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Business Recorder

Patchy security progress clouds confidence

Pakistan's volatile security environment, coupled with persistent political instability, has long acted as a drag on investment and business confidence, creating a climate of uncertainty that deters both local and foreign investors. Risks ranging from terrorism and militant attacks to street crime and politically charged demonstrations raise operational costs, elevate financial risk, and weaken long-term investment appetite. Recent findings from the OICCI Security Survey 2025, covering the period from June 2024 to May 2025, shed light on how changes in the security landscape are influencing business sentiment. The survey points to clear improvements in major economic hubs such as Karachi and Lahore, where businesses reported fewer operational disruptions and a more secure environment for company assets, employees, and customers. Declines in serious crimes, including armed robberies and kidnappings, particularly in Karachi, wider Sindh, and Punjab, have been a positive development, as has the notable drop in street crime in Karachi, Lahore, and Islamabad. Employee perceptions of safety during commutes have improved in these cities, suggesting that enhanced urban security directly supports workforce productivity and mobility. These positive changes have been underpinned by growing confidence in law enforcement agencies, with the Sindh Police, Sindh Rangers, Khyber Pakhtunkhwa Police, and the Citizens Police Liaison Committee (CPLC) Karachi receiving favourable assessments for their role in creating a safer business environment. However, the security outlook remains uneven. Regions like Balochistan, interior Sindh, and parts of Khyber Pakhtunkhwa have either stagnated or deteriorated, posing continued challenges for investors and businesses operating in or sourcing from these areas. In particular, Balochistan stands out as an emerging area of concern, with deteriorating law and order undermining perceptions of safety. Even in areas showing improvement, businesses continue to report issues such as illegal gratification, expatriate security risks, and disruptions caused by politically motivated strikes and demonstrations. These factors feed into broader governance challenges and perpetuate investor caution. The historical link between security and investment in Pakistan is clear. Episodes of heightened violence and political turmoil have repeatedly coincided with sharp declines in foreign direct investment. During 2008–2010, militant violence and political instability drove FDI down by more than 50%, from $5.41 billion in FY2008 to about $2.15 billion in FY2010. More recently, between 2022 and 2024, a combination of political turmoil, devastating floods, rising terrorism, and economic stress eroded investor appetite, stalling key projects and suppressing overall investment inflows. This pattern underscores the broader reality that improvements in macroeconomic indicators or temporary political consensus often fail to translate into sustained investor confidence without a secure and predictable operating environment. The OICCI Security Survey results suggest that while recent improvements in Karachi, Lahore, and other key business hubs offer a window of opportunity to strengthen investment prospects, this progress is fragile and regionally uneven. Long-term growth and the ability to attract sustainable foreign and domestic capital depend on addressing security risks comprehensively, tackling corruption, improving law enforcement in lagging regions, and reducing political disruptions. Without such systemic reforms, investor sentiment will remain cautious, and Pakistan's potential for leveraging its strategic location, young workforce, and emerging consumer market will continue to be constrained by the enduring perception of risk.