Foreign Corporate Exodus from Pakistan A Myth Dispelled

With the implementation of reforms and the establishment of the Special Investment Facilitation Council (SIFC), Pakistan is gearing up for a new wave of foreign investment, debunking the myth of mass corporate exit.

KARACHI: Contrary to the widespread belief that global companies are fleeing Pakistan, a closer examination reveals a different story. Over the past 18 months, more foreign firms have entered the market than those who have left.

A detailed report, “Pakistan Economy: Exodus of Foreign Investment, Myth not Reality”, co-authored by Arif Habib Limited CEO Shahid Ali Habib and Head of Research Tahir Abbas, sheds light on this trend. The report highlights that while 11 companies exited or planned to exit Pakistan, 16 new foreign firms are actively acquiring stakes in local businesses.

The narrative of a corporate exodus is not only misleading but entirely at odds with the growing interest from international investors. With recent government reforms and the SIFC in place, Pakistan is preparing for a resurgence of foreign direct investment (FDI).

Sectors like energy, mining, refineries, corporate farming, and exploration are drawing the attention of global players. As Pakistan’s macroeconomic indicators improve, a further increase in FDI is anticipated.

The country’s population reached 241.5 million in 2023, a 31% increase from 184.4 million in 2013. This population boom has driven demand for commodities, making Pakistan an attractive destination for foreign firms.

Additionally, the government has deregulated the prices of non-essential medicines and is considering similar moves for petroleum pricing. Planned developments in the tech sector, including IT parks and tech cities, are also expected to attract foreign interest, particularly in pharmaceuticals, oil marketing, and technology sectors.

In the fiscal year 2024, Pakistan saw a 17% rise in net FDI inflows, reaching $1.9 billion, compared to $1.6 billion in the previous year. China contributed the most, with $568 million, followed by Hong Kong at $359 million. The power sector attracted $800 million, while oil and gas exploration brought in $304 million in investment.

Oil Marketing Companies and Refineries

Pakistan’s oil marketing industry is undergoing a transformation, marked by a series of mergers and acquisitions. While established players like Shell Petroleum and TotalEnergies are leaving, new entrants such as Wafi Energy Holding, Gunvor Group, and Saudi Aramco are stepping in to fill the void, bringing with them fresh investment.

In May 2024, Saudi Aramco, one of the world’s most powerful energy companies with a market capitalization of $2 trillion, made its first investment in Pakistan by acquiring a 40% stake in Gas and Oil Pakistan Ltd (GO) for approximately Rs56 billion ($200 million).

Wafi Energy has also acquired a 77% stake in Shell Pakistan, and TotalEnergies is collaborating with Gunvor Group to sell off 50% of its stake in Total Parco Pakistan, illustrating the dynamic shifts in foreign investment in the region.

Pakistan’s local refineries are currently unable to meet the growing domestic demand. However, with a new refinery policy in place, the country is poised for significant investments in refining capacity. Saudi Arabia has expressed plans to set up a state-of-the-art refinery, which is expected to be operational in five to six years, reducing the reliance on imported petroleum products.

Pharmaceutical Sector

In recent years, several foreign pharmaceutical companies have exited the Pakistani market, with domestic firms stepping in to fill the gap. Pfizer Pakistan, a subsidiary of Pfizer Inc, sold six of its key products, including Ponstan, Ansaid, and Corex-D, to Lucky Core Industries. Japanese pharmaceutical company Eisai Co Limited has also sold off its Methycobal and Myonal product lines.

Bayer Pakistan, a subsidiary of the German company Bayer AG, sold 12 of its products to OBS Pakistan for Rs7 billion. These transactions reflect a significant shift in the pharmaceutical industry as local companies continue to grow.

IT and Tech Sector

Since January 2023, foreign investors have shown great interest in Pakistan’s IT sector, particularly in fintech. Turkish fintech company Papara acquired 100% of SadaPay, while Advans Pakistan Microfinance Bank, owned by a Luxembourg company, was sold to the Netherlands-based MNT Halan.

Additionally, Telenor is in the process of selling its Pakistan operations to UAE’s Etisalat-run Pakistan Telecommunication Co Ltd, following its exit from nine countries over the past seven years.

With the introduction of 5G on the horizon, Pakistan is expected to see further foreign investment in its tech sector. The power and personal care industries have also witnessed similar activity, underscoring the ongoing foreign interest in various sectors.

Pakistan is clearly on the path to attracting more foreign investment, with new players entering key industries, despite the misleading narrative of a mass corporate exodus.

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