Major foreign companies flee crisis-hit Pakistan

The economic turmoil in Pakistan has pushed the country towards a crisis which is massive by nature and duration. The combination of low growth, high debt, unprecedented inflation and a scary shortfall of foreign exchange has made the future of common people uncertain in the country.

There has been a continual flow of news about economic misery including about people dying in stampedes in queues for subsidized rations. With people losing faith in almost all institutions of governance, Pakistan watchers fear that the situation may even lead to a state of anarchy. However, the high decibel noise around the hardships faced by the poor and squabbles of the political class conceals the complete fallout of this economic calamity.

Less noticed but equally concerning is the gradual deterioration in Pakistan’s business environment and stagnancy in inward investments. While a part of it can be blamed on the economic condition, the impact of ill-treatment being meted out to investing companies cannot be ignored.

Impediments like political instability, corruption, discontinuity of macroeconomic policy, security concerns, and energy shortages, etc have traditionally kept foreign investors away from the country. The factors result in business environment problems including red-tapism, bureaucratic lethargy and corruption.

Companies choosing to enter Pakistan in spite of these roadblocks are troubled by the erratic policies of the government and the central bank of the country called the State Bank of Pakistan (SBP). A major issue hampering the smooth operation of multinationals in the current environment relates to SBP’s approach towards the ongoing forex crisis.

Its standard response to most of the problems has been strict control over the movement of forex from the country. The restriction is posing challenges for these companies in conducting their routine operations.

During the past few months, several multinational companies have expressed dismay over institutional hurdles impacting their businesses. Most prominent among them is the excessive foreign exchange control followed by Pakistan. The severity of the problem can be gauged by the fact that some very prestigious global companies are thinking of winding up their operations in the country.

Shockingly, the list includes some prominent companies with having presence across the globe. Among them is Siemens which is a global technology company operating in Pakistan since 1947. A subsidiary of Siemens AG of Germany, Siemens Pakistan is headquartered in Karachi, with branches in Lahore and Islamabad.

The company provides a wide range of technology solutions to various industries including energy, healthcare, transportation, and industrial automation.

Siemens Pakistan is a leading technology company serving various industries, contributing to the overall growth and development of Pakistan’s economy. However, the hostile attitude of the Pak government and SBP is forcing the company to reconsider its future in the country. According to some company insiders, the group is actively contemplating closing down its operations/ facilities in Pakistan.

The company is also said to be mulling over shifting to neighbouring countries including India. Facing an acute foreign exchange crisis, Siemens is believed to have been pushed to the brink by SBP which continues to block its funds amounting to $205 million for several months now.

Other companies facing similar troubles in Pakistan include multinationals from the United States as well. Among them are some big names like Proctor and Gamble, Oracle Services Pakistan, IBM Pakistan, FedEx (Gerry’s Group of Companies), Marriot Hotels, Troy Group Inc. (operating through Amanco Pakistan), Gray Mackenzie Restaurant (master franchise of KFC in Pakistan) and 3M Pakistan, etc.

These companies complain that they must approach SBP and other departments for minor problems, leading to disruptions in their operations.

Majority of issues faced by them are around importing raw materials and machinery into Pakistan, clearance of their shipments and repatriating their profits from Pakistan. It is worth noting that the Pak Ambassador to the US, Masood Khan recently met representatives of several US majors including Microsoft and Amazon to persuade them to increase investments in Pakistan.

However, the problems confronting the existing multinationals in the country expose the futility of lobbying efforts made by Pak Missions in various countries.

The ongoing crisis means Pakistan would have to struggle hard to get on the path of economic revival. The road to recovery would invariably warrant reforms in the business environment of the country including a hard look at the way the policy and governance intuitions are functioning.