KARACHI, Aug 15: The trend towards withdrawal of foreign companies with stakes in Pakistan seems to have been reversed with new entrants outnumbering those folding up.
Despite the renewed interest of more foreign firms, the volume of fresh investment however remains subdued.
According to the latest annual survey by State Bank of foreign liabilities, assets and foreign investment, the number of companies and firms with foreign stakes rose from 570 in 1999 to 583 in 2000, after falling sharply and consecutively every year from 800 in 1997.
The nuclear blast, freezing of foreign currency accounts, Hubco dispute and the regional tensions impacted adversely on foreign investment.
In the year under review, 45 “foreign interests” in locally incorporated firms ceased to exist against 55 fresh entrants, reflecting the global trends of capital flows specially in the realm of portfolio investment.
The number of firms/companies registered or incorporated outside Pakistan rose from 103 in 1999 to 107 in 2000, though still much below 134 in 1997. Against eight new entrants, four ceased operations.
Year over year, the number of companies incorporated in Pakistan, in which foreigners held interests, was up by 10 but partnership numbers fell from 4 to 3.
An analysis of the type of foreign investment indicates that over 57 per cent of the net inflow was accounted for by reinvested earnings in 2000, up nearly from 49 per cent in the previous year. Over 40 per cent was in the form of “cash brought in” and a mere two per cent in the shape of capital equipment, though that doubled over the year.
Whereas the number of foreign companies with stakes in Pakistan has increased, the net foreign liabilities has decreased from $9.1 billion in 1999 to $8.5 billion in 2000. In 1997, the figure stood at $9.68 billion. In rupee terms, the net foreign indebtedness has risen from Rs471 billion to Rs492.6 billion because of devaluation of the rupee.
Foreign companies have stakes in almost every field of economic activity and in companies run by the multinationals as well as sizable number of corporates managed by locals.
The number of companies, incorporated domestically, in which foreigners hold interest, was 473 in 2000. The net liabilities of Pakistani joint stock companies having foreign participation has declined from $7.2 billion in 1999 to $6.6 billion in 2000.
For year 2000, the gross foreign liabilities of Pakistani joint stock companies, were in the following ratios: equity 20.32 per cent, short-term debt 10.88 per cent and long-term debt 68.80 per cent. Over the years, the ratios for equity and short-term debt have fallen and long-term debt has gone up.
The branches of foreign firms/companies accounted for $1.939 billion of net foreign liabilities, down from $1.994 billion a year ago.
In a fast globalizing environment, the Pakistani nationals have also been investing abroad. Their holdings of foreign securities rose by $3.2 million to $6.2 million in 2000. But net creditor position of Pakistani firms/companies operating abroad declined from $84.3 million to $74.5 million over the year.