October 26, 2007	Friday	Shawwal 13, 1428

KARACHI, Oct 25: The rising trend of foreign investment in the country has changed its course heading southward as reflected from the first quarterly report issued by the State Bank on Thursday.

Foreign investment during July-September 2007-08 showed a decline of 11 per cent. The total investment during the period reached $1.020 billion against $1.146 billion in the corresponding period of last year.

The decline in the foreign investment was mainly on account of portfolio investment and privatisation proceeds. Last year, during July-September, the government had received $133 million as privatisation proceeds which is the real difference this year. The portfolio investment in the first quarter dropped to 57.6 million against $120.6 million in the corresponding period last year.

However, foreign direct investment has shown some strength with an increase of $128 million during the period to reach $1.020 billion. Last year the FID was $892.8 million.

The declining tend in foreign investment could be a cause of concern for the government fearing further widening of trade and current account deficit during the current year.

Foreign investment has been a major support for the imbalance in foreign account of the country and helped it to keep the foreign exchange reserves intact.

The government has failed to privatise the units it wanted to sell during the year.

Analysts said there was no hope for any privatisation during the next eight to 10 months as the country was in the process of general elections and the new government would need time to reassess or may revise the entire privatisation process.

The significant change was noted in the investment pattern as inflows from the developed countries sharply declined during the first quarter.

During the quarter the FID fell from $709 million last year to $509 million this year, a fall of $200 million or 28 per cent.

Pakistan received record foreign investment last year and most of the investment came from the developed countries. So far the highest inflows were still coming from the developed countries, but the decline indicates the changed pattern of investment.The investment from the Western developed countries proved vital for the growth of the economy and support of the imbalances in the balance sheet of the country regarding its foreign payments.

Some analysts said the political uncertainty could hurt the confidence of the foreign investment and the confidence shaking environment would continue to prevail till the settlement of new government in Islamabad.

However, it was also felt that the high economic growth would be the best way to keep these inflows intact and minimise the impact of existing political uncertainty.

“The threat is hidden behind the investment pattern. If the pattern persists for the entire year, it will greatly hit foreign investment and destabilise country’s payment ability for its import,” said Habib Ashar, an analyst.