Malaysia leads as FDI in Pakistan jumps 162%

Economist says difficult to predict investment flow in the face of uncertain political situation

KARACHI: Pakistan received foreign direct investment (FDI) of $223 million in July 2017, up 162% from $85 million in the same month of last year, according to data released by the State Bank of Pakistan (SBP) on Wednesday.

The sector that received the highest FDI in July 2017 was trade which got $94 million compared to just $1.1 million in the same month of last year. Power sector received $57 million compared to $26 million in the same month of last year.

Other notable sectors that received a significant amount of FDI in July 2017 were oil and gas exploration ($20 million), construction ($20 million) and financial business ($9.5 million).



Pakistan had got $2.41 billion in FDI in the fiscal year ended June 30, 2017, up 5% from $2.3 billion in the previous year. It received $5.4 billion in fiscal year 2007-08, which was the highest amount in the country’s history, according to the Board of Investment.

However, the country has been recording low levels of foreign investment since 2008. Many foreign investors, especially from western countries, have pulled out due to a persistent energy crisis, poor governance and security challenges.

“The current political uncertainty must have jolted the investors,” said Dr Ashfaque Hasan Khan, a renowned economist.

“We need to wait for at least a quarter to see how foreign investors react to the current developments in Pakistan. So it is difficult to predict anything about the future of FDI on the basis of July’s (the first month of FY18) data.



Malaysia surprises

Pakistan received a surprised investment of $92 million from Malaysia in July 2017 compared to just $0.1 million in the same month of previous year.

China came at second position with $73 million worth of FDI compared to $24 million in the same month of previous year.

Other notable FDI came from the UAE, which stood at $16.2 million, while $12.2 million came from Japan, $9.6 million from the US and $9.5 million from France.

Chinese investors are pouring in cash in the wake of the $57 billion China-Pakistan Economic Corridor (CPEC), mainly in major infrastructure projects.

Pakistan’s eastern neighbour led the list of individual countries, pouring an investment of $1.186 billion in FY17, up 11% from $1.064 billion in the previous year.



The Netherlands emerged as the second leading country with its FDI at $463 million in FY17 compared to just $29.9 million in the previous year. This came on the back of $448-million acquisition of Engro Foods by FrieslandCampina - a Dutch food company.

Turkey came at number three with $136 million investment in FY17 compared to just $17 million a year earlier while France brought in investments of $119 million compared with $95 million in the preceding year.

The power sector received the highest FDI of $795 million in FY17, but it was still significantly lower than $1.159 billion in the previous year.

It was followed by the food sector where the country received $493 million in FY17 compared to net outflows of $56 million in the previous year.

Surprisingly, construction was also among the fastest growing sectors in FY17, receiving a significant $468 million compared to just $46 million in FY16.

The electronics sector also received a respectable $143 million compared to just $34 million in FY16.

Published in The Express Tribune, August 17^th, 2017.

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