TELECOM SECTOR ATTRACTING MAJOR CHUNK OF FDI

Rapid expansion in the cellular, fixed and wireless phones has promoted foreign direct investment in the telecommunication sector this fiscal

From KHALID BUTT, Lahore
Nov 28 - Dec 04, 2005

The vibrant communication sector has emerged as the second largest sector to attract Foreign Direct Investment (FDI) in Pakistan for the current financial year 2005-06.

According to official figures, the sector fetched $82.6 million foreign direct investment, 13.8 percent of the total FDI the country received in eight months of this fiscal. In this fiscal Pakistan has received a total of $597.6 million FDI during July-February, 55.3 percent higher when matched with $384.8 million FDI the country received during the corresponding period of last fiscal.

Officials told PAGE that a major chunk of foreign direct investment had been received by the telecommunication sector in this fiscal.

Rapid expansion in the cellular, fixed and wireless phones in the backdrop of liberal telecom policy of the government has promoted foreign direct investment in the telecommunication sector in this fiscal, said the officials.

They said that ongoing expansion by the leading mobile phone companies and entrance of major players like Telenor and Warid in Pakistan has given an unprecedented boost to the telecommunication sector, especially mobile phones.

Meanwhile, oil, gas and petroleum refinery sector contributed the highest amount of $140.8 million or 23.6 percent of the total foreign direct investment in eight months of the current fiscal. Financial business fetched $77.2 million, 12.9 percent of the FDI, power 50.7 million, 8.5 percent, chemical $32.3 million, 5.4 percent, trade $31.4 million or 5.3 percent while remaining industrial/commercial sectors received $182.6 million, 30.6 percent of the total FDI in July to February 2004-05.

The United States continued to hold the leading position as Pakistan received 148.6 million FDI from the said country, which is 24.9 percent of the total foreign direct investment.

The United Kingdom (UK) emerged as the second major investor country and Pakistan recorded an inflow of $110.9 million FDI from UK in July-February period of this financial year. Similarly, United Arab Emirates invested 32.1 million dollars in this country, Japan 31 million dollars, Netherlands 27.9 million dollars, Hong Kong 16.3 million dollars, while Pakistan got 230.8 million dollars FDI from the remaining countries in the world.

The Board of Investment (BoI) had announced the annual target of one billion dollars FDI in 2004-05. The target seemed achievable as $300 million investment is expected in next few days from the Consortium of Kanooz Group that has acquired majority shares along with strategic control of KESC. In remaining 4 months of this fiscal a total of $402.4 million FDI is required to meet the annual target of one billion dollars FDI as the country had already received $597.6 million worth foreign direct investment in eight months of the current fiscal.

Despite having a vast potential of investment and growth, the Tourism sector in Pakistan has failed to attract Foreign Direct Investment (FDI) in nine months of this financial year

The Tourism sector has received a contemptible amount of FDI, $0.3 million in last three financial years, with $0.1 million FDI in each fiscal 2001-02, 2002-03 and 2003-04. But this sector could not attract a single penny during July-March period of 2004-05, discloses a brief sector-wise foreign investment profile, prepared by the State Bank of Pakistan.

Zero FDI in Tourism is a clear indicator of foreign investors' lack of interest in the plenty of tourism treasure in Pakistan.

Besides Tourism, two more sectors paper & pulp, rubber and rubber products also did not receive Foreign Direct Investment in nine months of the outgoing fiscal year.

Meanwhile, there are eight more economic sectors, which attracted an insignificant amount of FDI during July to March period of 2004-05. During this period the cement sector fetched only $0.6 million FDI, cosmetics $0.9 million, ceramics $0.2 million, basic metals $0.4 million, motorcycles $0.4 million, while postal and courier services received $0.1 million FDI in first nine months of this financial year.

The major FDI receiving sectors are the financial business (mainly privatization of banks), telecommunication, information technology, heavy vehicles manufacturing sector (buses/trucks/trailers), construction, trade, oil/gas exploration, pharmaceuticals, petroleum refining, chemicals and textiles.

According to latest FDI data, the inflow of Foreign Direct Investment has exceeded one billion dollars mark after a gap of over a decade.

Last time the country had witnessed over one billion-dollar inflow of FDI during first tenure of Benazir Bhutto, when the government allowed investment in power sector.

Meanwhile, during July to May 2004-05, Pakistan has received $1.03 billion worth FDI, $81 million higher than the corresponding period of last financial year. In percentage, the inflow of FDI reflected an increase of 14 percent in this fiscal. In the same period last fiscal the country had received $949 million FDI.

The Board of Investment has estimated the inflow of one billion dollars FDI in this fiscal, but the inflow has slightly gone up due to speedy privatization of public units, especially banks and growing investment in the telecommunication sector in the country.