, and enforcement over theater. Investors have stated what they need.
Global capital can accept risk; it cannot accept roulette.
(The writer is the Country Director for the ACT Alliance Pakistan.)
