FDI inflows at 5-month high with China leading the pack

Foreign direct investment stands at $280m in Nov 2018

KARACHI: Pakistan attracted five-month high foreign direct investment (FDI) of $280 million in November 2018, as its all-seasons friend China remained the single heavy investor, reflecting its strong belief in the country’s future.

The inflows were 17% more than the $239.5 million in November 2017.

China alone has invested net $249.1 million, which makes up 89% of the total $280 million received in the month. It has apparently invested the funds in Pakistan’s construction and power sectors, reported the State Bank of Pakistan (SBP).

The neighbouring country China is investing $50 billion in Pakistan’s infrastructure (roads and railways) and power sector under the banner of the China-Pakistan Economic Corridor (CPEC), a part of its global belt and road initiative (BRI).

So far, it has invested around $20 billion in Pakistan, according to official estimates. In the next phase of CPEC, China would assist in building special economic zones (SEZs), which would help boost production, exports and revive Pakistan’s economy in the years to come.

“The return of stability in rupee against the dollar is a must to attract foreign direct investment from other than China and other friendly countries,” Sherman Securities’ analyst Chander Kumar told The Express Tribune.

FDIs are expected to remain on the higher side in the remaining seven months of the current fiscal year, considering some other friendly countries have expressed their intentions to invest heavily in power, petroleum refinery, and oil and gas exploration sectors.

Kumar recalled Saudi Arabia has expressed interest in buying two LNG-fired power projects of around 2,400 megawatts in Punjab. The United Arab Emirates (UAE) has expressed interest in setting up a petroleum oil refinery in Karachi. Besides, the oil and gas exploration sector is also expected to attract considerable investment in the country, he added.

He estimated total FDI to stand in the range of $2.5-3 billion in FY19. “FDIs in the remaining months would remain around $300 million (on an average) per month,” he estimated.

According to the SBP, Pakistan attracted $3.09 billion FDI in the previous fiscal year 2018, ended June 30.

The analyst said other countries have put their investment plans on hold in the wait for clarity on the government’s economic policies, which are largely linked with acquisition of the International Monetary Fund (IMF) bailout package.

“Other countries would start investing in Pakistan as soon as it succeeds in getting an IMF bailout,” he said.

In case of a possible delay in receipt of the bailout, it is a must to receive the expected inflows worth billions of dollars into foreign currency reserves from China and UAE like Saudi Arabia, who parked $2 billion in the previous two months, he said.

Cumulatively in five months (July-November 2018) of the current fiscal year, FDI stood at $880.7 million, which is 35% lower than $1.36 billion attracted in the same five months last year.

Country-wise FDI

South Korea appeared the second highest investor with net $15.9 million in November 2018. It was followed by the United Kingdom and the United States, who invested net $14.5 million and $11 million, respectively, in the month.

However, Norway and Malta divested net $34.8 million and $11.7 million respectively.

Sector-wise FDIs

Electrical machinery witnessed the single largest inflow of FDIs (net) worth $119.1 million, followed by the power sector at $62.2 million. The construction sector attracted $55.9 million, while financial business received $14.4 million in the month.

Communication sector, which had continued to attract significant investment for quite a long time, witnessed a net outflow of $41.6 million in the month.  This was the second month in a row the sector has witnessed divestment.

Published in The Express Tribune, December 18^th, 2018.

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