Realigning business ties with Europe

The European Union Ambassador Dr Riina Kionka is reported to have stated this Tuesday that European companies are recognising Pakistan as a potential business destination and are exploring new avenues for economic partnership. Furthermore, the EU is the largest single market in the world and the largest destination for Pakistani exports. The EU is also the world’s largest foreign investor representing 42 per cent of outward foreign direct investment globally.

The positivity underlined in the statement of the European Ambassador is an inspiring prelude to ‘Business Forum’ scheduled for May 14-15 in Islamabad.

This event, which has the support of the EU, its member states, and the Government of Pakistan is being presented as a landmark event. It aims to facilitate dialogue, empower partnerships, and unlock business opportunities in both regions. The objective is bring together government leadership, high-level policymakers, business leaders and CEOs from Pakistan and Europe to foster dialogue between the government and the private sector to improve the regulatory framework and facilitate trade while promoting sustainable business practices. The event will also present the EU’s Global Gateway strategy, its largest investment programme outside of the EU that aims to leverage €300 billion of investments worldwide until 2027. The forum will mark the launch of the EU-Pakistan Business Network — which will group together the 300 plus European companies active in Pakistan.

This resurgence of European interest in Pakistan’s market has come at a time when Pakistan is in dire need of Foreign Direct Investment (FDI) to sustain its economy. It also comes at a time when many of the European companies, having most successfully served Pakistan’s market for decades, have walked out while others have scaled down their operations in Pakistan. The prime factors cited by them for this happening are an uneven playing field, weak regulatory framework, policy inconsistency and transparency challenges to conduct business in compliance to rules of business set by their parent organisations and EU regulatory framework.

The exit of foreign companies wiped out the state of art transfer of technology, skill development venues and, above all, a benchmark to maintain quality standards in products, processes and systems. European countries have played a pivotal role in developing Pakistan’s economic and infrastructure landscape since the country’s inception. The technology transfer, human resource development and vocational training centres set up by the European governments contributed in developing trade and industry, energy and telecommunication infrastructure, healthcare and education sectors. European bilateral funding agencies provided long-term soft loans for mega projects and development assistance, financial aid and technical expertise to support the development of the social sectors.

A great majority of the existing infrastructure projects in the energy sector of Pakistan now forms the backbone of the sector, were largely funded by KfW of Germany via German bilateral long term soft loans.

The GSP+ status granted by the EU has been pivotal in promoting trade between EU countries and Pakistan. These schemes have allowed Pakistani exports to access European markets at reduced tariffs, significantly benefiting its textile and agricultural sectors.

Somewhere down the years Pakistan missed out the importance of maintaining a balanced bilateral relationship with its founding European partners while it went in pursuit of new businesses and funding opportunities emerging from other channels like China and other sources. For years, the engagement of European companies in any sizable project execution or bilateral funding by the European government has been nearly non-existent.

With the fast changing political and economic world order, accelerated by the new government in the USA, the European Union is undergoing a major transformation and alignments in politics and economy. With challenges emerging from the USA markets European Union needs to enhance its share in alternate markets of which Asia in general and South Asia in particular offer a great business potential.

The changing world dynamics also provide Pakistan an opportunity to realign its interests and capitalise on the given situation starting with a strong effort of reaching out to European markets.

Copyright Business Recorder, 2025