PAKISTAN`S economy is at a critical juncture, struggling to attract foreign direct investment (FDI) while witnessing an exodus of international companies. Despite its strategic location, large population, and untapped potential, Pakistan has failed to create a conducive environment for investors.

Meanwhile, neighbouring countries like India, Bangladesh, and Vietnam have successfully positioned themselves as attractive global investment destinations. Understanding why Pakistan lags behind, what lessons it can learn from its neighbours, and why international companies are leaving is crucial for devising a sustainable path forward.

A primary factor hindering FDI in Pakistan is political instability and inconsistent policies.

Investors seek predictability, so our frequent government changes, policy reversals, and delays in implementing agreements create uncertainty, deterring long-term commitments.

Coupled with an underdeveloped legal framework for protecting investors` rights, these challenges erode confidence. Prolonged disputes, weak contract enforcement, and bureaucratic inefficiencies make operating in Pakistan risky for foreign firms, as evidenced by its poor rankings in ease of doing business compared to its regional peers.

Energy deficiencies and infrastructure gaps further discourage investment. High electricity tariffs, frequent power outages, and inadequate transport networks inflate operational costs and disrupt industrial activity. In contrast, Vietnam and India have made significant investments in renewable energy and infrastructure, ensuring reliability and reducing costs for businesses. Although Pakistan hassought to address these issues through initiatives like the China-Pakistan Economic Corridor (CPEC), progress has been uneven, and many special economic zones (SEZs) remain underutilised.

The perception of Pakistan as a high-risk destination persists despite improvements in security. Geopolitical tensions and sporadic unrest continue to affect investor sentiment.Additionally, the country`s tax regime is viewed as burdensome, with high corporate tax rates and overreliance on indirect taxes increasing costs. Combined with corruption and inefficiencies in regulatory processes, these factors further undermine Pakistan`s competitiveness as an investment destination.

International companies have increasinglycited economic instability, fluctuating exchange rates, and inflation as reasons for exiting Pakistan. High operational costs, particularly in energy, have made alternative markets more attractive. Shrinking consumer purchasing power has further eroded Pakistan`s appeal as a growth market. Companies like Procter & Gamble, General Motors, and HSBC have scaled back or closed operations, reflect-ing broader concerns about the country`s economic environment.

By contrast, Pakistan`s neighbours have implemented strategic reforms to attract FDI.

India has capitalised on its large market size, stable policies, and targeted initiatives like Make in India to lure multinational corporations.

Simplified tax structures, infrastructure devel-opment, and sectoral liberalisation have boosted its appeal. Vietnam has positioned itself as a manufacturing hub by integrating into global supply chains, signing free trade agreements, and offering incentives like tax holidays.

Bangladesh, focusing on its competitive advantage in ready-made garments, has created export processing zones and maintained consistent policy support to drive growth.

These examples underscore the importance of strategic vision, targeted reforms, and consistency in policymaking to create a favourable investment climate.

To reverse the declining FDI trend, Pakistan must undertake bold reforms. Political stability and policy continuity are essential to reassure investors. A bipartisan approach to economic policymaking would help ensure predictability and reduce uncertainty.

Strengthening investor protections, such as efficient dispute resolution mechanisms and secure property rights, would further enhance confidence. Simplifying tax structures, lowering corporate taxes, and offering targeted incentives would improve competitiveness and encourage foreign firms to invest.

Energy reforms are equally critical.

Expanding renewable energy projects, restructuring tariffs, and privatising loss-making state-owned enterprises in the power sector can reduce costs and enhance reliability.

Fully operational SEZs under CPEC, with modern infrastructure and streamlined regulations, can transform Pakistan into a hub for regional trade and manufacturing.

Human capital development is another key area. While Pakistan has a young population, the lack of vocational training and industryrelevant education limits its workforce`s poten-tial. Expan ding technical training programmes, improving education quality, and aligning skills with market needs will create a talent pool attractive to global industries.

Collaborating with international firms to establish training centres can accelerate this effort.

To strengthen external resilience, Pakistan must diversify its exports beyond textiles.

Sectors like information technology, pharmaceuticals, and engineering goods require targeted support to expand their global reach.

Improving customs processes, enhancing product quality, and exploring new markets will bolster competitiveness. Incentivising remittances through formal channels and rebuilding foreign exchange reserves through prudent monetary policies can reduce vulnerability to external shocks.

Pakistan`s struggle to attract and retain FDI stems from structural weaknesses, policy instability, and operational inefficiencies.

However, the successes of India, Vietnam, and Bangladesh demonstrate that these challenges are not insurmountable. By fostering political stability, reforming governance, improving infrastructure, and investing in human capital, Pakistan can position itself as a competitive destination for global investment.

The departure of international companies should serve as a wake-up call, emphasising the urgency of reforms. With decisive action and a long-term vision, Pakistan can transform its economic landscape and secure a prominent place in the global economy. The choices made today will determine the nation`s trajectory for decades to come. • The writer is an economic expert with 30 years of experience in 19 countries