KARACHI: Foreign direct investment in the first two months of this fiscal year fell by 37 per cent, the State Bank reported on Monday, to $87 million from $138m during the same period of last year.

The portfolio investment, however, surged by 216 per cent during July-August, jumping to $122m from $38m during the year-ago period.

The declining FDI would put more pressure on external accounts particularly in the wake of widening trade gap due to falling exports.

Know more: Foreign direct investment in China jumps 2.2pc

The present government has been struggling to attract foreigners to bridge the investment gap, but law and order and a host of other factors are scaring investors away.

The recent postponement of Chinese president’s visit to Pakistan aggravated the perception. Chinese investment here could have attracted more investment from other countries.

Another key factor dissuading foreign investors is the trend of domestic investment that has yet to pick up steam. “To attract foreign investors, domestic investment plays key role. Overseas investor follows the lead of locals,” commented an expert.

During the five years of previous government, the FDI did not pick up primarily because of the wave of terrorism across the country. The situation did improve on that front during this government’s tenure, but first political crisis and now floods have stifled the hope of a rise in foreign investments in the immediate future.

The outflow of dollars as dividends and profits is also increasing. In FY14, the payment of profits and dividends on FDI was $1 billion while the FDI was $1.6bn. If this trend persists, the outflow may surpass the inflow of dollars through FDI during this fiscal year.

Published in Dawn, September 16th, 2014