KARACHI: Foreign direct investment flows to the country fell to $69.5 million in August 2010 compared to $101.9 million in the previous month.
Data released by the State Bank of Pakistan revealed that in the first two months of the current fiscal year, net FDI inflows to the country amounted to $171.4 million, a massive decline of 50 per cent when compared to the same period last year, when net FDI stood at $344.5 million.
Overall foreign private investment in the first two months of the current fiscal year also dropped by 40 per cent to $260.9 million when compared to the same two months last year when it stood at $435.6 million.
Similarly, foreign private investment during the month of August slowed to just $117.2 million as against $143.8 million in the previous year.
Analysts highlighted that declines in foreign investments to the country have continued over the past four years. “The overall security situation in the country has worsened consistently in recent years,” commented Khurram Shehzad, head of research at InvestCap, adding that “the slowdown in investment flows to the country has followed the deterioration in law and order.”
Portfolio investment increased in August to $47.7 million, compared to $41.8 million in July of this year. However, it also witnessed a decline of 1.8 per cent to $89.5 million in the first two months of the current fiscal, when compared to the same period last year.
“The implementation of capital gains tax has contributed to the decrease in portfolio inflows,” commented Shehzad.
Foreign public investment increased to an inflow of $6.1 million for the first two months of the current fiscal year as compared to an outflow of $30.2 million during the same period last year.
Analysts have attributed this increase to better returns on government securities due to higher interest rates as well as some foreign interest in public sector companies such as OGDCL.
Experts contend that foreign investment opportunities will emerge from reconstruction activities in the country.
Published in The Express Tribune, September 18th, 2010.