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ISLAMABAD, Oct 16: Pakistan witnessed a 95 per cent growth in foreign direct investment (FDI) inflow in 2005 to touch the $2.183-billion mark, while the outflow fell to $44 million, states United Nation's World Investment Report 2006 launched here on Monday.
A comparative analysis showed that the growth in FDI inflow for Pakistan was much higher than some of the neighbouring economies. The FDI inflow has increased by 50 per cent for Bangladesh, 21 per cent for India and 17 per cent for Sri Lanka.
Globally, the FDI inflows have climbed by 29 per cent -- a second consecutive year of increase -- to reach a total of $916 billion. These increases were across the board. For developed countries, the FDI inflow went up by 37 per cent to $542 billion, while for developing nations it went up by 22 per cent to a record $334 billion.
However, still the world inflows remained far below the 2000 peak of $1.4 trillion.
Regionally looking South, East and Southeast Asia, because of continued high economic growth, has become more attractive to market seeking FDI. The region where the FDI inflows reached a new high of $165 billion in 2005 has become a hot spot for trans-national corporation investments in financial services and high technology industries.
The region is said to be attracting high quality FDI aimed at high value-added and knowledge-intensive activities.
The report also focuses on South-South investments that have been growing for almost 15 years and have strong global implication.
FDI OUTFLOWS: The FDI outflow for Pakistan fell to $44 million in 2005 from $56 million in 2004.
Outflows from the South, East and Southeast Asia region declined by 11 per cent during this period, although they were still relatively high at $68 million. Asia's new industrialising economies -- Hong Kong (China), South Korea, Singapore and Taiwan province of China -- remained the main sources of FDI from developing countries, despite a significant decline in their outflow in 2005.
Outward flow of FDI from the region still focuses on services, but a growing share of capital outflows from the region has been targeting manufacturing and natural resources.
Muhammad Muslim, director general (Planning and Policy), Board of Investment, speaking at the launch of the report said last year Pakistan was well ahead of its investment target of Rs3 billion. Pakistan received a cumulative investment of Rs3.6 billion.
In reply to a question, the official agreed that most of the foreign investment was going to the non-productive sector, particularly the services sector. Besides, he said Pakistan had its own limitations of absorbing the investment because of infrastructure constraints, something that was evident from the inability of “our roads to cope with the growth in the automobile sector”.
However, he noted that the growth in the services sector had a positive effect on the overall economy and boosted the productivity of the country.
