Foreign Direct Investment (FDI) to Pakistan decreased by 29 percent duringthe first half of the fiscal year 2020-21 (July to December 2020), centralbank data showed on Tuesday.
According to the State Bank of Pakistan (SBP), Pakistan was only able toattract less than a billion dollars in FDI during the H1FY21, to the tuneof $952.6 million.
This is down from the $1.357 billion FDI inflows in the same period lastyear, showing a decrease of $405 million year-over-year.
This comparison, however, might not be truly indicative of the economicrealities attracting FDI. The major part of this decline can be traced backto last year’s one-time FDI brought in by the telecom sector for GSMlicense renewal fees.——————————
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Analysts believe that the FDI of this year comprises mainly of investmentfrom China for CPEC-related projects, especially considering that China’sshare in Pakistan’s net FDI clocked in at 37 percent with $358 million forthe first half of FY21. China’s FDI was also for projects beyond CPEC andencompassed industries such as financial businesses, oil and gasexploration, and the communications sector.
The country saw an outflow of $44.1 million from the Norwegian firms inJuly-December FY2021 against an inflow of $288.5 million in the same periodlast year.
The power sector remained the major recipient of the inflows as FDI in thesector rose to $434.9 million in July-December from $262.2 million a yearago.
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The telecommunications sector pulled in $27 million foreign directinvestment in the first half of this fiscal year compared with an inflow of$419.7 million last year. FDI in financial businesses fell to $145.9million from $162.1 million.
Inflows sourced from Malta fell to $55.9 million in six months of thisfiscal year from $111.1 million a year earlier. The COVID-19 pandemicshattered the investor’s confidence globally, disrupting input suppliesamid growing uncertainties on economic prospects.
Due to the economic slowdown, foreign companies also faced adverseliquidity crunch. The companies refrained from reinvesting funds, which isanother important source of FDI in Pakistan. Experts expect this pace toincrease as additional funds would be poured into Pakistan for industrialcooperation during the second phase of CPEC, which is moving slowly.
FDI in Pakistan usually remains concentrated in a few non-export sectors,such as power, construction, financial business, oil and gas exploration,electric machinery, and telecommunications.
Furthermore, the investment in the Naya Pakistan Certificate is likely tocome through Roshan Digital Account in near future from overseas Pakistanisand investors.
On the side of the outflows, portfolio investment continued the trend ofnegative growth with an overall outflow of $244 million from July toDecember 2020.——————————
