July-February: FDI clocks in at $615.4m, falls 3.8%

Largest net outflow recorded in pharmaceutical and over-the-counter products.

KARACHI:

Pakistan received foreign direct investment (FDI) of $615.4 million in the first eight months of 2014-15, which is 3.8% less than the FDI received during July-February of the preceding fiscal year.

According to data released by the State Bank of Pakistan (SBP) on Tuesday, FDI decreased by $24.6 million year-on-year in July-February, as it amounted to $640.1 million in the first eight months of 2013-14.

FDI in February was $74.9 million as opposed to the net flows of $86.8 million in the preceding month.

Pharmaceutical loss

With a net FDI of negative $47.4 million in the eight-month period, the largest net outflow of FDI in July-February was recorded in the category of pharmaceutical and over-the-counter products.

Multinational pharmaceutical company, Johnson and Johnson, recently wound up its operations from Pakistan and sold the company to a Pakistani pharmaceutical company for reportedly $30 million. At least four multinational pharmaceutical companies have left Pakistan for good in the last six years.

In line with the guidelines prescribed by the US-based Food and Drug Administration, foreign sponsors of multinational pharmaceutical companies send money every year for balancing, modernisation and renovation (BMR) of their Pakistan operations. This constitutes foreign direct investment. But Pakistan is receiving less and less money under this head following the exit of many multinational pharmaceutical companies from Pakistan.

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 2014.

Other sectors

Sectors of the economy other than pharmaceuticals that experienced a considerable net outflow of FDI in the first seven months of the current fiscal year were metal products ($36.7 million), information technology ($29.9 million), food ($7 million), cement ($4.2 million) and industrial electronics ($5.7 million).



The largest increase in FDI in July-February was in the category of oil and gas exploration, which attracted $192.3 million. However, it was 40% less than the foreign investment received during the same months of the preceding fiscal year when it totalled $320.8 million.

There was a net inflow of FDI amounting to $126.1 million from the telecommunications sector in July-February. In contrast, the same sector had registered a net outflow of $223.4 million of FDI during the same period of the last fiscal year.

Financial businesses attracted $73.3 million worth of FDI in July-February. However, it was down 30.9% from the corresponding eight-month period of the preceding fiscal year.

Largest contributor to the FDI during July-February was China ($175.1 million), United Arab Emirates ($153.1 million) and United States ($117 million).

The year-on-year increase in the net inflow of foreign investment in Pakistan amounts to a massive 139% in July-February if the foreign public (portfolio) investment in debt securities is also accounted for.

Debt securities, such as treasury bills, Pakistan Investment Bonds (PIBs), Sukuks and Eurobonds, received a massive foreign public investment of $973.9 million in July-February.

It is more than 15 times higher than the investments made in this category during the same months of the preceding fiscal year.

Published in The Express Tribune, March  18^th,  2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.