FDI improves 12% in Jul-Nov

KARACHI:

Foreign investment in Pakistani businesses surged for the first time in the current fiscal year 2021-22 on a cumulative basis, as it improved 12% to $798 million during July-November FY22.

The foreign direct investment (FDI) had stood at $710 million in the first five months of the previous fiscal year 2020-21, the State Bank of Pakistan (SBP) reported on Friday.

“The credit for the higher investment inflows goes to the IT sector, as startups attracted lofty foreign investment in the wake of Covid-19 pandemic,” KASB Securities Head of Research Yousuf Rahman said while talking to The Express Tribune.

The financial sector is also among the areas that registered increase in the foreign investment. In this sector, “the technology-driven banks, the fintechs, remained prominent for having mobilised higher new investment,” he noted.

The latest updates suggest that startups in Pakistan have garnered record high foreign investment totalling to over $310 million in the first 11 months of the ongoing year 2021. The investment in the 11-month period is more than what startups attracted in the country over the past six years.

Earlier, FDI remained low on a cumulative basis in each of the first four months of FY22 compared to what the country had attracted in same periods in the previous year.

The cumulative investment number improved following multinational companies (MNCs) poured $135.6 million alone in the single month of November against divestment of $40.3 million in the same month last year.

China, which is the largest investor in Pakistan in the modern history under the banner of China-Pakistan Economic Corridor (CPEC), once again emerged as a lead ing investor in November after a gap of few months.

Oil and gas exploration, power and financial segments were the top three sectors in terms of receipt of investment during the month. In addition, IT and telecommunication and electrical machinery also attracted a most chunk of the receipts in the first five months (July-November FY22).

“Pakistan may attract net FDI worth around $2 billion in the current fiscal year 2021-22,” Rahman estimated.

The country received FDI amoutning to $1.86 billion in the previous fiscal year that ended on June 30, 2021.

He noted that Chinese investment had dropped significantly in the first five months after power projects in Pakistan have achieved completion under the CPEC.

The government is prioritising to attract foreign investment in export-oriented and import-substitution sectors and it is less interested to get new foreign investment in local consumption-led sectors. The strategy is aimed at improving balance of trade and country’s capacity to make international payments on necessary imports and debt repayments.

Country-wise FDI

Netherlands remained the single largest investor, as it poured a net $153 million in Pakistan during July-November FY22.

China became the second largest investor with a net $149 million in the first five months of FY21. It was followed by United States which invested $130 million in the period under review in the country.

Earlier, China was the single largest investor with a net $337 million in the same period (Jul-Nov) of the last fiscal year 2020=21. It was followed by UAE which had poured $127 million in the first five months of last fiscal year.

Sector-wise FDI

Power sector attracted single largest investment of $229 million during July-November FY22. This was, however, significantly low compared to $414 million received in the same period last year.

Oil and gas exploration companies received $111 million in the period under review compared to $99 million in the same period last year.

Financial sector got $156 million compared to $114 million. IT and telecommunication sector attracted $101 million during July-November FY22 against an outflow of $49 million in the same period last year.

Pakistan Stock Exchange

The investment flows suggest that foreign investors have continued to pull out investment from companies listed at the Pakistan Stock Exchange (PSX). They have withdrawn a net $263.2 million in the first five months compared to $185.5 million in the same period last year.

Published in The Express Tribune, December 18^th, 2021.

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