KARACHI: Foreign Direct Investment (FDI) from the United States surpassed inflows from China during the first quarter of the ongoing fiscal year (1QFY22), data released by the State Bank of Pakistan (SBP) on Monday showed.

FDI from the US jumped to $100.9 million during July-Sept FY22 compared to $19.7m in the same period of last year. Inflows from China have shrunk in 1QFY22 despite the neighbouring country being the largest investor and biggest trade partner of Pakistan.

The five-time higher FDI inflows from the US in 1QFY22 are encouraging for the country while at the same time a significant decline of FDI from China is worrisome.

The FDI from China declined by 50 per cent in 1QFY22, down to $76.9m compared to $154.9m during the same period of FY21. Reports appearing in the media pointed towards slow progress in China-Pakistan Economic Corridor. However, both Pakistan and China have denied these reports.

Pakistan is keen to develop economic relations with China which has become its biggest trade partner. Most of the trade is in favour of China. Exports from Pakistan witnessed slow progress during the last three years. The FDI during the last few years was dominated by China and contributed in the range of 40-50pc of the total inflows.

A four per cent decline in the total inflows of FDI reflected some improvement during the first quarter compared to last year. The country received $439m during the 1QFY22 compared to $457m in the same period in FY21. During the first two months of FY22, FDI declined by 20pc reflecting no improvement on this sector except that China increased FDI.

FDI inflows in September improved and rose to $236m compared to $202m in the same month of the previous year.

Other important inflows were $60m from the Netherlands, $49.7m from the United Arab Emirates, $30.3m from the United Kingdom and $34.8m from Hong Kong.

Despite record remittances and higher exports, the confidence of foreign investor could not be restored. Experts and industrialists blame unfriendly economic policies for investors along with political uncertainty, corruption and turmoil in the geopolitical situation of the region for low confidence.

Interestingly, investors have found it easier to invest in India and Bangladesh in the same region. FDI has been increasing in the two countries. In India, the FDI increased by 27pc to $64 billion in 2020 from $51bn in 2019.

The FDI during the last three years could not even reach $2.5bn in Pakistan; it was $947m in FY19, $2.315bn in FY20 and $2.056bn in FY21 showing the poor investment climate in the country.

The outflow of portfolio investment was $100m during 1QFY22, slightly lower compared to an outflow of $108m in the same period of FY21.

Power sector attracted highest FDI worth $131m while communications received $88.4m which included 24m for telecommunications and $64m for Information Technology. Financial business attracted $100.5m in the same quarter.

Published in Dawn, October 19th, 2021