Profits, dividends: Foreign firms repatriated $758 million
Foreign companies operating in Pakistan repatriated $758.3 million in profits and dividends to their home countries in 2010-11, which was 2.3 per cent lower than $775.6 million sent abroad in the previous year, shows data released by the State Bank of Pakistan (SBP) on Friday.
According to experts, power and gas shortages and bad law and order situation have not only affected local businesses, but have also undermined the capability of foreign investors. They said cost of production had increased because of rise in raw material prices and high benchmark interest rate of 14 per cent, which jacked up borrowing cost.
These companies also faced weak demand and low profits due to around 13 per cent inflation rate, which curtailed the purchasing power of consumers.
However, the experts said that around $2 billion foreign direct investment in 2009-10 did have its positive impact in the following year as well and that was the reason that despite difficult conditions there was no significant drop in repatriation of profits and dividends by foreign companies in 2010-11.
According to breakdown, the financial business sector repatriated the highest amount of $167.6 million, showing an increase of 57 per cent. The power sector sent home $105.4 million in profits and dividends, up 0.4 per cent, oil and gas companies repatriated $74.7 million, up 43 per cent and transport sector repatriated $70.8 million, up 260 per cent.
In a bid to attract foreign investment, the government has liberalised rules for investors, allowing 100 per cent ownership of business ventures as well as unrestricted repatriation of profits and dividends. However, energy shortages and law and order problems have discouraged companies from making heavy investments.
In the last fiscal year ended June 30, 2011, foreign direct investment fell 27 per cent to $1.57 billion compared to $2.15 billion in the previous year, according to State Bank data released last week.
Published in The Express Tribune, July 23rd, 2011.
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@fahim u r 100 % right china is one of the biggest enemy of pakistan they are killing muslims in xinjiang
This is a good article which brings out the fact that foreign private investment is not free! We always talk of it as a replacement for aid which is fine. But we offer full repatriation in terms of profits, interest and dividends and this impacts the balance of payments negatively.
Nevertheless, one hopes that, on balance, we are benefiting when newer vintage technology, better management and marketing skills and more skilled jobs with higher wages are taken into account.
Now that, we are suffering from Load-Shedding problem - we should at least give government some time as Black-Outs are not a short-term temporary problem. Decisions taken hastily are always expensive and inappropriate. I have an instinct that we will break through to the way of prosperity, one day its just a shallow patch, we just have to be strong.
Welcome to the world of FDI. Mr. Musharraf take note: This is what happens when you sell your prized state assets to foreignors for short term FDI gains. In the long term it is always more money sent out that originally invested. Isn't that the whole point of investment anyway?
The Musharraf govt has sold the largest utility companies, telecom companies and banks to foreigners. Now the next generation of Pakistanis have to grow up in a foreign-owned Pakistan.