FDI up 6pc to $1.284bln in July-February

KARACHI: Pakistan’s foreign direct investment (FDI) inflows rose 6 percent to $1.284 billion in eight months of current fiscal year of 2016/17, with major inflows going to food, construction, and electronics sectors, data released by State Bank of Pakistan showed on Thursday. 

The country drew $1.211 billion in FDI in the corresponding period of last fiscal year.  Almost half of the total FDI inflows were received from Netherlands followed by China, Turkey, and France. However, inflows from other countries remained unimpressive. 

The inflows from Holland came from a Dutch firm, which invested $467.8 million in the country during July-February FY17 against $24.4 million in July-February FY16. 

Overall investments, totaling $130.6 million arrived from Turkey in July-February FY17 against $16.3 million in July-February FY16. However, the foreign investment from China dropped to $264.8 million in July-February FY17 from $529.3 million a year ago. 

The SBP figures revealed that an investment of $468.6 million went into the food sector during July-February FY17, compared with an outflow of $35.4 million in the corresponding period of last fiscal year. 

The construction sector attracted $155.7 million in the FDI in eight months against $34.7 million last year, while net flows to the electronics businesses increased to $142.6 million from $31.3 million a year earlier. 

An analyst said the FDI inflows continued to maintain a moderate pace marked by some improvement in multinationals’ confidence in the country’s economy.  “Moreover, these flows were shaped by an acquisition activity seen in the food business,” he added. 

He further said the country seems to have received some remaining inflows against the acquisition of 51 percent shares in Engro foods by Netherlands-based Company --this transaction was finalised in December last year.      

However, the decline in FDI inflows was noticeable in power sector—where they dropped to $257.6 million from $532.8 million a year ago.   

Moreover, the foreign investment inflows in oil and gas exploration sector also witnessed a fall of $93.2 million, compared to $205.9 million recorded last year. 

Many economists believe the fundamentals of the FDI are expected to be positive but may depend on improvement in varying cost of doing business, good institutional governance, inflation and country risk. 

“There is a dire need to attract inflows into the manufacturing sector, rather than energy sector, which is concessional,” said Dr Salman Shah, former finance minister. 

Analysts expect increase in portfolio investments once the MSCI include Pakistan in its emerging market index in May 2017. 

Portfolio investment at the equity market witnessed an outflow of $353.2 million in July-February FY17, compared with the outflow of 347.6 million in July-February FY16.