KARACHI: Pakistan’s foreign direct investment dropped four percent to $439.1 million in the first quarter of the current fiscal year, the central bank data showed on Monday.
The July-September FY2021 FDI inflows stood at $457.6 million. The country attracted $236 million in FDI in September alone, which was lower than $202.8 million drew in the same month of last fiscal year.
The decline in the FDI inflows is attributed to the decreased investments from China. Net investment inflows from China fell to $76.9 million in July-September FY2022 from $154.9 million a year ago, while investment from the United States increased to $100.9 million from $19.7 million. FDI from Netherlands rose to $60.2 million from $21.6 million a year earlier. The power sector, which dominated the FDI inflows, did not manage to maintain an upward trend and net FDI from the power sector fell to $131.1 million in July-September FY2022 from $198.1 million in the same period of last year.
Oil and gas exploration inflows were $63.6 million between July and September, up $64.2 million from a year earlier. Global direct investment has been declining since the outbreak of the coronavirus with flows falling sharply in 2020 to level that was even lower that the thoughts witnessed during the last global financial crisis of 2008-09.
Advanced economies experienced the sharpest declines, though FDI flows to developing economies were also weaker than the previous year. China and India, however, were the major exceptions to this trend, as FDI to both these economies rose firms in the high-tech and ICT industries saw higher inflows amid mergers and acquisitions, whereas Chinese pharmaceutical firms also received fresh FDI inflows from abroad, said the SBP third quarterly report.
Nonetheless, the overall weak global trends were also partially responsible for the tepid FDI inflows to Pakistan. At the same time, some indigenous factors were also at play, it added.
First, there were a lack of triggers that could have stimulated fresh investments into that sectors that have been receiving higher FDI over the past few years such as telecom and power. In case of telecom sector, cellular service firms had borrowed from their foreign parent companies last year to deposit their licensce renewal fees with the government. These firms did not need to make large licensing payments this year and did not need receiving any significant fresh investments from abroad for other business or operating activities.
In fact, some of the firms repaid their intracompany loans this year which slightly increased the gross FDI outflows from telecom sector this year. In case of the power sector also, FDI was nearly unchanged. Some CPEC-related power generation and distribution projects, which had received significant FDI last year, received relatively lower investments this year as the projects near completion, whereas FDI outflows were also recorded from some power projects.