The foreign direct investment (FDI) in different sectors of Pakistan’s economy rose 20% to $1.06 billion in the first six months (July-December) of the ongoing fiscal year owing to government’s efforts to create an environment conducive for foreign investors.
According to data released by the State Bank of Pakistan (SBP) on Tuesday, the foreign investment in the country had stood at $879.7 million in the corresponding period of fiscal year 2020-21.
Lifting of Covid-19 restrictions across the world during the six months under review encouraged foreign investors to press ahead with their investment plans for Pakistan.
Moreover, the revival of work on energy projects under the China-Pakistan Economic Corridor (CPEC) drew investment in the power sector, which turned out to be the top segment in FDI inflows during July-December 2021.
Talking to The Express Tribune, Arif Habib Commodities CEO Ahsan Mehanti cherished that government’s efforts to attract foreign investment in the country had borne fruit as it jumped 20% despite the challenges posed by the pandemic.
“The timeframe of this data (July-December) is from the end of third wave of Covid-19 and the beginning of fourth wave, so there were no restrictions in between and investors poured money freely,” he pointed out. “However, the investment environment will be challenging in future.”
Although the data was encouraging, it would be difficult to keep the pace of FDI inflows at current levels for the next half year if Covid-19 challenges continued to mount, he said.
Arif Habib Limited Head of Research Tahir Abbas said that the spike in FDI came on the back of revival of ongoing projects under CPEC, particularly those that were related to the power sector.
He elaborated that work on energy schemes had been halted due to the Covid-19 outbreak in China and then in Pakistan but during the past six months, activities resumed at full pace, which led to the flow of investment between the two countries.
“Lockdowns have been lifted by both sides and it bodes well for foreign investment flows,” he said.
“If we take a look at the country-wise breakdown of foreign investment, China stands on top followed by the US and the Netherlands,” he pointed out.
“Moving on to sector-wise distribution, we notice that the power sector attracted the largest amount of investment followed by financial businesses.”
According to the analyst, Pakistan can attract $2-2.5 billion in foreign inflows in full fiscal year 2021-22.
Echoing similar views, Pak-Kuwait Investment Company Head of Research Samiullah Tariq said that investment in the power sector drove the overall FDI in Pakistan in the half year ended December 2021.
“Work on CPEC has resumed and this is the major reason behind the sharp increase in inflows during July-December 2021,” he said.
Elaborating, he said that hydropower and coal projects were being executed as part of CPEC, adding that in future startups would lead the FDI inflows.
In December 2021, Pakistan registered 29% year-on-year increase in foreign investment, which reached $219 million.
A report of Arif Habib Limited stated that inflows had amounted to $169 million in December 2020.
Country-wise FDI
China emerged as the biggest investor in Pakistan as it poured $306.7 million in July-December 2021. It, however, was 21.3% lower than the investment of $389.8 million in the corresponding period of 2020.
Investment by the US more than doubled to $149.3 million in the period under review against $68.2 million in July-December 2020.
Investment from the Netherlands skyrocketed 184.6% as it rose from $43.7 million in July-December 2020 to $124.5 million in July-December 2021.
Sector-wise distribution
In terms of sectors, the power sector topped the chart as investment inflows amounted to $363.7 million during the half year under review. It was 36.6% lower than the investment of $487.1 million in the same period of 2020.
The investment in financial businesses jumped 38% to $205.7 million during July-December 2021 against $127.4 million in the same period of 2020.
The communication sector recorded foreign investment of $146.5 million in the period under review against the outflow of $41.5 million in July-December 2020.
Published in The Express Tribune, January 19th, 2022.
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