KARACHI, July 7: Foreign direct investments have explored some new sectors in Pakistan other than power and telecommunication and the attraction received highest inflows during the last five years.But the most worrisome could be the net outflow of $108 million from the fertiliser sector during July-May 2006 while the foreign direct investment in this sector during the last five years was almost negligible.
The foreign private investors found attraction in the areas of construction and food while the biggest attraction was still oil and gas explorations which alone fetched $270 million during the first 11 months of the last fiscal year which was the highest in the five years.
The official government data also revealed that the privatisation proceeds constituted 50pc of the foreign direct investment. It also showed that once the salable assets, which attract foreign investors, would be sold out the FDI would fall sharply.
The construction industry received highest inflows during the last five years and it might increase further when the final figures of the 2005-06 would be available. The sector received $82.5 million FDI during July-May 2006 compared to $42.7m the same period last year.The cement sector, which recorded highest sales during the 2005-06, received $36.2m in FDI during July-May FY06 which was also highest in this sector. Last year it attracted $13.1 million FDI.
The food sector showed potential and attracted $48.7 million during the period under review. The sector could hardly attract a cumulative $27 million during last four years.
The official data showed that power and telecommunication sectors attracted $315 million and $1.734 billion respectively but both inflows were high because of privatisation proceeds of $255 million in power sector and $1.184 billion in telecommunication. The financial business also attracted $310m during the July-May FY06.
The government depends heavily on foreign direct investment to meet its ever increasing trade deficit which resulted in record high current account deficit during the eleven months of FY06. The foreign investment, privatisation proceeds and remittances being sent by the overseas Pakistanis would help the government to meet the current account deficit.The eleven months figure showed current account balance as negative $4.758bn against minus $1.643bn.
The huge imbalance would compel the government to borrow from the market or donor agencies. The government plans to increase exports to narrow the trade deficit looks failed.
“In the wake of widening trade deficit which may be over $11bn in the final figure of 2005-06 and exports below than target, the only hope for the country is the foreign direct investment,” said an analyst.
