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Why Pakistan fails to unlock its economic potential

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Marta Grudzinska
November 4, 2025

Pakistan’s foreign direct investment (FDI) remains strikingly low despite its abundant natural resources, youthful population and strategic location near major global economies.

With Pakistan's FDI averaging just 0.6% of GDP in recent years — far below regional peers like Vietnam — experts point to high corporate tax rates, limited export capacity and military dominance in key sectors as major deterrents. While China leads as the top investor, much of its involvement has come through loans rather than growth-driving projects. As Pakistan eyes its mineral wealth to attract new investment, questions persist about whether policy reforms and political stability can unlock its economic potential.

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