ISLAMABAD: The single largest transaction on account of procuring majority shares by Dutch company in Engro Foods brought $467.4 million foreign direct investment (FDI) into Pakistan, resulting into changing negative growth of FDI into positive during the first half of the current fiscal year.
Contrary to perception of increasing foreign direct investment mainly because of China in the context of $51 billion China Pakistan Economic Corridor (CPEC), the official data shows something very different that the FDI from China have declined, investing $213.4 million during July-Dec period of the ongoing financial year 2016-17 against $452.9 million in the same period of the last financial year 2015-16.
The foreign investment from China was less than half in the first half of the current fiscal compared to the same period of the previous financial year despite the much trumpeted CPEC entering into operational phase.
Although, China has become the largest bilateral donor by providing $847 million loans to Pakistan during the first six months of the current fiscal year yet its FDI declined significantly in comparison with the same period of the last financial year. The Engro Foods had entered into an agreement with Netherlands based company for selling majority shares of 51 percent in July last year 2016.
The Netherlands’ company Friesland Campina got majority stakes but the State Bank of Pakistan received $467.4 million in December 2016, so the FDI jumped up to cross $1 billion mark and turned negative growth of FDI in first five months into positive in the sixth month of the current financial year.
Pakistan received total net FDI to the tune of $1,080 million during first six months of the ongoing financial year against $978.5 million in the same period of the last financial year, registering a positive growth of 10.37 percent.
If this single largest transaction is excluded from the overall received FDI from all other countries then it would again result into negative growth. Instead of thumping each other part, the Board of Investment (BoI) will have to join hands for taking all out efforts to achieve positive results on account of receiving FDI in remaining months of the current financial year.
The official circles are still unclear as to how they are going to treat inflows coming from China because of lingering confusion which if persisted could result into double counting of these inflows. Whether inflows from China are debt creating or non debt creating, is still unclear. In order to resolve this lingering controversy, the government has constituted a committee comprising of all stakeholders to resolve this definitional issue once and for all.
When contacted the Planning Commission’s Chief Economist Dr Nadeem Javed said on Wednesday that the FDI was picking up partially because of CPEC as Chinese funded projects were picking up pace. The acquiring of food chain also resulted into accelerating the FDI as its first installment received and remaining amount would be received in coming months.
He said that many other countries were showing their interest to align themselves with the CPEC and it was expected that the positive trends in FDI would continue in months ahead. To another query about treatment of inflows from China and difference of opinion among the stakeholders, he said that it was not big issue and the committee formed by the government would resolve it amicably as it was definitional issue which would be resolved soon.
This correspondent made several attempts to contact Chairman Board of investment (BoI) Miftah Ismail but he did not respond till filing of this report.
