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KARACHI: Foreign direct investment (FDI) fell by 35 per cent in the first five months of the current fiscal year, mainly due to a sharp drop in Chinese investments.

The State Bank reported on Monday that the FDI during July-November FY19 clocked in at $880.7 million against $1359m in the same period of last fiscal year; a decline of $478m or 35pc.

FDI from China decreased to $554m during the period under review compared to $912m last year. Pakistan has been largely dependent on China for its FDI since total investments from the country during the last fiscal year stood at $2.85bn. The inflow from China constituted 66pc of the total FDI in FY19.

“Investors are moving ahead, but cautiously and with a wait-and-see attitude” said Abdul Aleem, Secretary General of the Overseas Investors Chamber of Commerce and Industry. He was upbeat about more foreign investment in the future, pointing to the acquisition of 29pc shares of Elengy Terminal Pakistan Ltd (ETPL) by Dutch giant Vopak announced late last week.

FDI had been on a declining trend in the country till FY2012, when it hit a trough of $820m but began rising from FY2013, led mainly by Chinese investments under China-Pakistan Economic Corridor. But those have begun to taper off now as the early harvest projects draw to a close.

The government officials are preparing to leave Beijing for the 8th Joint Cooperating Committee talks to develop a framework to guide the second generation of Chinese investment flows into the country, primarily through the construction of the Special Economic Zones and the agriculture sector.

The central bank report shows the outflow of portfolio investment rose to $330m in the five months compared to an outflow of $100m during same period of last fiscal year.

Furthermore, the overall foreign private investment fell by 56pc to $550m in the five months. Pakistan’s economic hardships have grown in the last year as the authorities failed to curtail the rising current account deficit amid declining reserves.

The government after assuming power in August sought help from Saudi Arabia and was successful in securing a $3bn bailout, of which it has already received $2bn, with the last payment due in January next year.

However, the government will not be able to use these funds to pay off its foreign liabilities.

Published in Dawn, December 18th, 2018