KARACHI, March 18: Foreign direct investment into the country fell by $246 million or about 39 per cent in the first eight months of this fiscal year i.e. between July 2003-February 2004. According to data released by the State Bank, FDI declined to $385 million in eight months to February 2004 from $631 million in a year ago period.

In February 2004 alone the country attracted $45.3 million up from $34.2 million in February 2003. This figure does not include the $190 million that the government has received as the first instalment of the privatization proceeds of Habib Bank Ltd.

The Aga Khan Fund for Economic Development that bought 51 per cent HBL shares for Rs22.4 billion paid last month the dollar equivalent of Rs11.4 billion for 26 per cent of shares to take over the bank. They are supposed to pay the remaining amount in two years time.

This amount of Rs11.4 billion or around $190 million is to be treated as foreign direct investment. "But currently these $190 million are in the foreign currency account of the Privatization Commission (with National Bank)," a source close to State Bank told Dawn.

Once this amount is transferred to the government account with the SBP it would be included in FDI. A National Bank source said that "these $190 million should be transferred to the SBP account by the quarter-end (i.e. by the end of this month)." But no official word is available to explain the delay in the transfer of HBL proceeds from the foreign currency account of PC to the rupee account of the government with the SBP.

Banking sources say the delay may enable PC to earn a little interest on this amount. PC may also realize a higher value of $190 million in rupees if the rupee sheds a few paisa in March.

With the expected inflow of $190 million the HBL privatization proceeds into foreign direct investment account this month the overall FDI in July-March 2003-04 would not be much lesser than the FDI in a year-ago period. In July-March 2002-03 FDI stood at $658.2 billion that also included the privatization proceeds of the United Bank sold out in October 2002.

Country-wise breakup of FDI shows that in July-February 2004, US topped the list of foreign direct investors with $156 million followed by (i) the UK $68m (ii) the UAE $46.5 million (iii) China $9.7 million (iv) Japan $9.3 million and (vi) the Netherlands $9.2 million. The following ten countries made a combined direct investment of $16 million: (i) Germany (ii) France (iii) Hong Kong (iv) Italy (v) Saudi Arabia (vi) Canada (vii) Korea (viii) Singapore (ix) Australia and (x) Switzerland.

Other countries not mentioned by individual names made $67.6 million foreign direct investment into Pakistan in the first eight months of this fiscal year. The sectoral distribution of FDI would also change when FDI figures for March are released in the middle of April with the financial business showing perhaps the largest amount of inflow due to HBL privatization.

July-February 2003-04 data for sector -wise FDI is not available but July-January 2003-04 data still serves as an indicator. Between July 2003 and January 2004 mining, quarrying and oil exploration attracted the highest FDI of $119.7 million followed by (i) petroleum and refining $44.1 million (ii) financial business $34.2 million (iii) Textiles $25.6 million (iv) chemicals/pharmaceuticals and fertilizers $17 million (v) Trade $16.2m (vi) Construction $16.1 million (vii) Transport/storage and communication including IT $14 million and (viii) Power $12.2 million.

The following six sectors attracted a combined FDI of $16 million: (i) Food/beverages and tobacco (ii) electric machinery (iii) machinery other than electrical (iv) electronics (v) tourism/paper and pulp; and (vi) cement and sugar. Many other sectors not specified attracted $24.5 million foreign direct investment in July-February 2003-04.