China contributes more than half of total FDI in 10MFY16

Foreign direct investment increases 5.4% in first 10 months of 2015-16 on a year-on-year basis


Our Correspondent May 17, 2016
Foreign direct investment increases 5.4% year-on-year. PHOTO: INP

KARACHI: Foreign direct investment (FDI) increased 5.4% in the first 10 months of 2015-16 on a year-on-year (YoY) basis, according to statistics released by the State Bank of Pakistan (SBP) on Tuesday.

Pakistan received FDI of $1,016.3 million in July-April, which is $52.5 million higher than the FDI received in the same 10-month period of the preceding fiscal year.

China contributes more than half to FDI inflow

Although most countries that had traditionally been the principal direct investors in Pakistan are now pulling out their investments, China has spiked its FDI in the wake of increased economic cooperation under the China-Pakistan Economic Corridor (CPEC).

More than half of the total FDI that Pakistan received in July-April of 2015-16 originated from China alone. FDI from China amounted to $549.9 million in the first 10 months of the fiscal year, which is up 152.2% YoY and equals 54.1% of the total FDI Pakistan received over the same period.

Excluding Chinese investment altogether would result in the FDI for July-April dropping almost one-fourth on a YoY basis. In other words, the rise in the FDI from China has offset the decrease in direct investments from the rest of the world in the first 10 months of 2015-16. FDI clocked up at $58.9 million in April 2016, down 55.2% from the FDI received in the same month of 2015.



Although the increase in the FDI appears satisfactory in percentage terms, a closer look at statistics reveals the YoY growth remained “concentrated in cross-border mergers and acquisitions” for at least the first six months of the fiscal year. According to the SBP’s latest quarterly report, the FDI in greenfield projects stayed “virtually flat” in nominal terms in Jul-Dec.

China leads FDI inflow in Pakistan

US difference

The United States has traditionally been a big source of FDI, but US investors are now losing their interest in Pakistan. As opposed to making fresh investments in Pakistan, they are now pulling out their money instead. US investors have pulled out $75.7 million from Pakistan in the first 10 months of 2015-16, although net inflows from the world’s largest economy amounted to $181.9 million in the same period of the last fiscal year.

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 (-$81 million), Egyptian (-$37.9 million) and German (-$32.4 million) investors in July-April, SBP data shows.

The largest net outflow of FDI in July-April was recorded in petro chemicals (-$136.1 million) followed by metal products (-$48.9 million) and IT services ($22.8 million).

China was followed by United Arab Emirates ($137.2 million), Hong Kong ($129.4 million) and Italy ($87.4 million) as the largest contributors to the FDI in July-April.

Case to make FDI stay in Pakistan

The largest increase in FDI in July-April was in the category of power, which attracted $518.1 million, up 208% from a year ago. Other sectors that attracted substantial FDI in the first 10 months of 2015-16 were oil and gas exploration ($234.8 million), telecommunications ($72.7 million) and beverages ($61.9 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. 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).

Published in The Express Tribune, May 18th, 2016.

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