MNCs like P&G, Shell wrap up operations in Pakistan; experts cite 'promotional ethics'

Procter and Gamble has decided to wind down operations in Pakistan

American MNC Procter & Gamble on Thursday announced its decision to wrap up manufacturing and commercial activities in Pakistan. The company also said that it would now be depending on third-party distributors to serve customers.

Meanwhile, several MNCs have announced decisions to wind down operations in Pakistan in the last three years, Dawn reported. The list includes Uber, Yamaha, Microsoft, Eli, Lilly and Shell, amongst others.

Dawn spoke to analysts about the shift in the working structure of the MNCs in Pakistan. Business and economy journalist Khurram Hussain told Dawn that the companies have their own reasons for exiting from Pakistan and it is not about the country as much it is about restructuring within the companies themselves.

“Take Shell as an example. They have exited the retail fuel business in Mexico and Indonesia as well as Pakistan, and retail energy more broadly in many other markets,” Hussain was quoted by Dawn as saying.

He added that the companies are looking at higher margin areas like liquefied natural gas and their exit from Pakistan was "part of this global restructuring".

While speaking to Dawn, former Pakistan Business Council (PBC) chief executive officer (CEO) Ehsan Malik said that several factors were responsible for this shift and that it varies from sector to sector.

He added that the MNCs operating in the pharmaceutical sector have opted to exit from Pakistan owing to several delays in price change approvals and promotional ethics that are not up to the mark.

He further said that companies like Shell and P&G have decided to leave because of the “global change of focus on categories and geographies” and several others are exiting due to weak enforcement of intellectual property rights, according to the report by Dawn.

"Growing competition from local companies, a large informal sector and shrinking margins dilute the group performance, which together with high taxes and a weaker Rupee are factors that also contribute to an exit," he was further quoted as saying.

Meanwhile, Malik also said that the MNCs often say that "security conditions" also play a part in the decision and added that local managements have now learnt to cope with the conditions. "It is important to note that an exit does not always result in the withdrawal of products and brands,” he said.

“A distributor model can maintain their presence and MNCs can rely on third-party market research and advertising agencies to promote their brands," Malik was quoted as saying by Dawn.

Meanwhile, Dawn also spoke to the Director of Research and AKD Securities, Awais Ashraf, who said, "Many companies are relocating as part of a strategic shift toward operating from regional hubs instead of maintaining manufacturing facilities in every country, enabling them to leverage economies of scale.”