KARACHI, April 24: Foreign direct investment went up to over $2.2 billion during July-March of the fiscal year 2005-06, but a big chunk of it came from the privatisation of PTCL.

The latest SBP data show that the country received a total of $2.224 billion as foreign direct investment during the first nine months of the current fiscal year as compared to $792.6 million in the corresponding period last year, registering a rise of 280 per cent.

Though the flow of foreign direct investment is highly encouraging, the diversification of investment is extremely narrow as the telecommunication sector alone attracted $1 billion during the period under review.

Other sectors, which attracted high inflows, were energy and financial sectors. Power, oil and gas sectors collectively attracted $521 million.

The energy sector has been a main target of foreign investment all over the world and analysts believe that investment in this sector in Pakistan is not that encouraging. “It should be higher than the current trend.”

The country received the highest inflow in the telecommunication sector. The sale of PTCL finally materialised and Pakistan received a total $1.4 billion as sell-off proceeds, which pushed the overall FDI higher.

“The FDI is coming as a result of sale of assets and not for growth or development of any new sector,” said an analyst. He said the FDI could reach $3 billion by the end of the current fiscal year.

The highest investment came from the United Arab Emirates followed by the United States. The total FDI from the UAE was $653.8 million and it was $369.3 million from the US. Other significant contributors were Saudi Arabia ($272 million), Switzerland ($157 million) and the UK ($136 million).

China’s investment of $1.6 million was the 2nd lowest after South Korea ($1.2 million).

“It seems that all government efforts to increase economic relation with China and get a share from its booming economy failed,” said another analyst.

He was of the view that the Chinese were targeted in Pakistan which might prevent them from investing in Pakistan. He said trade relation between the two countries had also not picked up despite efforts by the Pakistani authorities.

Portfolio investment showed a rising trend and the biggest investor was the United States. The US alone invested 84 per cent of the total portfolio investment at $407.4 million during nine months of the current fiscal year. The UAE invested only $72.3 million and Hong Kong $31 million.

“It also reflects the trend of portfolio investment in the country. Since the equity market of Pakistan is booming, the attraction should be diversified but the investment pattern shows that it is coming from one direction while others are not significant,” the analyst said.

At the beginning of the current year, the portfolio investments have been dominated by the US and the UK, but the data shows that the UK now withdrew its investment.