Pakistan's internet crisis sparks fears of mass exodus of foreign investments

The slow and erratic performance of the internet in Pakistan due to a controversial firewall system being installed by the government has led to business and industry associations warning of a mass exodus of foreign businesses from the country.

The warnings by the Pakistan Business Council (PBC) and the Pakistan Software Houses Association (PSHA) came months after some of the top companies, including Uber, Pfizer, Shell, Eli Elly (USA), Sanofi (France), Telenor (Norway), Lotto Chemical (South Korea) sold either their entire or partial holdings to local companies.

The move indicated a substantial outflow of foreign investments and questioned Pakistan’s investment climate, economic policies and regulatory hurdles.

“Many multinational companies (MNCs) are either planning to relocate their back offices from Pakistan or have already done so, as the reported imposition of a firewall causes widespread internet disruptions across the country,” the PBC said in a statement.

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A top financial analyst, Sarwat Ali said, the digital economy is imperative for a growing economy in any country.

“Pakistan is already facing economic challenges because of growing unemployment and sluggish growth and it doesn’t need investors and businesses to feel insecure about the future of their digital/outsourced businesses,” he added.

A recent report claimed that over the past two years, nine multi-million super-rich companies had divested their assets in Pakistan highlighting a significant setback for the country’s economy.

Their exit, including from several key sectors, reflects a broader concern over the issue of internet freedom in Pakistan and the infrastructure to provide businesses with the best facilities.

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The PBC said that last year, the Dubai Chamber of Commerce registered 8,036 new Pakistani businesses and this figure had grown to 3,968 Pakistani companies registered in Dubai between January and June 2024 — making Pakistan the second-ranked country on the list.

This migration reflects a deepening lack of confidence in the government’s economic policies. Key factors contributing to this trust deficit include the high cost of doing business, political uncertainties, soaring electricity costs, and deteriorating law and order.

The tech industry has already expressed serious concern over the recent internet slowdown.

The PSHA has also warned that the country could lose almost USD 300 million every month and more because of the imposition of a national firewall, which is causing prolonged internet disconnections and erratic performance of virtual private networks, threatening a “complete meltdown of business operations.” The country recorded USD 298 million in IT exports in June, up 33 per cent from the year before. During the fiscal year that ended in June, IT exports were worth USD 3.2 billion, up 24 per cent from USD 2.5 billion in the fiscal year 2023.

The Overseas Investors Chamber of Commerce and Industry (OICCI) also warned that frequent internet disruptions in Pakistan could derail the country’s economic progress.