Foreign Direct Investment

Foreign Direct Investment (FDI) has shown a sign of improvement after a long time as inflows improved 10 per cent year-on-year to cross the $1 billion mark in July-Dec.

The overall investment increased 52pc to $1.82bn for the period under review. However, this increase was achieved by including the money borrowed through the Eurobond floated by the government.

The State Bank of Pakistan (SBP) reported on Monday that FDI in July-Dec amounted to $1.08bn, showing annual growth of 10.4pc.

FDI has been declining for the last three years despite regular investments from China. However, Netherlands changed the trend with a massive investment in December.

According to the SBP report, Netherlands invested $459.5 million in December alone, which pushed up the FDI figure for the six-month period and showed positive year-on-year growth.

In December, the net inflow of FDI was $595m. China and the United Arab Emirates (UAE) contributed FDI amounting to $47.6m and $45.6m, respectively.

The inflow in December made the real change as it accounted for 55pc of total FDI during the six months. Data shows that FDI for the first five months (July-Nov) was less than the investment recorded in December alone, which was dominated by the inflow from the Netherlands.

The inflow from China, which is the main partner of the country under the China-Pakistan Economic Corridor (CPEC), in the six months remained $204m. The inflow from the Netherlands during the same period was $462m.

Collective inflows from the two countries were 61pc of total FDI received in the first six months of the current fiscal year. FDI is coming from a handful of countries, which indicates that the country is still not attractive for international investors.

Research reports issued by analysts show the investment outlook has improved, particularly with the improvement in law and order. However, corruption remains a major hurdle to foreign investment.

FDI from the United States grew to $38m compared to the net outflow of $44m a year ago. The investment from Britain fell 50pc to 44m in the six months.

Turkey was the third largest investor in Pakistan with a total investment of $129m. Other important investors were the UAE ($77m) and France (46m).

The half-yearly report is encouraging for the country’s economic managers who have been struggling to attract FDI. The finance minister and his team have been asserting that the CPEC is a game-changer. But analysts believe that inflows from China are still not encouraging.

The government also came under fire for showing borrowing through the Eurobond as investment.

Published in Dawn