FDI inflows stand at $170.6 million in April

Foreigners inject 4-month high capital in sectors like power, banks, electronics

KARACHI:

Long-term foreign investors injected a four-month high capital at net $170.6 million during April 2022, in major sectors of Pakistan’s economy including power, banks, electronics and communication despite global as well as domestic political and economic uncertainties.

The foreign direct investment (FDI) recorded a turn-around in the month under review as compared to a net outflow of $30.4 million in the prior month of March, according to the central bank data.

The FDI inflows remained almost flat in the month as compared to $169 million recorded in the same month of the previous year.

The financial sector has continued to attract foreign investment amid its transition from conventional to digital banking. Most of the investment in the financial sector is believed to have been attracted by growing Fintechs.

Similarly, more people are buying home appliances like splits, LED TV and water dispensers following the rise in their income amid higher economic activities in the country. The trend encouraged the investors to put capital in electronic goods.

Communication sector has kept updating itself to cater rising demand for mobile phone connectivity and advanced 3G/ 4G mobile internet. Communication sector was also playing an important role in digitalising the economy. App-based growing e-commerce, startups and transportation sectors are also aggressively using communication tools.

China stood as a lead investor in the power sector under the banner of China-Pakistan Economic Corridor (CPEC) projects in Pakistan.

Cumulatively, in the first 10 months of the current fiscal year 2021-22, the FDI slightly reduced by 1.6% to $1.45 billion as compared to $1.48 billion in the same period of the previous year.

Commenting on the latest FDI inflows at $170.6 million in April, Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General M Abdul Aleem said “the inflows are well below Pakistan’s potential, but this is not unusual in view of the uncertain environment not only in Pakistan but in the region as well”.

He said foreign investors have continued to invest in the ongoing projects in Pakistan despite the global geo-political situation like Russia-Ukraine conflict and Pakistan’s political and economic instability these days.

“Besides, the flow of Chinese investment into the new projects in Pakistan under CPEC has slowed down.”

Earlier, Covid-19 pandemic did not allow global investors to take new investment decisions for emerging markets including Pakistan, he underlined.

The foreign investment would surge once the situations at global and domestic levels are cleared soon. “Pakistan remains high on global investors’ radar considering the country remains largely an untapped market from the point of investment into almost all the sectors of the economy.”

However, there is a great need that the government aggressively market the projects in which it wants to invite foreign investment, he added.

Multinational companies (MNCs) are doing small-scale expansions and new projects in the range of $50-200 million value each. “The expected improvement in political and economic conditions will help attract projects of the value in the range of $500 million to $1 billion in near future.”

Another official, who remains in contact with foreign investors, said on the condition of anonymity that international investors remained keen to put capital in Pakistan’s long-term projects.

They, however, remained uncertain due inconsistency in economic policies including abrupt changes in rate of taxes.

He revealed that he had received new inquiries from foreign investors for investment in the sectors “including foods for exports and hospitals”.

The top global economy – the United States – emerged as the single largest investor in Pakistan during April 2022. Its MNCs invested net $40.3 million in the month, followed by the second largest global economy China which injected net $22.3 million in the domestic economy.

The United Arab Emirates (UAE), Kuwait and Germany stood other notable investors. They injected in the range of $16.5-17.5 million each in the month under review.

Published in The Express Tribune, May 21^st, 2022.

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