KARACHI: Foreign direct investment (FDI) fell by 30 per cent in the first eight months of FY21, reflecting poor confidence in the country’s investment environment.

For the last several years the country has been unable to attract any sizeable foreign investment despite providing incentives on taxes and assurances for one-window facility to the investors.

The country received $1.3 billion in FDI during July-February 2020-21 compared to $1.854bn in the same period of last year, a decline of 29.9pc.

However, the inflow of FDI in February witnessed a steep fall of 44pc to $155m against an inflow of $277.5m in February 2020. The entire world has been witnessing falling inflows of FDI due to the Covid-19 pandemic.

The portfolio investment also presented a dark picture as it noted a net outflow of $256.3m during 8MFY21 compared to an outflow of $26.3m in the same period last year.

The State Bank of Pakistan (SBP) data showed that the overall foreign private investment during 8MFY21 fell by 43pc to $1.044bn compared to $1.828bn in the same period last year.

Chinese investment remained at the top of the list of countries invested in Pakistan but the inflows from Beijing also dropped to $493.3m during 8MFY21 compared to $654.8m in the same period last year. For last several years China has been the top investor in the country.

Further details showed that inflow of FDI from the Netherlands increased to $117.8m compared to previous year’s $73.5m. The inflow from the United States also increased to $83.4m against $39.8m in the eight months of FY20.

However, the inflow from Hong Kong declined to $106.3m compared to $134.3m in the same period of previous fiscal year. The inflow from the UK increased to $79m compared to $60.5m in last year.

Previous reports showed that most of the investments were coming for electricity, gas, steam, etc while finance and insurance sector remained the second most attractive sectors.

The government has been struggling to invite foreign investment in the housing and construction sectors but has failed to make the sector attractive for them. Investment in housing and construction has increased domestically but the sector has great opportunity for foreign investors as the country lacks almost 10 million houses for its 220 million population.

Published in Dawn, March 18th, 2021

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