KARACHI: Pakistan’s foreign direct investment increased 12 percent in the five months of the current fiscal year, with major inflows going into the oil and gas explorations, communications, and the financial sectors, the central bank data showed on Friday.
The country attracted $798 million in foreign direct investment (FDI) in July-November FY2022, compared with $710 million in the corresponding period of the last fiscal year. In November, the FDI came in at $136 million.
Net FDI flows in the financial businesses rose to $156 million in July-November FY2022 from $114 million a year ago.
The communications sector witnessed an inflow of $100 million in July-November FY2022 against the outflows of $48 million last year.
Foreign companies invested $11 million in the oil and gas exploration sector in first five months of current fiscal year, compared with $98.9 billion in the same period last year. The SBP’s data on the FDI by the source of origin showed that FDI flows from China continued to decline as Chinese firms invested $149 million, compared with $337 million last year.
Emerging markets, including Pakistan, have been facing a challenging environment with respect to FDI.
However, apart from a number of global factors, the lower FDI inflows to Pakistan also reflected some indigenous factors. In the wake of no major telecom spectrum issuance or license renewals, FDI into the telecom sector dropped sharply from last year’s elevated levels, according to the SBP’s annual report on the State of Economy for FY2021.
In FY20, the government had received license renewal fees from three major cellular service providers in the country. Telecom firms tend to take intercompany loans from their foreign sponsors to make such payments, and these loans had pushed the FDI into Pakistan is lately being driven by sector-specific activity in a few segments of the economy for many years now, and is primarily dependent on progress on CPEC-related projects, said the report.
“For telecom, this includes spikes in FDI whenever the government conducts auctions of telecom spectrums or when license fees of cellular firms become due. Meanwhile, since the advent of CPEC in FY2016, the sizable investments into the power sector have primarily originated from China,” it said.
“As such, there is a need to actively pursue the second phase of CPEC, while also utilizing the opportunities presented by the upcoming special economic zones to attract FDI from China. In addition, a further enabling in the policy environment, including by simplifying and easing relevant regulations, may attract foreign investment into more dynamic sectors of the economy, such as ICT,” it added.