Foreign investment stands at $1.31b in nine months

Direct investment falls 28% while portfolio investment soars 229%.

KARACHI:

Foreign investment in the country stood at $1.32 billion in the first nine months of the current fiscal year 2010-11, remaining almost the same as in the same period the previous year when foreign investors injected $1.321 billion, shows data released by the State Bank of Pakistan (SBP) on Thursday.

However, of the total $1.32 billion, the share of foreign direct investment fell by 28 per cent to $1.08 billion in July-March 2010-11 compared with $1.5 billion in the corresponding period last year. On the contrary, portfolio investment surged 229 per cent to $235 million compared with an outflow of $183 million last year.

According to analysts, the country needs much more than a meagre investment of $1.3 billion to help support industries and accelerate economic growth. To increase investment in the country the government needs to improve law and order and security conditions and provide incentives to investors, they added. Difficult conditions in the global economy, particularly in the United States and European Union, and political conflict in the Middle East and North Africa region have also blocked the flow of investment to the country.

“Political instability, security problems and governance issues have served as a deterrent to the flow of foreign investment into the country,” said Hamad Aslam, Group Head of Equity Research at BMA Capital. Improvement in law and order conditions, tax breaks and streamlined regulatory procedures could be an encouragement for foreign investors.

Discussing the increase in portfolio investment, Aslam said investors were focusing on emerging markets which offered lucrative returns on investment compared to developed markets. “In Pakistan, foreign investors are investing in shares of good performing big companies which give handsome dividends and bonus shares,” he said.

In foreign direct investment, the oil and gas exploration sector attracted the biggest amount of $396 million in the July-March period, but it was 24 per cent lower than $520 million invested in the same period last year. Other big areas which attracted somewhat better investment were financial business and power, which received $126 million and $100 million, respectively, against the previous year’s $119 million and $19 million, respectively.

Aslam said that Hungary’s oil exploration company MOL was investing consistently and heavily in exploration and production activities in the Tal block and that was reflected in the oil and gas sector’s performance in terms of investment.

In case of investment in the financial sector, he said Singaporean investment house Tamasek Holdings has invested in NIB Bank while United Arab Emirates’ Suroor Investments has injected money in acquiring Pakistani banks.

Among different countries, the largest investment came from the US which invested $387 million, but it was 44 per cent lower compared with the last year. UAE increased investment by 42 per cent to $196 million while UK investment fell 17 per cent to $188 million. Investment by European Union states fell 67 per cent to $186 million.

Published in The Express Tribune, April 15^th,  2011.