How can a Foreign Company set itself up and operate In Pakistan?

Yes this is possible, but before any company which incorporated abroad can open a branch in Pakistan,  it is necessary for it to get permission from the Board of Investment (Pakistan). Furthermore , an issue of shares by a local company to non-residents requires permission from the State Bank of Pakistan.Legal protection of minority shareholders is normally achieved by suitable provisions in Articles which under Companies Ordinance, 1984 can only be altered by special resolution requiring ¾ majority. Special resolution is also required for reduction of issued share capital along with confirmation of reduction by court.

Every company incorporated outside Pakistan must, within one month of establishing a place of business in Pakistan, file with Registrar a certified copy of its charter or memorandum, address of its principal or registered office, list of its directors, chief executive and secretaries, name and address of principal officer of company in Pakistan, names and addresses of one or more persons authorized to accept service of process and notices on behalf of company, and address of its principal place of business in Pakistan. Any change in any of matters aforesaid must be reported to Registrar, and company must file with Registrar each year its annual balance sheet and profit and loss account.