Pakistan's Prime Minister Shehbaz Sharif (left, ©AP via Kyodo) and India's Prime Minister Narendra Modi (Courtesy of the Japanese Cabinet Secretariat).
In recent years, the operating environment for multinational corporations (MNCs) in South Asia has diverged sharply between Pakistan and India. While India continues to attract record levels of foreign investment and corporate expansion, Pakistan has witnessed a steady retreat of global firms across sectors. This contrast reflects not only macroeconomic trends but also the underlying business culture, regulatory frameworks, and institutional capacity that shape investor confidence and long-term strategic decisions.
Pakistan, despite being the fifth-most populous country in the world, has struggled to retain the interest of major international companies. The recent announcement by Procter & Gamble (P&G) to shut down its manufacturing and commercial operations in Pakistan is emblematic of broader challenges.
P&G, which entered the market in 1991 and built a strong portfolio of household brands, now plans to serve Pakistani consumers through regional distribution channels. While part of a global restructuring effort, the decision also reflects persistent local issues: economic instability, currency repatriation barriers, weak consumer demand, and rising operational costs.
A Concerning Trend
P&G's exit follows similar moves by Shell, Pfizer, TotalEnergies, Telenor, and Microsoft. Pfizer sold its Karachi manufacturing plant to Lucky Core Industries in 2024, ending local production. Shell exited in 2023 after years of strategic reconsideration, selling its stake to Saudi Arabia's Wafi Energy.
TotalEnergies divested its share in Total PARCO Pakistan Limited to Singapore-based Gunvor Group. Telenor, after a failed merger attempt, agreed to sell its Pakistan operations to Pakistan Telecommunication Company Limited, though regulatory approvals have delayed the transaction. Microsoft, after 25 years in Pakistan, quietly shut down its operations in July 2025.
These exits span diverse sectors, consumer goods, energy, pharmaceuticals, telecommunications, and technology, suggesting systemic rather than sector-specific issues. Industry leaders have pointed to high power costs, regulatory uncertainty, and infrastructure bottlenecks as key deterrents.
Saad Amanullah Khan, former CEO of Gillette Pakistan, noted that such departures should serve as a wake-up call for policymakers. The lack of reliable logistics, frequent power outages, and delays in approvals have made it increasingly difficult for MNCs to operate efficiently.
The pharmaceutical sector offers a particularly stark example. Multinational drug companies have faced prolonged delays in price change approvals and regulatory hurdles from the Drug Regulatory Authority of Pakistan (DRAP). Inconsistent enforcement, lack of transparency, and outdated promotional standards have discouraged innovation and investment.
Incentives, Policies and Instability
These challenges are compounded by macroeconomic instability, currency depreciation, inflation, and limited access to foreign exchange, which erode profitability and complicate financial planning.
Pakistan's tariff structure and frequent policy shifts further undermine investor confidence. High import duties on essential inputs, including machinery and technology, raise production costs and discourage modernization.
The absence of meaningful incentives for foreign investors, coupled with a weak intellectual property regime, limits the scope for long-term strategic engagement. Even when MNCs maintain a presence, it is often through scaled-down operations or third-party distribution models, reflecting a cautious approach to risk.
India In Contrast
In contrast, India has emerged as a preferred destination for global investment. In FY24–25 alone, India attracted $81 billion in foreign investments, driven by steady economic growth, a rapidly expanding middle class, and a business-friendly policy environment. The government's proactive initiatives, such as "Make in India," digital infrastructure expansion, and tax reforms, have created a conducive climate for corporate expansion.
Major global firms are deepening their footprint in India. Airbus is investing across manufacturing, engineering, and training, aligning with national priorities. Microsoft has committed $3 billion to expand its cloud and AI infrastructure, with new data centers planned to support growing demand.
Apple has significantly increased iPhone production, assembling over $22 billion worth of devices in April 2025 alone. Amazon, already one of India's largest employers, is investing an additional $8.2 billion in cloud infrastructure in Maharashtra. NTT DATA has launched its largest data center campus in India, while VinFast LLC is building a $2 billion EV manufacturing plant in Tamil Nadu.
The pharmaceutical sector in India is also thriving. Eli Lilly is investing over $1 billion in contract manufacturing and establishing a global capability center in Hyderabad. The company is positioning India as a key hub for innovation and production, including the rollout of its experimental weight loss drug. These moves reflect confidence in India's regulatory environment, skilled workforce, and infrastructure readiness.
Consistency, Stability, Competitiveness
India's success in attracting and retaining MNCs is not merely a function of market size. It stems from consistent policy reforms, institutional stability, and a strategic focus on competitiveness. The country has made significant strides in ease of doing business, digital governance, and infrastructure development. Regulatory agencies are increasingly responsive, and intellectual property protections have improved, fostering innovation and investment.
The contrast with Pakistan is stark. While India is scaling up operations and integrating into global supply chains, Pakistan is grappling with exits and downsizing. The divergence is not inevitable but reflects choices in governance, policy design, and institutional capacity.
Pakistan's challenges, economic volatility, regulatory inefficiency, and infrastructure gaps, are solvable, but require sustained commitment and reform.
In conclusion, the retreat of MNCs from Pakistan underscores the importance of a stable and supportive business environment. Without improvements in regulatory transparency, infrastructure reliability, and macroeconomic management, Pakistan risks further isolation from global investment flows.
Meanwhile, India's ascent as a strategic hub for multinational corporations highlights the dividends of reform and long-term planning. For policymakers in Pakistan, the message is clear: competitiveness is earned, not assumed, and the global marketplace rewards those who build for the future.
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Author: Professor Pema Gyalpo, PHD
Dr Pema Gyalpo is a Visiting Professor at the Takushoku University Center for Indo-Pacific Strategic Studies.
