Wednesday Nov 17, 2021
KARACHI: The net foreign direct investment (FDI) into different sectors like power, communications and oil and gas exploration dropped 24% to $223 million in October 2021.
FDI had stood at $293 million in the same period of the previous fiscal year, the State Bank of Pakistan (SBP) reported on Wednesday.
Cumulatively, in the first four months (July-October) of the current fiscal year 2021-22, FDI inflows dropped 12% to $662.1 million compared to $750.6 million in the same period last year.
The drop in foreign direct investment has placed a big question mark over the investment climate in the country. Analysts say that a decline in foreign investment can be attributed to volatile currency during the period.
According to Bloomberg, the rupee has become Asia’s worst performer in the past six months.
The government earlier predicted that Pakistan’s economy will slowly and gradually gain growth momentum, which should encourage foreign investors to invest in new projects, however, the figures do not support the claim.
The overall weak global trends were also responsible for the tepid FDI inflows into Pakistan.
Speaking to Geo.tv, Arif Habib Limited (AHL) Head of Research Tahir Abbas said that last year, during October, a major chunk of investment came in the telecom sector particularly in 3G/4G mobile internet which is why the $223 million figure looks dismal.
“Going forward, the investment depends on the government’s policies — we expect inflows to pour into real estate sector in the upcoming months,” the analyst said.
Endorsing his views, Pakistan-Kuwait Head of Research Samiullah Tariq said that the decline came on the back of COVID-19 as concerns related to the pandemic still weigh on the investors' minds.
“Moreover, last year foreign investment came on the back of telecom licenses issued by the Pakistan Telecommunication Authority which was missing this year, however, when Pakistan will roll out 5G licenses we will once again see significant inflows,” Tariq said.
He added that since the COVID-19 outbreak, investment in the oil and gas sector has dropped which has also contributed to the decline during the four months.
“Going forward, FDI is expected to rise or drop within a range of 10-15%,” he said.
The Netherlands was the largest foreign direct investor in Pakistan as it invested $160.5 million in the first four months of FY22. China emerged as the second biggest investor as it invested $116.5 million compared to an investment of $399.5 million in the same period last year.
The United States emerged as the third-largest investor with an investment of $114.3 million compared to $27.7 million in the corresponding period last year.
Investment from Hong Kong clocked in at $45.5 million.
The power sector attracted the largest investment of $173.5 million in the first four months of FY22 compared to $467.2 million in the same period last year.
The financial business sector invited the second largest foreign investment worth $114.2 million compared to $106 million last year.
Meanwhile, the communications sector attracted investment worth $93.8 million compared to an outflow of $5.1 million.