US investors pull out as FDI drops 24%

Amounts to $350.8m compared to $462.5m in corresponding period last year

KARACHI:

Foreign direct investment (FDI) dropped by almost one-quarter in the first four months of 2015-16, statistics released by the State Bank of Pakistan (SBP) on Tuesday showed.

Pakistan received FDI of $350.8 million in July-October, which is 24.1% less than the FDI received in the same four-month period of the preceding fiscal year. FDI decreased $111.7 million year on year in July-October, as it amounted to $462.5 million in the corresponding months of 2014-15.



Despite being one of the principal foreign investors in Pakistan historically, the United States is now pulling out its investments at a massive level. US investors have pulled out $104.5 million from Pakistan in the first four months of 2015-16, although net inflows from the world’s largest economy amounted to $84.3 million in the same period of the last fiscal year.



Direct investment pulled out by American investors in the four months constitutes over 93% of the total outflow of FDI from Pakistan registered over the same period.

Pakistan has faced low levels of foreign investment in recent years. The SBP has called an increase in FDI “imperative” for the sustainability of the economy’s external sector.



Other major outflows of FDI were from Saudi Arabian (-$42.5 million), Egyptian (-$15.5 million) and German (-$3.6 million) investors in July-October, SBP data shows.

Net FDI in October alone clocked up at $134.6 million, down a whopping 48.6% from the net inflow of $261.9 million recorded in the same month of the preceding fiscal year.

The largest net outflow of FDI in July-October was recorded in the petro chemicals (-$135.8 million) followed by metal products (-$19 million).

Largest contributor to the FDI in July-October was China ($272.8 million), followed by the United Arab Emirates ($74.5 million), United Kingdom ($41.4 million), Switzerland ($40.5 million) and Italy ($34.5 million).



The largest increase in FDI in July-October was in the category of power, which attracted $168.7 million. Other sectors that attracted substantial FDI in the first four months of 2015-16 were communications ($67.2 million), oil and gas exploration ($56 million), tobacco and cigarettes ($28.5 million) and financial businesses ($25.8 million). However, the FDI in the oil and gas exploration category dropped 53.6% on a year-on-year basis.

Pakistan received FDI of $709.3 million in 2014-15, which was 58.2% less than the FDI received in the preceding fiscal year. Largest contributor to the FDI during 2014-15 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. At least four multinational pharmaceutical companies have left Pakistan for good in the last six years. The category of pharmaceutical and over-the-counter products lost FDI of $47.2 million in the last fiscal year.



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, November 18^th, 2015.

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