The Multinational Corporations in Pakistan

 

The multinational Corporations in Pakistan:

It was indeed a time, when multinational companies did very well in the economic prosperity of Pakistan.

But, during last decades the multinational corporation suffered a lot globally due to below reasons.

 

1.       A worldwide recession especially in North America and Europe.

2.       Restructuring of  many corporation in the form of mergers and acquisition.

3.       Market competition especially from the far eastern economies, as most of the corporation are based in either Europe or North America.

4.       The overall cost of doing business increase globally.

 

Due to above reasons, the corporation started outsourcing of their business processes to countries where cost of labor is cheaper. As a result of this move below countries got some extra opportunities in their economic activities due to extra toll manufacturing  task received:

 

1.       Indonesia

2.       Thailand

3.       Taiwan

4.       Brazil

5.       Turkey

6.       India

 

Once can easily find that Pakistan did not get any share in this economic shift due to below reason.

 

1.       Isolated from the  global economic platform

2.       Political and social unrest

3.       Due to global interest in South Asia, which were  different from the benefit of  Pakistan interest.

 

As a result of these factors, Pakistan not only  failed to attract new foreign investment rather, its existing  foreign  economic corporation, started shifting businesses and  found to reduce cost, below were the negative effects in Pakistan economy which on can easily found.

 

1.       Closure of foreign banks operation

2.       Changes in global regional hubs, and Pakistani based  multinational were instructed to report to India.

3.       Back office support, including procurement, accounting, HR , reporting centers of multinational corporation were shifted from Pakistan to India.

 

Surprisingly, the GDP growth  was at normal levels during last decade in  Pakistan due to some positive input from local industry and strong service sector contribution. But as a result of moving back office functions of multinational corporations  to India, now the negative effect is very apparent. Below are vital aspects in this context.

 

1.        A massive  increase in unemployment  rate    in the field of  Finance, procurement, engineering  and human resources.

2.       Massive redundancy  examples were observed from multinational corporate sector in Pakistan

3.       People were fired from the jobs and could not be absorbed in the local corporates.

4.       FBR lost  portion of direct taxation from the employees of multinational corporates.

5.       The cost of doing business of all multinationals was drastically decreased, and the enjoyed huge global profits.

6.       Created a  social unrest and widen the class difference in Pakistan economy and society as a whole. Karachi and Lahore  both got a severe hit in all this process, since most of the corporates are based here.

 

Below are some remedies to stop this mal practices   of multinational corporations specially in Pakistan.

 

1.       The professional bodies in Pakistan, like Engineering Council, ICAP, ICMAP and other should take notice of this  economic crises in Pakistan and  propose the options which will benefit the local economy  accordingly.

2.       The  corporate law and taxation authorities should  devise a sort of due diligence process for multinational corporation, to avoid shifting its  partial business processes to India.

3.       Massive  corporate taxation should be imposed over such  corporations which breach  the above said element

4.       SECP should  devise  some laws for multinational  corporates to outsource their business  activities only to locally incorporated Pakistani companies.

5            There should be  massive  incentives for local  Pakistani corporates to  produce goods and services                      where multinationals enjoy monopoly.