The investment made by multinational companies hit a six-month high at $189 million in September 2020 as they poured capital into various projects in Pakistan, particularly oil and gas exploration and power production.
The investment, however, stood low when compared with an average of $200 million per month in previous fiscal year 2019-20.
The flow of foreign direct investment (FDI) into the country, especially for initiating new projects, will improve gradually until Coivd-19 challenges are overcome across the globe.
The health crisis has prompted investors in developed countries to put their major investment decisions on hold for developing states until the world finds a way out of the crisis, say experts.
On a year-on-year basis, FDI halved to $189 million in September 2020 compared to $383.5 million in the same month of last year, the State Bank of Pakistan (SBP) reported on Friday. FDI dropped 24% to $415.7 million in first quarter (July-September) of the current fiscal year compared to $545.5 million in the same period of last year.
“Latest FDI numbers are pretty much in line with expectations,” JS Global Head of Research Hussain Haider said while talking to The Express Tribune. FDI inflows have remained low for the past couple of years. “Pakistan has the potential to attract 10 times higher FDI compared to what it has been receiving, but for that we need to win investors’ confidence through good policymaking,” he added.
Pakistan needs to develop specific policies for attracting FDI. “We need to market the potential projects where we need foreign investment,” he stressed, adding, “the provincial government of Balochistan had chalked out plans to attract investment through roadshows in Turkey and Germany, but the Covid-19 outbreak stalled all plans at least for now.”
He pointed out that current political instability in the wake of a public rally of the opposition parties may further hurt investors’ confidence. “Return of political stability is a must to win investors’ trust,” he said.
He voiced hope that Pakistan would return to the white list of Financial Action Task Force (FATF) from the grey list and that the country would soon resume the International Monetary Fund’s (IMF) loan programme.
“The positive developments should help to encourage foreign investors to initiate new projects in Pakistan,” he said.
Country-wise FDI
Chinese firms emerged again as top investors in Pakistan. They invested a net $97 million in September 2020, followed by Hong Kong-based investors who poured a net $22.8 million, according to the central bank.
Cumulatively, in three months (July-September), Chinese firms were the largest investors with net FDI of $103.6 million, followed by Malta with capital injection of $55.6 million and the Netherlands with $49.1 million.
Norway was the largest investor with net FDI of $248.2 million in the same quarter of last year. It was followed by Malta with net investment of $55.6 million and China with $55.4 million.
Sector-wise FDI
The power sector attracted the largest foreign investment of $107.8 million in September 2020, followed by the oil and gas exploration sector, which received foreign investment of $32.9 million.
Cumulatively, in the first quarter (July-September) of FY21, the power sector attracted the biggest investment of $113.3 million, followed by financial businesses that attracted a net $102.5 million and oil and gas exploration firms that received inflows of $67.2 million.
The communication sector had attracted the largest investment of $307.4 million in the same quarter of last year, followed by electrical machinery that received $65 million.
China has remained the largest investor in Pakistan’s power projects. UK and US-based investors have been pouring capital mainly into oil and gas exploration and financing businesses, a central bank official said the other day.
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