FDI hits 20-month high in June

Foreign investors pour $271.1m mainly in power, communication, financial sectors

KARACHI:

Foreign investors sprang a surprise by making 20-month high investment of $271.1 million, mostly in power, communication and financial sectors in Pakistan in June 2022, as they set aside all the doom and gloom about the economy and political situation by focusing on long-term business opportunities.

The all-weather friend of Pakistan, China, remained the largest investor as it made notable investment in its ongoing power, telecom and financial projects.

Investment in June 2022 was 92% higher compared to $141.2 million in the prior month of May 2022 and compared to $141.3 million in June 2021, the State Bank of Pakistan (SBP) reported on Thursday.

With this, the cumulative foreign direct investment (FDI) amounted to $1.87 billion in the previous fiscal year 2021-22, which was 2.6% (or $43.7 million) higher compared to $1.82 billion in 2020-21.

China, the United States, Switzerland, the UAE, Hong Kong, the Netherlands and Singapore were the top investors during the year.

On the other hand, four traditional sectors including oil and gas exploration, power, telecommunication and financial business received the major chunk of investment during the year, according to the central bank data.

“Despite the environment of doom and gloom, heavy flow of negative news and political upheaval, the latest investment number is highly encouraging. It speaks volumes about the potential of the country,” remarked Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General M Abdul Aleem while talking to The Express Tribune.

He said foreign investors had kept their commitment to investing in Pakistan despite the challenging environment across the globe and homegrown issues over the past 12 months, including high global commodity prices, delay in revival of IMF loan programme for Islamabad, significant depreciation of the rupee against the US dollar, increase in cost of doing business, high inflation reading and change of government in Pakistan.

“We from the platform of OICCI keep building Pakistan’s positive image and convince global investors that it is not only Pakistan that is facing such grave issues, but almost every economy is passing through critical times,” he said.

Furthermore, when the investors have staged a return to Pakistan, the authorities should take care of them, support them through facilitation and policy actions, he added.

“We tell global investors that yes there are problems in Pakistan like any other country of the world, but business opportunities are high here. It is a nation of 225 million having a large population of middle class. They need power and food and while we have potential investment sectors.”

More investment is expected in the coming months. However, there is a need for coordinated efforts to attract investment, he said.

Arif Habib Limited Head of Research Tahir Abbas said investors made comparatively high investment during the month of June as there was a growing confidence among them that IMF loan programme will be revived. They made the investment after watching that the new government has started fulfilling IMF’s prerequisite commitments one-by-one, which were long-time overdue.

Also investors made higher investment in June, as it was the last month of fiscal year in Pakistan. They opted to sum up the full-year investment targets in the month since they had made low investments in earlier months due to the happening of one issue or the other, Abbas remarked.

Furthermore, China, US, Switzerland and UAE have cumulatively made 57% of the total investment during fiscal year 2021-22. Besides, Power sector, financial business and oil and gas exploration sectors attracted cumulatively 60% of the total investment during the year, he told.

Country-wise FDI

China made the single largest investment of net $532 million in Pakistan in FY22, followed by the United States which injected net $250 million during the year.

Switzerland invested net $146 million during the year as UAE poured net $144 million. Hong Kong invested net $138 million, Singapore injected net $115 million, while Netherlands invested net $104 million during the previous fiscal year ending on June 30, 2022.

Sector-wise FDI

Power sector attracted the single largest foreign investment worth $738 million during FY22, followed by financial business which received net investment worth $405 million during the year.

Oil and gas exploration sector won net investment of $195 million, while communication sector saw net foreign investment of $119 million during the previous fiscal year ended June 30, 2022.

Published in The Express Tribune, July 22^nd, 2022.

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