27pc drop in foreign direct investment

Published February 23, 2021
The seven-month decline was mainly due to a decline in net FDI from China and increase in net outflow to Norway. — AFP/File
The seven-month decline was mainly due to a decline in net FDI from China and increase in net outflow to Norway. — AFP/File

KARACHI: Foreign direct investment (FDI) during the first seven months of the current fiscal year fell by 27 per cent compared to the same period of last fiscal year, the State Bank of Pakistan (SBP) reported on Monday.

The FDI during July-Jan FY21 was $1.145 billion against an inflow of $1.577bn in the same period last fiscal year. The inflow during January was $192.7m compared to $219m in the same month of previous fiscal year; 12 per cent decline was noted.

However, the seven-month decline was mainly due to a decline in net FDI from China and increase in net outflow to Norway.

The country-wise details showed that net inflow of FDI from China was $402.8 million against $502.6m in the same period of last fiscal year. So far, the net FDI from China is the highest in the list of inflows from other countries. The inflows from China were $707.2 million during the seven months but the outflow of $304.4m in the same period reduced the net FDI to $402.8m.

Others from where over $100m net FDIs were received were the Netherlands and Hong Kong, as they invested $122m and $105m, respectively, during the first seven months of FY21. The inflows of FDI from the UK (83.8m), the US ($73.5m) and Malta ($60.6m) were also significant during the seven months.

However, a drastic change in the inflows from Norway affected the overall inflow of FDI this year. The SBP data shows that during the seven months of the previous fiscal year, the inflow from Norway was $288.5m, while in the seven months of the current financial year a net outflow of $25.8m was noted instead of any inflow from the Scandinavian country.

Sector-wise investment

The power sector attracted the highest investment of $475.8m against $373m in the same period of last financial year; an increase of 27.6 per cent.

Within the power sector, coal power attracted the highest investment as the inflow reached $271m compared to $233m in the same period of FY20. The hydel power attracted $111m and thermal received $93.9m.

The financial business (banks) attracted slightly higher FDI compared to last fiscal as it received $181.3m against $178.9m in the same period of last fiscal year.

In the oil and gas exploration sector, the inflow declined to $136.7m compared to $186.5m last year. The sector has been attractive for the investors but the slow growth in this sector reflects the declining interest of the investors.

The trade sector noted vital change as it attracted $118m compared to just $22.3m in the same period of last fiscal year.

The FDI in electrical machinery dropped to $70.5m compared to $133.2m in the previous year.

While the country is getting extra support from remittances being sent by the overseas Pakistanis, it looks still hard to improve the foreign investments and exports to any significant level. Remittances during the seven months of the current fiscal year were up by 24pc as the country received $16.5bn.

Financial sector exports said despite all-out efforts and incentives, exports grew slowly while foreign investment could see a change once the country exited the FATF grey list. A decision about Pakistan’s ouster from the grey list of the Paris-based taskforce is expected by end of this week.

According to the SBP data, portfolio investment during July-Jan FY21 noted net outflow of $236.9m against a net inflow of $21.5m last year.

The overall foreign private investment (with deduction of portfolio investment) fell by 43.2pc to $908.4m against the inflow of $1,598m in the same period of FY20.

Published in Dawn, February 23rd, 2021

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