KARACHI: Pakistan has recorded a notable growth in fresh foreign direct investment in projects related to oil and gas exploration, power production and mobile phone services in recent months.
The growth in investment, however, remains low compared to the existing potential as investors anxiously wait for consistency in economic policies before initiating new projects in the country.
The inflow of foreign direct investment (FDI) surged 65.7% to $1.56 billion in first seven months (Jul-Jan) of the current fiscal year compared to $943.6 million in the same period of last year, the State Bank of Pakistan (SBP) reported.
In January alone, the investment increased 52% to $223.1 million compared to $146.8 million in the same month of last year, it said.
“The FDI number is good but it could be better,” Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General Abdul Aleem said while talking to The Express Tribune.
A notable growth in foreign investment came during the period under review compared to the same period of previous year when foreigners made comparatively lesser investment in Pakistan.
“Foreign investment remained less than 1% of GDP (gross domestic product). This should be around 3%…we achieved the desired ratio of 3% in 2007-08,” Aleem said.
The inflow of foreign investment could be much larger in Pakistan if the government assured investors of consistency, transparency and predictability in the economy, he said.
Foreign investment in Asia was huge, but the investment which could have flowed to Pakistan was directed to other countries such as Vietnam and Indonesia due to the uncertainty, he said.
The foreign investment-to-GDP ratio stands between 6% and 7% in Vietnam and at 2-3% in Indonesia. The ratio stands at around 1.5% in India despite the fact that its economy is passing through a tough phase.
British Trade Commissioner for Middle East, Afghanistan and Pakistan Simon Penney stressed early this month that Islamabad needed to bring consistency in the regulatory environment.
“Inconsistency in regulation has remained a big concern for several UK firms while deciding whether to invest in Pakistan or not,” he said during his visit to Pakistan in the first week of February.
Penney revealed that there were only 135 UK-based companies operating in Pakistan compared to around 5,000 in the UAE. He acknowledged that there was a huge potential for Pakistan to attract more firms not only from Britain, but the UK-based firms operating in the UAE as well.
More UK-based companies may invest in manufacturing, pharmaceutical and educational sectors in Pakistan, he said.
The OICCI secretary general urged the government to interact with foreign investors from time to time to know what could accelerate foreign investment in Pakistan.
“OICCI members invest around $2-2.5 billion per year, which does not reflect in the FDI as they reinvest the profit earned in local currency in the country,” he revealed.
China remained the largest foreign investor in Pakistan. It invested a net $532.8 million in first seven months of FY20 compared to $282.6 million in the same period of last year.
It was followed by Norway which invested a net $288.5 million in the period under review compared to outflow of $3.9 million in the corresponding period of last year.
Malta poured $129.6 million compared to outflow of $81.6 million last year, according to the SBP.
The telecommunications sector attracted the largest foreign investment of $446.7 million in the seven-month period of FY20 compared to outflow of $134.9 million in the same period of previous year.
It was followed by the power sector which attracted a net $404.1 million compared to outflow of $297.5 million last year. Financial business got investment of $178.9 million compared to $215.6 million last year.
The oil and gas exploration sector received $158 million in FDI compared to $182.2 million last year.
Published in The Express Tribune, February 19th, 2020.