FDI surges 91% to $2.4b in July-May

Most of foreign investment goes to ongoing projects in Pakistan

KARACHI: Foreign investment in Pakistan's long-term projects like power plants, oil and gas exploration and 3G/4G internet dropped to a nine-month low at $120 million in May 2020 mainly due to the global health and economic crisis.

Foreign direct investment (FDI) was 10% lower than the $133.2 million recorded in April 2020 and 53% lesser than the $254 million registered in May 2019, the State Bank of Pakistan (SBP) reported on Friday.

"Covid-19 crisis forced global investors to put their new investment plans on hold," said Topline Securities Director Research Syed Atif Zafar while talking to The Express Tribune.

The global lockdown imposed to contain the virus badly impacted economic activities, businesses, people's income and their purchasing power. As a result, the demand for many products, except for food and pharmaceuticals, dropped sharply.

Most of the foreign investment during the Covid-19 pandemic went to the ongoing projects in Pakistan.

Cumulatively in 11 months (July-May) of the outgoing fiscal year, FDI grew almost 91% to $2.40 billion compared to $1.26 billion in the same period of last year, the central bank said.

The overall 91% growth in FDI got major support from an increase in Chinese investment, mainly in power projects under the China-Pakistan Economic Corridor (CPEC), Zafar said. "The flow of foreign investment in future depends on the unfolding Covid-19-related events like the second and third waves of infections, controlling the crisis and introducing the much-awaited vaccine," he added.

The revival of demand for products like cement, textile and chemical would attract foreign investment in future, he said. The financial health of companies around the globe is deteriorating. Many of them are filing for bankruptcy. "The return of stability to the financial health of global firms is a must to attract new foreign investment in Pakistan," he said.

Country-wise FDI

Norway made the largest investment of $57.5 million in May 2020, followed by Malta that injected $18.5 million and the Netherlands that poured $15.3 million.

Cumulatively in first 11 months of FY20, China was the largest investor with net investment of $855.6 million. Norway emerged as the second largest foreign investor with $346 million and Malta injected $203.7 million.

In the same period last year, Hong Kong, the United Kingdom, Norway, China and Japan were the top five foreign investors in Pakistan.

Sector-wise FDI

The communication sector, mostly the 3G/4G service providers, attracted the largest foreign investment of $73.5 million in May 2020, followed by oil and gas exploration firms $18.6 million and financial businesses $15.5 million.

In the 11-month period, the power sector got the largest investment of $749.6 million, followed by the communication sector $583.8 million, oil and gas exploration $275.9 million, financial business $256.8 million and electrical machinery $153.4 million. 

Published in The Express Tribune, June 20^th, 2020.

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