KARACHI: Foreign direct investment (FDI) amounted to more than $2 billion in July-May, up 22.6 per cent from a year ago, reported the State Bank of Pakistan (SBP) on Wednesday.

In 2015-16, FDI amounted to $1.903bn. It was less than $1bn in 2014-15.

The improvement in FDI during the last couple of years was because of increased inflows from China.

FDI from China in July-May rose to $879 million. It constituted 43pc of the total FDI received over the 11-month period. A large part of Chinese FDI is coming into the power sector that still needs investments of billions of dollars to generate sufficient electricity.

Second-highest inflows were from the Netherlands that invested $465.6m in July-May, followed by France ($180m) and Turkey ($135m).

FDI amounted to $295m in May with China and Norway contributing $160.5m and $75m, respectively.

The highest investment came into the power sector. It amounted to $548m during the 11 months. The power sector is the focus of Chinese investment under the China-Pakistan Economic Corridor (CPEC). Within the power sector, FDI worth $333m was in coal-based power projects.

FDI into the construction industry was surprisingly high. It attracted $418m during the period under review. Real estate has become a highly profitable business for the last three years as property prices in big cities went up many times.

The food sector attracted the second highest inflows in July-May with FDI of $476.2m. Oil and gas exploration and electronics attracted $135.6m and $148.7m, respectively.

Despite record growth in FDI, the size of inflows was still not significant compared to foreign investment received by neighbouring countries.

Moreover, FDI has been concentrated in a few sectors. Therefore, it is likely to create jobs within a small number of industries.

Outflows through portfolio investment have increased during the 11-month period. This curtailed the overall foreign private investment to $1.616bn. Outflows via portfolio investment during this period were $411m. Despite these outflows, overall private investment increased 27pc.

Higher FDI played a vital role in the economic growth of India and China, which have been receiving foreign investment of $60-65bn annually.

Published in Dawn, June 22nd, 2017