A new research report by the Institute of Cost and Management Accountants of Pakistan (ICMAP) has highlighted a major turning point in Pakistan’s business environment, as multinational companies (MNCs) increasingly restructure, downsize, or exit the market in response to rising operational costs and persistent policy uncertainty. Titled “Diagnosis of Multinational Exits from Pakistan,” the report outlines how the growing adoption of digital and asset-light business models is emerging as a strategic response for companies seeking to remain competitive in an increasingly complex operating landscape.
According to the report, Pakistan continues to present a unique mix of opportunity and risk for global corporations. The country’s large consumer market and strategic geographic location offer strong long-term growth potential. However, high production costs, unpredictable regulatory changes, and inadequate infrastructure have significantly increased the difficulty of operating in the market. These domestic challenges, combined with evolving global business trends, are pushing many multinational companies to adopt defensive strategies such as scaling down operations, selectively exiting underperforming segments, or entering partnerships with local firms.
One of the key issues highlighted by the report is the long-standing challenge of foreign exchange restrictions and delays in profit repatriation, which have historically discouraged sustained foreign investment. Profit repatriation fell sharply from $1.7 billion in fiscal year 2021 to just $273 million in fiscal year 2023, significantly limiting the ability of companies to reinvest their earnings in local expansion. However, the report notes a strong recovery, with repatriated profits rising to $2.215 billion in fiscal year 2024 and reaching $2.1 billion in fiscal year 2025. This rebound reflects improved profitability in specific industries as well as more strategic capital management by multinational firms operating in Pakistan.
The report also identifies bureaucratic bottlenecks as a major operational barrier. Lengthy procedures for acquiring permits, securing tax clearances, and obtaining customs approvals continue to slow business activity and increase compliance costs. Although recent reforms were intended to simplify investment processes, bureaucratic inefficiencies remain deeply entrenched, discouraging new investment and complicating expansion plans. High electricity tariffs, inconsistent power supply, and outdated logistics infrastructure further compound these challenges, driving up production and transportation costs across multiple industries.
Export-oriented firms face additional difficulties due to port congestion, limited road and rail connectivity, and frequent delays in cargo movement. These logistics constraints undermine delivery timelines and weaken Pakistan’s competitiveness in international markets, particularly in sectors reliant on just-in-time supply chains. The report notes that while Pakistan is still viewed as a high-risk market, it continues to be considered a high-potential destination for investment, prompting many multinational companies to maintain a “selective presence” rather than a complete market exit.
Despite the ongoing challenges, the report highlights signs of resilience and adaptation among multinational firms. Increasing digitalisation, changing consumer behaviour, and pressure to innovate are driving companies to rethink traditional operating models. Digital-first strategies and asset-light frameworks are becoming more common, enabling firms to reduce fixed costs while improving service delivery and market responsiveness. The recovery in repatriated profits over the last two fiscal years reflects this adaptability, demonstrating that companies capable of aligning with local realities can still achieve sustainable returns.
The report concludes that Pakistan remains a dynamic and evolving market that continues to attract foreign investment, even as some multinational players adjust their operational footprint. Sectors such as automotive, energy, finance, information technology, e-commerce, and mining continue to draw international interest, underscoring that while the operating environment is challenging, the long-term potential of Pakistan’s market remains intact.
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