New Delhi, Oct 12 : A worrying trend is emerging in Pakistan's economy as multinational companies continue to scale back or completely exit their operations, raising questions about the country's investment climate.

The latest example is Procter & Gamble, which has decided to wind down its local operations and shift to third-party distribution.

This move follows a series of high-profile exits over the past two years, including Sanofi-Aventis, Eli Lilly, Bayer, Shell, TotalEnergies, Telenor, and Pfizer.

In 2025, Microsoft closed its domestic offices, while Careem suspended services altogether.

These departures are not limited to a single sector. Companies from pharmaceuticals, technology, energy, and telecommunications have all pulled back -- highlighting a broader structural problem rather than isolated business decisions.

Analysts say these exits send a strong signal to global investors that Pakistan has become a challenging environment for rule-bound, globally regulated firms.

Experts point to an unpredictable policy environment as the main reason for these exits.

Abrupt tax changes, regulatory reversals, and ad hoc import controls have increased the cost of doing business and made long-term planning difficult.

For many investors, the risk posed by government policy now outweighs market opportunities.

Taxation is a major concern. Large corporations in Pakistan face a 29 per cent corporate tax, an 18 per cent general sales tax, and a super tax of up to 10 per cent, resulting in an effective tax rate that is much higher than regional peers.

Sudden policy reversals have also damaged confidence. In one instance, a planned refinery project became unviable overnight after a last-minute tax change, demonstrating how arbitrary decisions can threaten large-scale investments.

Meanwhile, the informal economy continues to thrive, with smuggling, counterfeiting, and tax evasion estimated at around 68 billion US dollars in 2023, roughly one-fifth of the formal economy.

This undermines fair competition and pushes more businesses off the books, further shrinking the tax base.

While macroeconomic challenges such as inflation, a depreciating currency, and import restrictions are common in developing countries, investors are particularly alarmed by Pakistan's inconsistent policy responses.

Corporate exits not only result in job losses and missed technology transfers but also weaken supplier networks and damage Pakistan's reputation as a reliable investment destination.

Experts say solutions are straightforward but require political will. Policymakers need to commit to stable, multi-year tax and regulatory frameworks, bring rates closer to regional averages, enforce rules consistently, and crack down on the informal economy.

Transparent and rules-based dispute resolution is also crucial to ensure that commercial conflicts do not linger for years.

Procter & Gamble's exit is more than a single company leaving; it is a warning signal. Each corporate withdrawal reflects growing investor unease and the urgent need for Pakistan to prioritise predictability, discipline, and enforcement if it hopes to regain global confidence.

/IANS