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Contribution by the multinational companies in Pakistan

Multinational Companies (MNCs) are significant employers across Pakistan which is a substantial support to the government. The government on its own may and should not be doing the work of generating the employment opportunities rather the government should work as an efficacious regulator to ensure that the objectives are being met as per requirement.

Pakistan unlike India and China has not really been an avid destination of the MNCs from across the world for a multitude of reasons. Though a country with the population exceeding 208 million, Pakistan lacks the lure in terms of attracting the MNCs. Whether leading multinational consumer goods companies, leading beverage companies, global automobile companies, mobile handsets, etc. Pakistan is not the foremost choice in the region. And those MNCs which have been operating in Pakistan for decades have not invested in local talent as such and have not realized the potential of the Pakistani market. The MNCs operating in Pakistan need to invest in the local talent as is being done in India and China in addition to other countries across the world. Merely imposing global business models and practices in the Pakistani market has not worked and may not work in the future as well. Besides, investing in the local talent, MNCs do invest in Research & Development across the world unlike in Pakistan where window dressing is more prevalent rather than the work which might prove beneficial for the economy and the population of Pakistan.

Proponents of the MNCs believe that the capital repatriation by the MNCs from Pakistan is a normal course of action whereas the opponents presume that the MNCs are fleecing the population of Pakistan and are not even following the international laws. MNCs have not made inroads in employment generation as such and have not set up model Research & Development facilities in Pakistan. MNCs need to make their mark so that people may not equate them with the East India Company (1600-1874) which is an instance of drawbacks.

There are several schools of thought about the operation of the MNCs in Pakistan. According to one school of thought, MNCs in Pakistan have the privileges which might not be offered to them even in our neighboring countries. MNCs in Pakistan are presumed to be so strong that even the government decisions get impact.

MNCs usually are a good source of foreign direct investment. MNCs do work and purchase raw material for the operations from the country of operation. In the instance of Pakistan, purchasing raw material from the local producers is a point of debate. Do MNCs purchase raw material from the local producers or do the local producers provide quality raw material and are they able to meet the requirement of the MNCs?

Enormous challenges lie ahead of the economy of Pakistan. What could be the strategy of the economic team of Pakistan to fix the economy sooner rather than later. One of the ways may be to lure the MNCs to invest in Pakistan. Besides technological transfers, transfer of skills, trickle down effects, contribution in the government revenue, encouraging competition, substantial influence and budgets. MNCs are a great source to get investment which does help the balance of payment crisis, which Pakistan is currently going through. The greater the Foreign Direct Investment (FDI) by the MNCs, the more controlled the current account deficit, which has shaken the economy of Pakistan in recent months.

 

There are MNCs across the world with a budget greater than the economies of certain countries. This is the sheer power of the concept of an MNC.

Pakistan’s economic woes in terms of current account deficit cannot only be addressed by imposing regulatory duties to curtail imports. One of the immediate methods could be to encourage the existing MNCs to set up plants and augment the number of products by giving them tax incentives. The new entrants may as well be lured to generate employment opportunities along with revenue collection. However, the long term repercussion could be the repatriation of profit and dividends as is being witnessed for last couple of years.

The successful models of attracting MNCs may be witnessed in both China and India where localization of the MNCs was ensured along with ever-increasing investment in setting up plants and even the investment in the export-oriented sector. These models have proved win-win situation for both the MNCs and the country where the investment is made.

There were merely 7000 MNCs in the 1970s, however, the number has sprawled to hundreds of thousands today by virtue of the returns on investment and the burgeoning demand throughout the globe right from the developing to the developed countries.

There are instances of multinational giants acquiring Pakistani companies as part of their growth strategy to establish presence in Pakistan. One of the leading current examples is the purchase of an online shopping company by a global conglomerate which indicates that the Pakistani market is a potential market for the global conglomerates. China’s Alibaba Group acquired the entire share capital of Rocket Internet’s Daraz Group which operates online marketplaces in Pakistan.

Pakistan could be a favorite destination for the MNCs since there is burgeoning educated young population which surely would be the focus of attention by the MNCs for their profitability.

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