FDI: China leads, but foreign direct investment declines 4.5% in January

Amounts to $106m; construction, energy and financial businesses attract inflows

Our Correspondent February 16, 2018
Amounts to $106m; construction, energy and financial businesses attract inflows PHOTO: EXPRESS

KARACHI: Foreign investment inflows in Pakistan declined 4.5% in January, amounting to just $106 million from $111 million in the same month of 2017, according to data released on Thursday by the State Bank of Pakistan (SBP).

January was the second successive month of the current fiscal year that saw a fall in foreign direct investment (FDI).

Cumulatively, in the first seven months (Jul-Jan) of the current fiscal year, FDI decreased close to 3% to $1.49 billion from $1.53 billion in the same period of the previous year.

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Analysts say majority of the foreign investors seem to have taken a wait-and-see approach in making new injections in Pakistan considering mounting political tension ahead of the planned general elections this year. Additionally, worrying macroeconomic indicators are keeping investors at bay, say analysts.

China leads

Country-wise breakdown showed that China stood as the single largest net investor with $34 million in January 2018, followed by the United Kingdom ($17 million), the United States ($10 million), Italy ($8.7 million), Germany ($8.5 million), the Netherlands ($8.1 million) and Switzerland ($7.1 million). Other countries made almost no net investments in Pakistan.

China, at the same time, also leads in outflows with $17 million in January 2018. Beijing’s investments in recent months come as multi-billion dollar infrastructure and power projects under the China-Pakistan Economic Corridor (CPEC) gather pace.

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. Construction, energy and financial businesses attracted the largest chunk of FDI in January. Construction sector attracted $34 million, financial services $21 million and oil and gas exploration attracted a net $15 million.

Most of the FDI in Pakistan in recent months came in the power sector mainly because of energy projects that are being constructed under CPEC.

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 (BoI).

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, February 16th, 2018.

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