EDITORIAL: Exit of MNCs

EDITORIAL: According to a Business Recorder exclusive, the government is considering the introduction of investment and production protection policy for multinational corporations (MNCs) to forestall their exit from the country.

The focus to date, the report indicates, is on reducing federal excise duty.

The question is if this focus would arrest the exit of the MNCs. The recent MNCs that exited the country include: (i) Shell, which has sold its stake in Shell Pakistan, TotalEnergies sold 50 percent stake in Total PARCO to the Swiss Gunvor Group with the objective of focusing on regions with greater growth potential; (ii) pharmaceutical companies, including Pfizer, Bayer, Sanofi-Aventis and Novartis, have ended production in the country; (iii) Microsoft has closed its local operations after 25 years, (iv) Uber and Careem have suspended their operations; (v) Proctor and Gamble is winding down its production operations and shifting to third-party distribution; and (vi) Yamaha has scaled back its operations.

The reasons cited include a discriminatory tax policy, high corporate taxes, restrictions on profit repatriation and a cumbersome regulatory system. The current government has left itself little room to adjust the programme design flaws that were agreed with the International Monetary Fund (IMF) under the ongoing Extended Fund Facility (EFF) due to the continued looming threat of default for three persistently prevailing reasons.

Firstly, the Fund programme design is based on dated policies which fail to take account of the evolving international world order — from the US-led unipolar neoliberal economic system of the recent past to a multipolar world order that has continued to flourish in spite of weaponising of sanctions, freezing of sovereign funds and barring the use of transfer of funds through the Western-controlled SWIFT system.

Secondly, not taking account of the unique domestic conditions with Pakistani economic team leaders retaining the same mindset as their predecessors through support of neoliberal economic policies (market capitalism inclusive of privatisation, free trade).

This fallout of this mindset is exacerbated by the fact that market capitalism has never truly prevailed in Pakistan as government overspending on current expenditure routinely crowds out private sector borrowing accompanied by all major industrial groups having formed powerful associations that effectively influence and benefit from the budgeted fiscal and monetary policies.

And finally, foreign exchange reserves that are cushioning the external rupee value and containing the budgeted expenditure under interest and payment of principal as and when due are entirely debt-based — the rollovers by friendly countries plus loans are in excess of 16 billion dollars while reserves as per the State Bank of Pakistan website are 14.5 billion dollars as of 20 November 2025.

The Pakistani government would have been well advised to slash its own current expenditure rather than put the onus of a reduction in the budget deficit to sustainable levels on raising revenue.

The Finance Minister often cites the upgrade in Pakistan’s rating by the rating agencies as an achievement; however, he must also take note of the fact that our rating remains well below investment grade that would have lured foreign investors.

Additionally, the regulatory framework especially with reference to the pharmaceutical sector, focuses on making medicines affordable but at the same time failing to take account of rising input costs, associated with the Fund programme as it insists on full cost recovery, leading to closures.

To conclude, there is a need for the government to negotiate more proactively with the Fund staff in phasing out upfront quantitative conditions, which would be possible if the government can increase leverage through curtailment of the current expenditure that would automatically reduce the inordinate focus on increasing revenue, which is one of the main reasons cited for not only exit of MNCs but also lower output of domestic units.

Copyright Business Recorder, 2025