KARACHI: The returns on investment in the country’s financial sector continue to be highly lucrative despite anaemic GDP growth rate for the last five years.

The State Bank’s latest report showed that $327 million was paid in profit/dividend during the first 11 months (July-May) of this fiscal year on the investment in financial businesses, mostly banks, while foreign direct investment (FDI) in this sector during the same period was just $142m.

The report also revealed that the repatriated amount on foreign investment is rising each year. The total amount repatriated during the period was $1.157 billion against net FDI of $1.362bn.

The country has significantly improved its foreign exchange reserves with the help of borrowing from multilateral sources, aid and selling of Eurobonds, but the foreign investment has yet to pick up.

According to the SBP report, the highest amount repatriated during the period was from financial sector ($327m), followed by power sector ($143m), oil and gas exploration ($98m) and food ($93m).

The telecommunications sector showed drastic change, receiving second-highest FDI of $396m during the 11-month period compared to the disinvestment of $386m a year earlier. The repatriated amount from this sector was $39m against last year’s $12m.

The oil and gas exploration received the highest FDI of $425m during this period while it repatriated $98m. Last year, the sector received $500.3m while repatriated amount was $38m.

The report showed that a number of companies received much less investment during the first 11 months of this fiscal year, but the amount repatriated as dividend and profits was much higher.

The food sector received $7.5m investment but repatriated amount was $93.8m. Similarly, refining showed a net disinvestment of $16m but the repatriated amount was $69m. Petrochemicals received $1.2m but repatriated $18m, pharmaceuticals received $9.8m but repatriated $35.5m, cement received $18m but repatriated $39m and the power sector received $33.5m but repatriated $143m.

The overall scenario is disappointing as it shows the companies have been receiving less while repatriating more on the basis on previous investments.

Only two sectors, oil and gas exploration and communications, collectively received FDI worth $832m, or 61 per cent, out of total $1.361bn FDI during the period. It shows the FDI is mostly restricted to few sectors, reflecting a hopeless situation for the government struggling to attract foreign investors.

Published in Dawn, June 25th, 2014