FY14: FDI inflows drop sharply by 27% in first-half

Investment weakens following hefty decline in December.

KARACHI: Pakistan received $416.1 million in foreign direct investment (FDI) in the first half of fiscal year 2013-14, 26.8% lower than the amount received in the corresponding six months of the preceding year.

According to data released by the State Bank of Pakistan (SBP), the sharp drop in foreign investment from July to December is largely due to a year-on-year decline of 66.2% in FDI during the last month alone.

FDI amounted to $85.4 million in December as opposed to $253 million in the same month of the previous year. FDI in the first five months stood at $330.7 million, up 4.7% compared with the same period of fiscal year 2012-13. Pakistan had received FDI worth over $1.4 billion in the last fiscal year.

The oil and gas sector attracted the highest amount of FDI in the July-December period. It got a net investment of $212 million. However, it was 27.4% lower than the investment of $292.2 million in the corresponding period of the preceding year.



Sectors of the economy that received major FDI inflows during the last six months include financial businesses ($79.1 million), chemicals ($65.1 million), tobacco and cigarettes ($45.3 million), food ($43.7 million) and beverages ($24 million).

In contrast, a major dip in FDI was registered in the telecommunications sector, where the net outflow was $119 million. Other sectors that recorded a considerable net outflow were electrical machinery ($11.1 million), petroleum refining ($8.8 million) and hydroelectric power ($6.4 million).

Portfolio investment

As for foreign portfolio investment (FPI), which includes foreign public investment, Pakistan attracted $85.7 million during the July-December period as opposed to $123 million in the corresponding six months a year earlier. This reflects a year-on-year decline of 30.3%.

Countries that brought significant amounts of FDI into Pakistan include Switzerland ($122.8 million), United States ($103.3 million), Hong Kong ($86.7 million), United Kingdom ($56.7 million), Italy ($50.5 million), France ($35.8 million), Oman ($35.2 million) and Austria ($28.4 million).

Analysts believe one of the reasons behind the continuous decline in foreign exchange reserves is a sharp slowdown in FDI flows into the country. Foreign exchange reserves held by the central bank stood at $3.4 billion on January 10, down 61.2% on a year-on-year basis.

Published in The Express Tribune, January 18^th, 2014.

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