China contributes over half of FDI inflows in Pakistan

KARACHI: China has contributed more than half of the total foreign direct investment (FDI) into Pakistan during the first 11 months of the current fiscal year.

The Chinese inflows also offset the adverse impact of significant outflows from the capital market during the period under review, according to the data of foreign investment released by the State Bank of Pakistan (SBP) on Friday. 

The total FDI during July–May 2015/16 registered 10.5 percent growth to $1.083 billion as compared to $980 million in the corresponding period of the last fiscal year.

The net FDI inflows from China during the period stood at $571 million, which was $234 million in the corresponding period of the last fiscal year, depicting a growth of 144 percent.

Analysts said that the major chunk of inflows from China came under China-Pakistan Economic Corridor (CPEC). China has launched $46 billion project, comprising construction and infrastructure in Pakistan.

The government in the budget 2015/16 estimated $2.1 billion, or Rs207 billion, disbursement from China, mainly in the power and construction sectors.

The analysts said that the inflows would start from the next fiscal year, as the government in the budget 2016/17 announced concessions and exemption for Chinese investment, especially for the development of the Gwadar Port.

Other significant investors during July-May 2015/16 are Hong Kong ($130 million), Italy ($92 million), Switzerland ($74 million), UAE (US$151 million) and the UK ($66 million).

The outflows to Saudi Arabia continued this year also. The net disinvestment by the Kingdom during the 11 months under review was $92 million as compared to $59 million a year ago.

The analysts attributed the inflows to lower oil prices and lower fiscal space.

The power sector received the biggest chunk of FDI inflows, attracting $533 million this year as compared to $181 million during the same period of the last fiscal year.

Of the total, $132 million was invested in thermal energy, $110 million in hydroelectric and $290 million in coal-based power plants.

The total foreign private investment has come down 62 percent to $702.6 million during the first 11 months of the current fiscal year as compared to $1.855 billion in the corresponding month of the last year.

The portfolio investment sharply declined by 143 percent to outflows of $381 million as compared to inflows of $874.9 million in the 11 months of the last fiscal year.

The analysts said that amortisation of $500 million Eurobonds issued in FY06 was major factor behind the fall. Similarly, turmoil in China’s equity market, weak global oil prices and interest rate hike by the Federal Reserve adversely affecting the portfolio investment in the private sector.