FDI increases 4.6 percent to $2.410 billion in FY17

KARACHI: Pakistan drew $2.410 billion in foreign direct investment (FDI) during last fiscal year of 2016/17 , up 4.6 percent from a year earlier, the central bank’s data showed on Monday.

However, FDI inflows fell to $198.9 million in the month of June, compared with $269 million in the corresponding period of FY16.

FDI into Pakistan grew at faster pace in five years in FY17 as Chinese firms continued to invest in electricity generation and construction sectors largely under the $57 billion worth China-Pakistan Economic Corridor (CPEC) initiative.

Chinese investments accounted for nearly half of the total foreign direct investment received by the country in FY17.  Net FDI from China increased 11.47 percent to $1.185 billion during last year.

Apart from China, Netherlands, Turkey, and France emerged as major contributors to FDI, with their investments mostly flowing into food, construction and electronics’ manufacturing sectors.

A country-wise break up on foreign investment revealed that FDI flows from Netherlands surged to $463.4 million, compared with $29.9 million in the previous year.  

Investments from Turkey rose to $135.6 million against $16.8 million in FY16. Moreover, cross-border acquisitions made Pakistan a favoured FDI destination last year.     

The food sector attracted $493 million worth of investment flows in FY17, compared with an outflow of $56 million from the country following an acquisition deal in a Pakistani food processing company by a Dutch conglomerate.

Similarly, purchase of a privately held home appliance company by a Turkish firm boosted foreign inflows into the country. The electronics sector fetched $143 million in FDI in FY17 from $33.7 million a year ago.     

According to Economic Affairs Division, Ministry of Finance, the Chinese companies put money into various infrastructure projects in FY17 that included Havelian-Thakot section of the Karakoram Highway, Sukkur-Multan section of the Peshawar-Karachi Motorway, and the Lahore Orange Line project.

Analysts said prospects of the FDI look brightened on the back of acceleration in CPEC-related projects, improved availability and growth supporting reforms. Foreign investors are comfortable with the country’s growth trajectory.   

However, as the International Monetary Fund warned in its latest report, some risks to foreign investments remain there. “Low growth in advanced countries and in emerging countries along with greater uncertainty around world trade could weaken exports, FDI and workers’ remittances,” the IMF said in its staff report published last week following its Article IV consultations with the Pakistani authorities.

The Fund expects FDI flows to increase to $3.6 billion in FY18. Analysts predicted Pakistan would register a moderate growth in FDI during the current fiscal year. They agreed that net FDI, including from China and other countries, should increase further from its present level to ease pressure on foreign exchange reserves and external payments.

The State Bank of Pakistan’s data showed that portfolio investment saw a decrease of 66 percent in FY17 due to $530.9 million outflow from the local bourse.

Total foreign investment surged 9.1 percent to $2.157 billion in the last year, mainly supported by the 40 percent stake sale of Pakistan Stock Exchange to a Chinese-led consortium.