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FDI inflows likely to keep up at moderate pace

China emerged as the top investor during the last three years

PAKISTAN FOREIGN DIRECT INVESTMENT 2010-16

Foreign Direct Investment in Pakistan increased by $2761.10 million in 2016. Foreign Direct Investment in Pakistan averaged $2651.26 million from 2010 until 2016, reaching an all-time high of $3184.30 million in 2010 and a record low of $2099.10 million in 2012.

FDI INFLOWS IN 2015-16

State Bank of Pakistan (SBP) latest data indicated that the FDI inflows in 2015-16 rose 39 percent to total $1.281 billion, up from $923 million in 2014-15. The volume should be appreciated in the context of the fact that 2015-16 saw Pakistani Armed Forces bringing peace and insuring safety to the economy.

At the same time, the government pro- investment and business policies helped generate more electric power and supplied larger quantity of natural gas, including LNG imported from Qatar, to help the industry in boosting the production. UAE undertook investment of $164 million followed by Hong Kong and Italy, which provided $131 million and $103.5, respectively. The United States investment, which was $208 million in 2014-15, turned into minus because of its investment outflow of $65 million. The SBP also reports that 2015-16 saw a net outflow of portfolio investment of $319.7 million.

The foreign investors were keen on highly productive investment into power sector, which attracted $566.6 million, up from $219 million in 2014-15. All indications are that for the next few years’ power sector will be the most attractive sector for FDI investment as demand rises rapidly.

INVESTMENT IN JULY 2016

Foreign Direct Investment (FDI) has registered massive growth of 162.8 percent in July 2017 to $222.6 million as compared with $84.7 million in the same month of last year, according to foreign investment data released by State Bank of Pakistan (SBP). The inflows under FDI were $247.8 million and outflows were at $25.1 million in July 2017.

The portfolio investment in the capital market posted decline of 122.7 percent to outflows of $11.4 million in the first month of fiscal year 2017/2018 as compared with inflows of $50.3 million. Net foreign investment into the country registered increase of 56.5 percent to $211.3 million as compared with $135 million.

INFLOWS OF INVESTMENT FROM CHINA (JULY-APRIL 2016-2017)

The inflows of investment from China has been recorded at 56 percent of the total foreign investment into Pakistan during July-April 2016-2017, according to data released by State Bank of Pakistan (SBP). The total foreign investment into Pakistan during first ten months recorded at $1.345 billion out of which inflows from China has been recorded at $754.3 million in the same months of the current fiscal year.

Analysts said that the inflows towards projects under China Pakistan Economic Corridor (CPEC) were the prime reason for the increase. The total inflows into Pakistan have recorded 16.7 percent growth to $1.345 billion during July-April 2016-2017 as against $1.153 billion in the corresponding period of the last fiscal year.

The inflow from China has also increased by 17.6 percent to $754.3 million as against $641.5 million during the period under review. Foreign Direct Investment (FDI) – the major component of total foreign investment into Pakistan posted growth of 12.7 percent to $1.733 billion during first ten months of current fiscal year as compared with $1.537 billion in the corresponding months of the last year.

Outflows from the equity market during the period remained continued. The foreign portfolio investment (FPI) witnessed outflows of $387 million during the July-April of current fiscal year as compared with $385 million outflows in the same period of the last fiscal year.

 

FDI GAINS STRENGTH — AUGUST 2017

The Foreign Direct Investment (FDI) to Pakistan in August 2017 inched up by 148 percent year-on-year. It had gone up by 162.8 percent last month. If percentage growths were a thing, Pakistan would end up attracting a little over $6 billion by the end of FY18. $234 million FDI in August consolidates the momentum that started building in the last quarter of fiscal year 2017. The 12-month moving monthly FDI has been hovering in the vicinity of $200 million, inching up gradually.

The growth in the recent past has been rather solid, without one-offs, and makes a case of strong consolidation, and could well see Pakistan fetching in excess of $3 billion by the end of FY18. Pakistan will happily take anything near $3 billion as annual FDI, given the dismal performance this decade.

HUGE FDI CAME FROM CHINA

Moving on to the specifics, 80 percent of FDI came from China in August 2017. And expectedly so, CPEC related investments keep coming. The share of Chinese FDI has been two-third of the total pie since January 2017, which is up from a little over-one third in the preceding six months.

Barring, one-off investments in telecommunication or FMCGs, the eggs seem well placed in the Chinese basket. Among sectors, power sector continues to fetch the bulk of FDI, with a 66 percent share in August 2017. It was followed by construction at 15 percent, and all else was in single digits. Power sector is the new E&P, in terms of FDI in Pakistan.

A lot more has to come as China-Pakistan Economic Corridor (CPEC) related power projects are well spread out and are likely to continue attracting sizeable investment in the future. Telecommunication sector sits third on the list with 9 percent share for July-Aug. Trade sector fetched just one percent for the same period.

Food, power, construction, electronics, oil and gas exploration, financial business and communication were the main recipient sectors of foreign direct investment (FDI) during the fiscal year 2017. These sectors of economy helped in attracting FDI of $2.41 billion in 2016-17 during the fiscal year 2016-17, which showed growth of 4.6 per cent, according to official data.

Owing China Pakistan Economic Corridor (CPEC), China emerged as the top investor during the last three years, with outlay of over 1.1 billion investments, almost half of the inflows received during the fiscal year.

MODERATE PACE TO CONTINUE

FDI inflows continued to maintain a moderate pace marked by improvement in multinationals’ confidence in the country’s economy.

The global integration of economies has provided an opportunity to developing countries to adopt liberalized policies to attract foreign direct Investment (FDI); official sources said adding that the Special Economic Zones (SEZs) have also helped in attracting FDI. They were of the view that Pakistan has a great potential to investment due to abundant resources, large market with growing middle class and better geographical location relative to other countries. Due to better policies and initiatives of present government, Pakistan is becoming a favourite destination for investors and investment climate is improving on fast track, they added.

The FDI Strategy 2013-17 outlines a conceptual framework for cooperation of economic sectors in Pakistan in both public and private sectors, towards mobilizing the Private Investments (domestic and foreign) that are required to achieve Pakistan’s economic targets.

Board of Investment (BOI) is providing orientation and facilitation to investors through a comprehensive facilitation package of investment. It has also organized several conferences to attract foreign direct investment into the country in different sectors of economy.

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