FDI grows 11% to $1.17b in Jul-Jan FY22

KARACHI:

China and the United States, the two leading global economies, emerged as the largest foreign investors in Pakistan during the first seven months (July-January) of current fiscal year.

Among different sectors of the economy, power, banks, communication and oil and gas exploration were on top as they attracted significant investment in their projects.

The flow of foreign direct investment (FDI) into Pakistan increased 11.3% to $1.17 billion in July-January of fiscal year 2021-22 compared to $1.05 billion in the same period of last year, the State Bank of Pakistan (SBP) reported on Thursday.

“China has continued to remain the largest foreign investor in Pakistan, as projects under the China-Pakistan Economic Corridor (CPEC) have entered the second phase of development,” Arif Habib Limited (AHL) Economist Sana Tawfik said while talking to The Express Tribune.

Most of the investment in the power sector is coming from China. The US emerged as the second largest investor as its companies were running diverse projects in Pakistan in different sectors including financial, energy, pharmaceutical, food, beverages and fast-moving consumer goods, it has been learnt.

Tawfik said that Malaysia and the Netherlands were also prominent investors in Pakistan in the seven months under review.

“If Pakistan continues to attract FDI at the current pace, then foreign investors may pour up to $2 billion in the ongoing fiscal year,” she estimated.

Read: Pakistan moves to address China’s Gwadar concerns

She said that Pakistan had the potential to attract much more than $2 billion per year as the government was taking measures to secure a higher amount of foreign investment.

IT, construction and allied industries are among the top potential sectors that will attract substantial foreign investment in the coming months.

“The government is focusing on digitalisation, IT exports and construction industry and the measures taken to promote these areas will encourage foreigners to pour fresh investment,” she said.

Now, the government has enabled overseas Pakistanis to buy properties in their home country and invest in the real estate sector through the Roshan Digital Account (RDA).

Investment from the non-resident Pakistanis through the RDAs would become a new source of foreign investment in domestic businesses, she said.

The increase in government’s initiatives to attract foreign investment can help the country reduce its reliance on foreign debt. The government should aggressively market its projects if it wants to catch the attention of global investors, she said.

In January 2022, the inflow of FDI dropped 35% on a year-on-year basis and 50% on a month-on-month basis to $110 million.

FDI stood at $168.3 million in January 2021 and $218.7 million in December 2021, according to the central bank data.

Country-wise FDI

China remained the single largest investor in Pakistan with total investment standing at $360.4 million during the July-January period of fiscal year 2021-22.

The investment, however, was less than $432 million secured in the same period of last year.

Multinational companies (MNCs) in the US invested $168.9 million in the seven months compared to $77.9 million in the same period of last year.

Hong Kong based investors poured $123.6 million during the period under review against $103.8 million in the same period of last year.

Sector-wise FDI

The power sector attracted the single largest foreign direct investment worth $406.8 million in the first seven months of the ongoing fiscal year. The investment, however, was less than $539.9 million received by the sector in the same period of the last year.

Financial businesses received $230.6 million during July-January FY22 compared to $160.3 million in the corresponding period of previous year.

Communications sector attracted investment worth $174.9 million during the period compared to an outflow of $31.7 million in the same period of last year.

The oil and gas exploration sector receive FDI worth $161.8 million in the period under review compared to $143.4 million in the corresponding period of last year.

Published in The Express Tribune, February 18^th, 2022.

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