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Thursday March 28, 2024

FDI falls 3.8pc to $615.5 million

KARACHI: Flows of foreign direct investment in Pakistan fell 3.8 percent to $615.5 million in the first eight months (July-February) of the current 2014/15 fiscal year, showed the central bank data on Tuesday, as security challenges deterred investors. Several economists see the current fiscal year as grim in terms

By Erum Zaidi
March 18, 2015
KARACHI: Flows of foreign direct investment in Pakistan fell 3.8 percent to $615.5 million in the first eight months (July-February) of the current 2014/15 fiscal year, showed the central bank data on Tuesday, as security challenges deterred investors.
Several economists see the current fiscal year as grim in terms of foreign direct investment (FDI).
They said foreign companies are unwilling to invest in Pakistan because of deteriorating security conditions and business climate.
Adverse law and order in the country, especially in oil and gas-rich areas (of Balochistan especially), discourages foreign investors.
Trade policies are not conducive for the foreign companies to put their money in the country, they added.
“In 2006-07, Pakistan had attracted more interest from foreign investors when FDI flows stood at $5 billion and portfolio investment was $3.5 billion,” said Dr Salman Shah, former caretaker finance minister. “However, global recession, weak security situation and the energy constrains changed that dynamic.”
In July-February 2013/14, the country attracted $640.1 million, showed the data by the State Bank of Pakistan (SBP).
In February this year, FDI was recorded at $74.9 million as against $86.8 million in February last year, it said.
“If present trends hold, FDI is likely to increase to $1 billion by the end of this (fiscal) year,” forecast Dr Shah.
“Pakistan needs foreign investment in energy and infrastructure sectors, but the response from foreign investors has not been encouraging,” he said.
“The energy sector, in particular, offers tremendous investment opportunities to foreign investors. Not only wellhead prices are above the global standards, exploration success rate is also attractive compared to international standards.”
In July-Feb FY15, foreign portfolio investment sharply rose 397.2 percent to $194.9 million as compared to $39.2 million in July-February FY14, the SBP said.
Analysts attributed a considerable growth in portfolio investment in Karachi Stock Exchange to higher returns offered to foreign investors.
Total foreign investment flows saw a significant growth of 138.9 percent in the period under review as it stood at $1.776 billion against $743.6 million earlier.
The SBP said the decline in FDI was broad-based except for textiles, transport, oil and gas exploration, power and telecommunications and financial business.
Economists said though global recession of 2009-12, which hit the economies of Europe and America, subsided and Pakistan got no objection certificate from the International Monetary Fund for foreign investors to invest in the country, the country’s credit rating from different global agencies has not been improved so far.
They said the present government claimed that it would do its level best to increase FDI, but it couldn’t do so.
The government said Chinese President, who will soon visit Pakistan, will bring more foreign investment into energy and power sectors.
It said the financial closure of power projects under the Pak-China Economic Corridor will be complete this month.