1QFY15: FDI clocks in at $169.5m, 26.5% less than previous year

Analysts rule out political turmoil as reason behind decline .

KARACHI:

Pakistan received foreign direct investment (FDI) of $169.5 million in the first quarter of 2014-15, which is 26.65% less than the FDI received during the same three-month period of the preceding fiscal year.

According to data released by the State Bank of Pakistan (SBP) on Friday, FDI decreased by $61.6 million year-on-year in July-September, as it amounted to $231.1 million in the first three months of 2013-14.

Two political parties have been staging sit-ins and rallies in different cities since August to demand the resignation of the prime minister. However, analysts believe political turmoil in the last two months has not had significant bearing on the declining FDI.



“FDI is a long-term phenomenon. It is a result of slow and sustainable process and should not be linked with political unrest in recent months,” Topline Securities analyst Zeeshan Afzal told The Express Tribune.

FDI remained $82.4 million in September, up 30.5% from August. FDI in 2013-14 clocked up at $1.63 billion after increasing by 11.99% on an annual basis. The increase during the last fiscal year was mainly on the back of the auction of the telecom spectrum that fetched the government $610.9 million in May.

There was a net outflow of FDI amounting to $32.7 million from the telecommunications sector in July-September. In contrast, the same sector had registered a net outflow of $58.4 million of FDI during the same period of the last fiscal year. FDI in the telecommunications sector in September amounted to a negative $11 million.

The largest increase in FDI in July-September was in the category of oil and gas exploration, which attracted $86.2 million. However, it was 17% less than the foreign investment received during the same months of the preceding fiscal year when it totalled $103.9 million.

Financial businesses attracted the second highest FDI in July-September, with net foreign investment of $36.8 million, down 9.13% from the corresponding three-month period of the preceding fiscal year.



Other sectors of the economy that received major FDI in July-September include tobacco and cigarettes ($30.1 million), chemicals ($23 million), food ($13.4 million), trade ($10.5 million), personal services ($12.1 million), textiles ($7.8 million), power ($18.7 million) and cars ($7 million).

Sectors of the economy that experienced a considerable net outflow of FDI in the first three months of the current fiscal year were pharmaceuticals (-$47.7 million) and cement (-$6 million).

As for foreign portfolio investment (FPI), which includes foreign public investment, Pakistan attracted $141.4 million during July-September, which is 31.41% higher than the FPI worth $107.6 million received in the comparable months of 2013-14.

FPI in 2013-14 was $2.74 billion, up 21 times from $124.2 million received in the preceding fiscal year.

Countries that brought significant amounts of FDI into Pakistan in July-September include the United States ($41.5 million), Hong Kong ($43.4 million), United Kingdom ($36.6 million), France ($17.7 million), Norway ($17 million), Japan ($10.8 million), Italy ($19.8 million), Egypt ($6.9 million) and Austria ($9.2 million).

Countries that took out major investments out of Pakistan during the last three months are Qatar ($14.8 million), Saudi Arabia ($14.6 million), United Arab Emirates ($8.7 million), Singapore ($11.3 million), Malaysia ($6.6 million), China ($3.9 million), Canada ($6.2 million), Finland ($6.4 million), Luxemburg ($6.7 million) and Switzerland ($22.5 million).

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

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