Thursday September 28, 2023

FDI plunges 30 percent to $952.6 million in first half

By Our Correspondent
January 19, 2021

KARACHI: Foreign direct investment (FDI) dropped around 30 percent to $952.6 million in the first six months of the current fiscal year as Chinese investment under corridor projects was seen losing its pace, data from the State Bank of Pakistan (SBP) showed on Monday.

The country drew $1.3 billion in FDI in the corresponding period of last fiscal year. FDI fell to $193.6 million in December from $493 million in the same month of last year.

Net FDI from China decreased to $358.9 million in July-December FY2021 from $395.8 million in the same period a year ago, according to the SBP’s data. The country saw an outflow of $44.1 million from the Norwegian firms in July-December FY2021 against an inflow of $288.5 million in the same period last year.

Power sector remained the major recipient of the inflows as FDI in the sector rose to $434.9 million in July-December from $262.2 million a year ago. Telecommunications sector pulled in $27 million foreign direct investment in the first half of this fiscal year compared with an inflow of $419.7 million last year. FDI in financial businesses fell to $145.9 million from $162.1 million.

Inflows sourced from Malta fell to $55.9 million in six months of this fiscal year from $111.1 million a year earlier. The Covi-19 coronavirus shattered the investors’ confidence globally, disrupting the input supplies, while there were growing uncertainties on economic prospects. Due to economic slowdown, foreign companies also faced adverse liquidity crunch.

The companies refrained from reinvesting funds, which are also the main source of FDI. This was in addition to weariness in making investments in new projects. China has been funding series of infrastructure projects under the China-Pakistan Economic Corridor (CPEC) framework, an integral part of Chinese ambitious ‘Belt and Road Initiative’ for improving China’s integration with the region. For the last seven years, a number of power sector and road infrastructure projects have been financed in Pakistan.

The pace is expected to increase as the additional funds would be poured in Pakistan for industrial cooperation, the second phase of CPEC that is moving slowly. FDI in Pakistan usually remains concentrated in a few non-export sectors, such as power, construction, financial business, oil and gas exploration, electric machinery and telecommunications. The sectors attract around 90 percent of total FDI that came into the country, while investment in key exporting sectors, such as textiles, food and leather products, have a very little share in the total investment.