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June 11, 2019

FDI tumbles by 51.7pc to $1.376 bn in 10 months of PTI govt

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June 11, 2019

ISLAMABAD: Foreign Direct Investment has tumbled alarmingly by 51.7 percent in the first 10 months of ongoing fiscal to US $1.376 bn as compared to US $2.849 billion in the last financial year in same period.

According to the Economic Survey 2018-19, the FDI from China stayed at 31.2 percent of overall inflows as compared to 60.5 percent in the preceding year. However, China continued to dominate direct investment followed by the UK and Hong Kong.

It also mentions that a considerable decline in investment from Malaysia has been observed in this period. However, Pakistan has improved its position on ease of doing business index and jumped to 136th position as compared to 147thposition last year out of total 190 economies.

This will surely attract foreign investors and will boost FDI. Furthermore, Pakistan carried out three reforms during the past year in the areas of starting a business, registering property and resolving insolvency, according to the World Bank’s annual report titled “Ease of Doing Business 2019”.

Among regional peers Pakistan ranked behind Bhutan (89), India (77), Nepal (110), and Sri Lanka (100), only ahead of Bangladesh (176) Maldives (139), and Afghanistan (167). In terms of sectors, construction sector replaced the power sector in attracting highest net FDI of US $386.8 million followed by oil and gas exploration of US $287.3 million and financial business US $256.5 million.

Power sector being the main contributor to drag down the overall inflows showed a sharp decline of 127.21 percent in July-April FY2019 as compared to the same period last year. This is mainly due to the completion of early harvest CPEC projects.

Though there have been increased inflows in electrical machinery and financial business. Yet power sector declined inflows could partially be compensated. The focus of the current government is to improve the investment climate to attract foreign investment in the country.

For the purpose, the government has taken different initiatives at the international level. Pakistan has recently signed offshore Gas Pipeline deal with Russia. Similarly, Saudi Arab has shown interest to invest in a new oil refinery in Pakistan's growing deep-sea port of Gwadar which is likely to increase FDI in Pakistan.

Moreover, Prime Minister’s recent visits to Malaysia and UAE would also be helpful in attracting more FDI. Foreign portfolio investment account witnessed outflows of US $1.27 billion during July-April FY2019 as compared to US $2.352 billion inflows in the same period last year. It is worth to be mentioned that the previous government had mobilised US $2.5 billion in FY2018 by issuing Eurobond and Sukuk in December 2017.

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