Investor confidence in Pakistan is improving, but issues persist

The confidence of foreign investors in Pakistan as a favorable investment destination has been rising, a new survey has shown, while highlighting that lingering issues like tax refunds and delays in dispute resolution continue to impact the business environment.

The Overseas Investors Chamber of Commerce and Industry (OICCI), the body of more than 200 leading foreign investors in Pakistan, has released its biennial ‘Perception and Investment Survey 2025’, revealing a cautiously optimistic outlook from foreign investors on Pakistan’s business and investment climate.

The survey showed 73% of OICCI members recommended Pakistan as a viable destination for foreign direct investment, up from 61% in 2023.

This shift reflects improved macroeconomic stability, reduced inflation — declining from 37% in mid-2023 to 4% by July — and a relatively stable rupee, alongside upgraded international credit ratings.

The survey highlighted Pakistan’s regional standing on investment viability has improved compared to 2023. Around 35% of respondents reported that their headquarters are now considering Pakistan a priority destination for investment, compared to 24% in 2023.

Commenting on the survey, OICCI President Yousaf Hussain said the improved investors’ sentiment demonstrates that economic stability and policy coordination are beginning to deliver results.

“Initiatives like the SIFC have provided a structured mechanism for investment facilitation and inter-governmental alignment,” he said about the Special Investment Facilitation Council, which includes both civilian and military officials, and serves as a one-window destination for foreign investors.

Hussain called for more private-sector engagement and continued taxation and regulatory reforms to sustain this momentum.

Persistent issues

The OICCI survey findings also indicated that structural bottlenecks continue to constrain Pakistan’s investment potential.

Among the most critical concerns highlighted in the survey is the lack of federal-provincial coordination which received negative feedback from 57% of respondents.

According to the survey, 96% of respondents reported higher energy costs, 95% reported increased wage expenses, and 91% cited higher domestic raw material costs as issues that hamper their businesses.

Over 80% expressed concern over delayed tax refunds, which in most cases take more than two years to process. Furthermore, over half of the respondents indicated that commercial disputes take over five years to resolve, highlighting the need for judicial reform and more efficient dispute resolution.

OICCI members also recommended enhancing Pakistan’s digital and regulatory landscape, supported by stronger human capital and a comprehensive, sector-focused investment policy. They emphasized developing non-IT industrial capacity to diversify growth.

They also called Pakistan’s improved global image vital to attracting long-term foreign investment.

Call for reforms

The OICCI survey called for several reforms to sustain improved investors’ confidence. It included reduced input costs, setting up a National Tariff Commission to evaluate unfair trade practices, maintaining a flexible exchange rate to ensure export competitiveness, expanding access to trade financing, and improving infrastructure.

About the new tariff policy — which aims to reduce import tariffs by 2030 — OICCI said the move could increase exports by around 14%, boost GDP by 0.2% and create over 300,000 jobs.

Future outlook

On global perception, 82% of respondents noted that negative international coverage continues to influence investment decisions, highlighting the need for a proactive communications strategy to project Pakistan’s economic recovery and reform progress at global forums.

The survey’s recommendations call for broadening the tax base, ensuring policy consistency, strengthening coordination between federal and provincial governments, and enhancing intellectual property rights enforcement to sustain investor confidence and attract long-term FDI.

Foreign investors identified IT and digital services, renewable energy, agriculture, pharmaceuticals, and export-oriented manufacturing as the most promising sectors for future FDI. However, operational constraints persist, including a rising tax burden, policy inconsistency, high energy costs, and issues with contract enforcement, all of which continue to impact competitiveness.

The secretary general of OICCI, M. Abdul Aleem, said even though the investor confidence has improved, there remain critical areas like high business costs, complex taxation, and delays in contract enforcement that require immediate attention of policymakers.

“OICCI members recommend harmonizing tax policies, simplifying regulations, and enhancing institutional capacity to translate optimism into concrete FDI inflows.”