KARACHI: Foreign direct investment (FDI) has not improved as much as the government expected, but the latest data shows inflows are originating from a number of countries unlike the investment pattern witnessed in recent years.
The State Bank of Pakistan (SBP) reported on Wednesday FDI increased 10 per cent to $1.16 billion in July-January.
Pakistan recently came in the limelight following the improvement in its international credit ratings. In addition, some research reports also recognised Pakistan as a fast-growing economy.
Local and international reports said higher economic growth and investment potential was due to the China-Pakistan Economic Corridor (CPEC), which involves more than $55bn investment.
While a few countries have expressed their willingness to join the CPEC, investments have yet to land in Pakistan.
Investment from the Netherlands was highest in July-Jan, although analysts believe it was a one-time inflow because a Dutch company purchased Engro Foods during the period under review.
Investment from China, which was highest after the Netherlands, remained below expectations as analysts anticipated major changes in the economy with the beginning of the CPEC.
FDI in January slightly rose to $81m from $78m in the same month of the last fiscal year. Investment from the Netherlands in July-Jan was $469m while that from China was $237m.
The government has been trying to improve FDI without success for the last four years. Pakistan has been facing a serious problem of terrorism, which scares investors away. But the recent military operation has brought back peace.
Analysts believe the recent bomb attacks in Lahore and two other cities will again create an image problem for the country.
Other important investors during the seven months were Turkey $130m, France $96m, United Arab Emirates $83m, United Kingdom $48m, United States $43m and Italy $37m.
The latest data reflects diversified sources of investment and indicates that the country is coming out of international isolation. It also negates the impression that European and American investors have stopped taking interest in Pakistan after China increased its involvement in the national economy.
However, experts believe the country needs to improve its image with more effective action against terrorism.
Pakistan needs massive foreign investment to meet its trade deficit, improve exports and meet the challenge of slowly declining remittances.
Published in Dawn, February 16th, 2017