FDI falls 58 percent to $709.3 million in FY15

KARACHI: Foreign direct investment (FDI) inflows into Pakistan fell 58.2 percent in the last fiscal year of 2014/15 even through a range of other economic indicators during the period pointed to a speed-up in the economy, figures from the central bank showed on Wednesday.
The data issued by the State Bank of Pakistan showed that the FDI inflows dropped to $709.3 million in July-June FY15, compared with $1.698 billion during the preceding fiscal year.
In June 2015, the country saw a net capital outflow of $93.9 million as against the inflow of $189.5 million in June 2014. Total foreign investment was also down 42.3 percent to $2.561 billion in FY15.
FDI is a measure of investment in businesses and factories, as opposed to foreign portfolio investment in assets such as stocks and bonds.
Growth in South Asia’s second-biggest economy picked up in the last fiscal year and full-year growth reached over four percent. Economy preformed comparatively well last year when the government had taken some tough economic reforms. While good relations with the international monetary organisations also gave a much-needed boost to the economy.
Portfolio investment at local bourses significantly increased to $924.6 million in FY15 as against $622.8 million in FY14.
The SBP data revealed that sectors, like financial, oil and gas exploration and telecommunications posted decline in FDI inflows, while beverages, textiles, power and construction sectors were able to mobilise higher inflows than the last year.
Analysts said FDI inflows have been weakened and inadequate for the last seven to eight years as foreign companies slashed spending in developing economies due to global economic slowdown.
They said struggling growth combined with other factors, including political instability, poor internal security situation and bad governance also slowed down foreign and capital investments into the country.
“Pakistan will not be a destination for big foreign investors until and unless the economy grows at the rate of 6-7 percent annually,” an analyst said.
Analysts said the FDI outlook for the current fiscal year will remain cloudy as structural bottlenecks at the domestic levels like energy shortages and prevalence of circular debt are still unresolved, and continue to hurt economy.
They, however, believe that the cross border investments will start picking up momentum this year mainly in the energy and infrastructure sectors under the China-Pakistan Economic Corridor.
“Despite positive message coming from international financial institutions on Pakistan's economy, global investors remain nervous and uncertain,” said Dr Ashfaque Hasan Khan, dean at NUST Business School. “Resultantly, foreign investors are pulling out money from the country,"
An amount of $1.570 billion pulled out from the country in FY15.
International Monetary Fund had also cautioned Pakistan on slow investment into the country and said the private investment, including FDI, and exports are still much below the desired levels.