China continues to dominate as FDI jumps 150% in Oct

Power sector leads with investment flow into mega CPEC projects

KARACHI: Pakistan received foreign direct investment (FDI) worth $288 million in October 2017, up by a significant 150% compared with inflows of $115 million in the same month of previous year, according to data released by the State Bank of Pakistan (SBP) on Wednesday.

Of the total FDI in October 2017, $202 million came from China, which has been dominating in investment flow mainly due to capital injection under the China-Pakistan Economic Corridor (CPEC).

Other countries that made significant investments in October 2017 were the Netherlands ($27 million), France ($9.5 million) and Singapore ($9 million).

Total FDI in the first four months of fiscal year 2017-18 touched $940 million, up 74% compared with $539 million in the same period of preceding year.





In July-October FY2017-18, Chinese investments in Pakistan jumped to $632 million, up 224% compared with $195 million in the corresponding period of previous year.

The second highest FDI came from Malaysia which amounted to $107 million in the first four months, up 1,088% compared with just $8 million in the corresponding period of previous year.

France stood at third position with investment flow of $38 million and the Netherlands at fourth with $33 million. Hungary brought $28 million, the US and the UAE injected $27 million and $24 million, respectively.

Sector-wise investment

The power sector received the highest FDI in October 2017 as the country got $154 million for the sector. The construction sector received $53 million while the trade sector got $43 million.

So far, in the first four months of FY2017-18, the power sector led the FDI inflow, which stood at $422 million. Analysts believe this is happening due to investments going into mega power projects under CPEC.

Overall, the construction sector came at the second place as it received $177 million in the first four months of FY2017-18. Other notable sectors were financial business ($76 million), communications ($69 million) and oil and gas exploration ($58 million).





Analysts say while Chinese investment is crucial, other countries including the US and western European countries have been increasingly shying away since the financial crisis of 2008, which should be a cause for concern for policymakers of the country.

Pakistan received $2.41 billion in FDI in the fiscal year ended June 30, 2017, up 5% from $2.3 billion in the previous year. It got $5.4 billion in 2007-08, which was the highest inflow 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 persistent energy crisis, poor governance and security challenges.

Published in The Express Tribune, November 16^th, 2017.

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