KARACHI: Foreign direct investment (FDI) increased 4.6% in the first seven months of 2015-16 on a year-on-year basis, according to statistics released by the State Bank of Pakistan (SBP) on Tuesday.
Pakistan received $647.9 million in FDI in the July-January period, which is $28.4 million higher than the FDI received in the same seven-month period of the preceding fiscal year.
FDI from China saved the day for Pakistan, as investment from the neighbouring country amounted to $409 million in Jul-Jan, which increased almost 120% from a year ago. The share of Chinese investment in the net FDI Pakistan has received in Jul-Jan stands at 63.1%, more than double from 30% a year ago.
Despite being one of the principal foreign investors in Pakistan historically, the United States is now pulling out its investments on a massive scale.
US investors have pulled out $86.5 million in the first seven months of 2015-16, although net inflows from the world’s largest economy amounted to $120.7 million in the same period of previous fiscal year.
Pakistan has faced low levels of foreign investment in recent years. The SBP has called an increase in FDI ‘imperative’ for sustainability of the economy’s external sector.
Other major outflows of FDI were from investors of Saudi Arabia ($74.4 million), Germany ($30.6 million) and Egypt ($26.3 million) in Jul-Jan, SBP data shows.
FDI inflow was just $23.9 million in January, up $14.7 million from the investment received in the same month of 2014.
The largest net outflow of FDI was recorded in petrochemicals ($136.1 million) followed by metal products ($34 million).
China was followed by the United Arab Emirates ($98.5 million), Hong Kong ($94.3 million) and Italy ($61.1 million) as major contributors to the FDI in Jul-Jan.
The largest increase in FDI was in the category of power, which attracted $334.2 million. Other sectors that attracted substantial FDI were oil and gas exploration ($187.7 million) and communications ($53.5 million).
Pakistan received FDI of $709.3 million in 2014-15, which was 58.2% less than the FDI received in the preceding fiscal year. The largest contributor during the year was the United States ($238.7 million), followed by China ($229.5 million) and United Arab Emirates ($222.4 million).
Many foreign investors have left Pakistan for good in recent years because of the energy crisis and bad governance. According to the latest annual report of the SBP, FDI divestments have taken place in cement, metal and pharmaceutical sectors.
“Some of these divestments highlight policy-related constraints in the manufacturing sector,” the SBP said while referring to Tuwairqi Steel that has shut down its production unit in Pakistan because of a dispute with the government over the pricing of gas.
However, FDI from China is expected to rise further in view of the recently announced China-Pakistan Economic Corridor (CPEC), according to the SBP.
“The implementation of infrastructure development and energy projects under the CPEC will further enhance the improving investment environment,” it said in a recent statement.
Published in The Express Tribune, February 17th, 2016.