KARACHI: Foreign direct investment (FDI) more than doubled to $2.1 billion in the first nine months of the current fiscal year mainly on Chinese inflows and spectrum proceeds from Norway, the central bank’s data showed on Monday.
The State Bank of Pakistan’s (SBP) data showed that FDI amounted to $905.1 million in the corresponding period of the last fiscal year.
The surge in FDI was mainly driven by increased Chinese inflows followed by Norway. Net direct investment from China rose to $872 million in July-March FY2020 from $22.4 million a year earlier. Investment from Norway increased to $288.5 million from $6.4 million.
In March, FDI also increased to $278.7 million from $145.4 million in the corresponding month a year earlier.
Analysts are cautious to predict the impact of the coronavirus pandemic that hit the global economy with growth forecast at negative three percent in the current fiscal year
“The extent of damage is unknown. It is too early to make a guess,” Abdul Aleem, CEO of the Overseas Investors Chamber of Commerce and Industry said. “So going forward, this environment of doom and gloom is bound to negatively impact on the capacity and motivation of the leading international organisations and countries who regularly lead FDI in the developing world.”
Aleem said the level of FDI would likely be lower globally for next 12-18 months and Pakistan might also be part of this downward trend.
“Although we feel, that with highly attractive cost of production, due to extremely low Pakistan rupee to USD, and a large middle class market potential, Pakistan should be on the radar of many MNCs (multinational companies) looking for opportunities to relocate their manufacturing facility for local consumption and export,” he added.
In July-March, power sector fetched the highest FDI of $757.4 million compared with an outflow of $353.1 million in the corresponding period last year. Another noticeable increase was seen in communication sector that received $490.3 million FDI as against the outflow of $141.1 million.
Aleem said FDI in Pakistan has been well below the real economic potential of the country over the years, for various reasons, including negative perception of the country. “The world is currently in the middle of one of the most challenging threats in the form of COVID-19, which has severe human and economic consequences.”
“Pakistan could be very attractive place for growing export of IT services,” he said, however. “Philippines, for example, a country half of our size in population, has annual IT export of over $30 billion, more than our total exports. Why is Pakistan lagging behind, is a point to ponder for all stakeholders in this sector, more so for the regulators.”
The SBP’s data further showed that foreign portfolio investment in stock market saw an outflow of $103.3 million in nine months compared with $409.5 million outflows last year. Foreign investment in market treasury bills and Pakistan Investment Bonds stood at $331.1 million compared with $0.7 million a year ago. Total foreign investment rose 380 percent to $2.375 billion in July-March FY2020.
