Foreign investment falls sharply

KARACHI: Pakistan’s net foreign investment suffered a sharp decline during the current fiscal year, and massive fall was noticed even in most attractive sectors, like telecommunications and financial business.

The State Bank of Pakistan reported on Monday that net foreign investment fell by 34.4 per cent to $1.466 billion during July-January against $2.234 billion in the same period last year.

FDI received the major impact as investors despite ample liquidity in the global market decided not to invest in the most profitable sectors of Pakistan.

The FDI fell by 54.6 per cent during the first seven months of the current fiscal. The only revival was noted in the portfolio investment which showed an investment of $290.7 million in this period.

Experts said fall in the FDI would be the real source of concern for the government as inflows from of other sources were drying up. The only source of bulk inflows has been loans from the International Monetary Fund (IMF).

Remittances from overseas Pakistani increased by 21 per cent during the first seven months, but government as well as economists consider it an unreliable source of inflows.

They said the only reliable source for foreign exchange is export proceeds which were never higher than imports of the country, resulting in trade deficits and biggest source for soaring current account deficit.

The details provided by the State Bank show that massive fall in investment was noted in the telecommunications sector which received just $209 million during those seven months against $713 million, a decline of 70 per cent.

Under this head, information technology also suffered heavily as it faced disinvestment of $96 million compared to a net investment of $53.3 million during seven months of last year.

The second major blow was received to financial business as investment remained much lower than expectations.

Investment in this sector during the seven months fell to $86.4 million compared to the investment of $635 million of the corresponding period of last year.

Cement was another victim of this low FDI as investment fell to $5.5 million from $30.5 million made in the seven months of last year.

Oil and gas exploration had been an attractive subject for foreign investors and it is still attractive but the level of attraction is diminishing. Foreigners invested $320 million in oil and gas exploration but it was much lower than $417.9 million last year.

Automobiles also suffered during this period as investment fell by 83.7 per cent to $8.4 million compared to 51.9 million of the previous year.

Highest foreign investment was received by the power sector which attracted a total of $102.4 million during this period, an increase of 36.5 per cent.

The surprising inflow of dollars was in paper and pulp sector which did not receive a single dollar last year, but during the current fiscal year, it attracted $80.5 million.

Food sector also received $30 million as against $9.3 million, chemicals received $72.4 million as against $31 million and construction received $63.3 million as against $27 million in the seven months of last year. Transport received 87 per cent higher investment of $63.5 million as compared to $33.9 million.

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