In the first seven months of the current fiscal year, foreign direct investment (FDI) fell by 27 per cent compared to the same period last fiscal year, the State Bank of Pakistan (SBP) reported on Monday.
The FDI was $1.145 billion during July-Jan FY21 against an inflow of $1.577 billion in the same period last fiscal year. In January, the inflow was $192.7 million compared with $219 million in the same month of the previous fiscal year; a decrease of 12 percent was noted.
The seven-month decline, however, was mainly due to a decline in China’s net FDI and a rise in net outflows to Norway.
The country-wise data showed that China’s net FDI inflow was $402.8 million, compared to $502.6 million in the same time last fiscal year. So far, China’s net FDI is the largest in the list of other countries’ inflows. During the seven months, inflows from China were $707.2 million, but the outflow of $304.4 million in the same period decreased the net FDI to $402.8 million.
Others from where over $100m net FDIs were earned were the Netherlands and Hong Kong, as within the first seven months of FY21 they spent $122m and $105m, respectively. During the seven months, the inflows of FDI from the UK (83.8m), the US ($73.5m) and Malta ($60.6m) were also important.
However, the total inflow of FDI this year was influenced by a dramatic shift in inflows from Norway. The SBP data shows that the inflow from Norway was $288.5 million during the seven months of the previous fiscal year, while a net outflow of $25.8 million was noted in the seven months of the current financial year instead of any inflow from the Scandinavian region.
Investment Sector-wise
In the same timeframe last financial year, the power sector received the highest investment of $475.8 million versus $373 million, a rise of 27.6 percent.
Within the power sector, as the inflow reached $271m compared to $233m in the same span of FY20, coal power attracted the highest investment. Hydel power attracted $111m and $93.9m was received by thermal energy.
Compared to last fiscal year, the financial sector (banks) attracted marginally higher FDIs as it earned $181.3 million compared to $178.9 million in the same timeframe last fiscal year.
The inflow decreased to $136.7 million compared to $186.5 million last year in the oil and gas exploration market. The sector has been attractive for the investors but the slow growth in this sector represents the declining interest of the investors.
As it attracted $118 million compared to just $22.3 million in the same period of last fiscal year, the trade sector noted vital changes.
Compared to $133.2 million in the previous year, electrical machinery FDI fell to $70.5 million.
Although the country is receiving additional support from remittances sent by Pakistani foreigners, it still seems difficult to increase foreign investment and exports to any significant extent. Remittances were up by 24pc during the seven months of the current fiscal year as the nation earned $16.5bn.
Exports from the financial sector said that, despite all efforts and incentives, exports grew slowly, while foreign investment could see a shift once the country left the FATF grey list. A decision on Pakistan’s withdrawal from the Paris-based task force’s grey list is expected by the end of this week.
Portfolio investment during July-Jan FY21 registered a net outflow of $236.9 m compared to a net inflow of $21.5 m last year, according to the SBP results.
Compared to the inflow of $1,598 million in the same span of FY20, the net foreign private investment (with a deduction of portfolio investment) dropped by 43.2pc to $908.4m.