Western companies moving out of Pakistan due to unfriendly business environment

It is the ease of conducting business more than just the increasing cost of doing business that is forcing many western companies to drive away from Pakistan. Many companies find problems with the speed in which tasks are accomplished in Pakistan. With an energy crisis leaving many without power for hours a day and oil and gas shortages as just the tip of the iceberg; it is corruption that many are finding a problem in Pakistan.

Walt Disney pulled approximately$200 Million dollars worth of yearly textile production from Pakistan and put the country on a banned list of approved supplier countries. The company labeled Pakistan as a risk to their flow of business.

Bob Chapek, president of Disney Consumer Products in a statement said that after much thought and discussion, they felt this was the most responsible way to manage the challenges associated with their supply chain.

He added that the decision is based on a recent report from the World Bank, which assesses how countries are governed, using metrics like accountability, corruption and violence, among others.

Last week Canadian menswear label and retailer Kanati Co. also announced major losses in Pakistan due to corruption, extended down-times and supply chain issues.

As an organization that serves clients globally, hence they can’t afford the disruption and down time in Pakistan. Their clients depend on a fast and reliable service.They can no longer wait and hope for improvements in Pakistan said company co-founder Liam Massaubi.

They recognize when it is time to cut losses and move on. There are added benefits of a domestic manufacturing approach where they are able to control all of the variables, which they cannot do in Pakistan

Kanati Co. followed Walt Disney in placing Pakistan on a banned list of approved countries it will accept as a supplying country.
Western companies are finding themselves in a situation in Pakistan where they are completely unprotected. The overall perception is that Pakistani law enforcement is ineffective and corrupt.

Many companies cite substantial losses from dishonest business associates in Pakistan. When something like this happens; the police do not act and they are left with no recourse.

An environment such as this is extremely unattractive to foreign investment. Instability drives prices and there is no real benefit from doing business in Pakistan. If a company can re-shore and accomplish the same job for a similar cost by time you account for all the added costs and down-time in Pakistan; the country becomes an unnecessary risk.

Unless the Government of Pakistanis willing to step in and offer foreign investment protection and make drastic improvements to law enforcement; they may continue to see more western companies making exits from the region hastily.

Pakistan is a country on the decline according to the World Bank’s “Ease of Doing Business” ranking system that places the country at only 128 of 189 countries.