Over the past decade, Pakistan has witnessed many multinationals rolling up their banners, citing ‘unviable conditions’ — in reality, meaning unbearable uncertainty.
We are witnessing a tragic threshold where flight of capital is occurring because of irreplaceable arithmetic of taxation and despair. Multinationals in Pakistan are not running away from our market but from fear and chaos, which is further exacerbated by the inconsistency in our taxation system. Their departure from our market will also leave us to deal with job losses and social decay.
A comparative analysis of global FDI inflows explains the whole scenario: China at $130 billion (2024); India: $84 billion (2024); Saudi Arabia: $35 billion (2024); UAE combined: $45 billion (2024); and Pakistan: $1.79 billion (2024) – the lowest in South Asia.
In an article I wrote for these pages (‘The taxation system needs reform’, October 1), I elaborated with evidence that our current taxation regime is structurally anti-investment – with corporate tax at 29%; super tax around 10%; workers’ welfare & participation levies at 6.0%; and dividend tax at 15%. Thus, the effective burden is around nearly 45% – and that is before accounting for inflation and devaluation. Compare this to India 25%, Bangladesh 27%, and in Saudi Arabia around 20%.
A historic analysis of our economy from 2000 to 2025 reveals a stark reality: every revenue surge was followed by rupee devaluation. When the PML-N government was ousted in 1999, the tax collection CBR revenue was Rs362 billion at Rs52 per dollar and exports were $9 billion.
When Musharaff’s era ended in 2008, the revenue was Rs700 billion, the rupee fell to Rs85 per dollar and country exports reached $19 billion. When the PPP government completed its tenure from 2008-2013 the revenue was Rs1,850 billion at Rs100 per dollar and exports reached $25 billion.
By the end of the PML-N government from 2013 to 2018, FBR revenue was Rs3,850 billion, rupee around Rs115 per dollar and exports were stuck at $29 billion. In the PTI government 2018-2022, revenue doubled again to Rs6,000 billion, even the rupee crashed to Rs190, and exports still at $29 billion. Now in 2025, FBR collection doubled again as usual at Rs12,000 billion, rupee is around Rs288 per dollar and exports still stagnant around $32 billion.
Over 25 years, our revenue grew by 25 times, whereas our exports remained stagnant and rose only by $23 billion. In alI tenures, we have seen record revenue collections yet the rupee has massively devalued. This is proof that we taxed inflation and devaluation, but not development. Had the rupee remained stable around R100 per dollar, our GDP would have grown in excess of $800 billion instead of $340 billion as of today. We gained the revenue but lost the real wealth of the nation.
Over the last decade, the Pakistani rupee lost over 70% of its value. A $100 investment made in 2015 at Rs100/$ is now worth one-third when exchanged back. The Indian rupee moved modestly in the same period – INR60 to INR88 per US dollar – and Bangladesh’s taka moved from BDT78 to BDT116. During this decade India and Bangladesh gained competitiveness whereas Pakistan only gained inflation and the eventual outcome is overwhelming: In 2017 our exports were $29 billion and in 2025, exports are $32 billion.
We can certainly learn from the Chinese experience where they paired low taxes per industrial scale. India is another example where they ensured policy continuity with predictable taxes, thus attracting 45 times more FDI than Pakistan. Bangladesh also set up a $47 billion garment empire through liberal reforms. In the Middle East, Saudi Arabia’s Vision 2030 unlocked new sectors, attracting $35 billion FDI, while the UAE achieved $45 billion FDI with stability and zero corporate tax. And in our homeland Pakistan, meanwhile, we form committees for every crisis and come up with the conclusion to tax restaurants because ‘they seem full’.
And now recently we have seen food become our economic theory and we are committed to never let go the element of surprise – as seen in our interest Chicken AlBaik. This is not economics.
Economic progress is built on industrial planning, not on recipes and food chains. When government officials claim that crowded restaurants indicate wealth, they are channelling Mughal emperors who, in an era when Europeans built universities, were obsessed with spices and cuisine.
Since 2000, the country’s real-estate sector is representing another illusion that has trapped our capital and competence in plots and files. As land values rise, the country’s entrepreneurial spirit diminishes, with untaxed real estate booming while stifling other industries.
As a result, manufacturing’s share of GDP has dropped from 18% in 2005 to just 11% in 2024. Meanwhile, services – mostly informal – now dominate 60% of GDP but lack export capacity. Youth unemployment exceeds 11% and 60% of graduates are eager to leave the country.
The regulatory labyrinth is another impediment, as multinationals in Pakistan confront many overlapping taxes, levies and NOCs. Bangladesh clears investors in a one-window operation, whereas Saudi Arabia does so in 72 hours. The SIFC was meant to cut red tape, yet only added another layer to the regulation. Such over-governance is killing the spirit of entrepreneurship in Pakistan.
Infrastructure without ecosystem is another problem. For instance, the electric-vehicle policy was announced with fanfare but executed without prudence. Electricity tariff for home charging around Rs20/unit; in-city charging around Rs100/unit; motorway charging is Rs150/unit.
A car charging that costs Rs1,000 to charge at home costs Rs9,000 on the motorway. Who will buy an EV? Infrastructure without ecosystem is policy theatre, and without MNCs or FDI, progress remains illusion.
Pakistan’s bureaucracy was primarily designed for control, not modern commerce and investment business. To drive investment, it needs professionals from finance, industry and technology – people who have met payrolls, not just deadlines. An example: PIA loses billions while private airlines on identical routes earn profit. The difference is competence and professional management.
These issues can be resolved through reforms – and reforms are visible in every successful economy. What can be done must be done – and fast. We can incentivise MNC and FDI through the following: we must stabilise the rupee and end devaluation for fiscal cosmetics; cut corporate tax to 25% and remove all nuisance levies; guarantee profit repatriation in foreign exchange; digitise taxation to eliminate discretion and corruption; privatise bureaucracy, not national assets: bring in professionals to run the system and reduce the government size; promote services exports through tax breaks and venture capital incentives; by taxing idle plots and reward productive investment; offer one-window investor clearance within 72 hours.
Above all, reinstate confidence by demonstrating that Pakistan honours contracts, protects investors and values enterprise.
Pakistan’s investment climate is paralysed by fear. What began with NAB has grown into a network of hostility by agencies and has turned law enforcement and regulation into intimidation. Despite stable finances, record PSX index and strong foreign ties, even domestic investors are avoiding new investment activities. Overregulation and excessive state interference have replaced confidence with caution and investment activity reduced to nearly negligible.
Both MNCs and FDI are mobile, rational and remorseless; they reward efficiency and punish confusion. Because the purpose of any corporation is profit maximisation. When a nation’s best minds prefer to sell plots rather than products, it is not a market failure but a moral one.
Pakistan is not poor but has been poorly governed, and is suffering from a crisis of confidence, not capital. There is a need to understand that capital flight is not betrayal but self-preservation and it is certainly reversible.
Confidence is a very scarce commodity but can be bought with very simple formula – govern justly, tax rationally, spend honestly and protect investors. Once we do this, both MNCs and FDI will return to our market and multiply manifolds. If we try to be complacent, every departing multinational will be another obituary for competence.
The writer is a political economist, public policy commentator and advocate for principled leadership and regional cooperation across the Muslim world.
Disclaimer: The viewpoints expressed in this piece are the writer's own and don't necessarily reflect Geo.tv's editorial policy.