The significant fall in Pakistan’s foreign investment in the first six months of Fiscal Year 2018-19 (FY19) has raised serious questions over the progress of current regime.
Total foreign investment in Pakistan including foreign direct investment, foreign public investment, portfolio investment and foreign private investment fell drastically by 77.2 percent in said period to $899.5 million as compared to $3.9 billion in same period of last fiscal, the State Bank of Pakistan (SBP) reported on Wednesday.
Net foreign direct investment (FDI) fell by 19.2 percent to $1.4 billion in first half (July-December) FY19 as compared to $1.7 billion in same period of FY18. However, FDI rose to $319.2 million in December 2018 from $ 272.8 million in December 2017, showing 17 percent increase.
According to independent economists, continuous drop in Chinese investment was a main reason behind overall decline in foreign investment in the country.
FDI from China decreased to $760 million during the period under review compared to $ 1.1 billion in corresponding period last fiscal. However, China remained biggest foreign investor in Pakistan during the said period.
Economists said looming uncertainties in the macroeconomic and political environment in Pakistan kept foreign investors at bay as investors seem unoptimistic about the prospects for the country’s economy.
Independent economist Dr Shahid Hasan Siddqiui believes that Pakistan’s key investor China is upset with the early statement of Prime Minister Imran Khan’s advisor Abdul Razak Dawood regarding rollback of CPEC.
He said country’s broader economic indicators have been deteriorating since new governments are in place. He said Pakistan’s foreign reserves have been declining by average $1 billion per month and the value of Rupee has gone down by 33 percent while the exports registered only 2 percent growth. “We are still running our economy on remittance and exports instead of industrialization”.
Siddiquie added that it seems PTI’s rhetoric on accountability by calling opposition leaders ‘thieves’ didn’t go well and failed to make good impression internationally.
Meanwhile, United Kingdom emerged as the second biggest foreign investor in Pakistan with a total investment of $116 million made during the first half of FY19.
Other major contributors to the FDI were United Kingdoms (UK), UAE, Netherlands, South Korea, Japan, and the United States of America (USA) who contributed $116 million, $49.2 million, $52.8 million, $ 59.6 million, $54.2 million, and $54 million respectively.
According to the Central Bank’s data, the local equity market witnessed an outflow of $419.8 million in July-December FY19 against $132.4 million last year.
On the other hand, Secretary General of the Overseas Investors Chamber of Commerce and Industry (OICCI) M Abdul Aleem said due to uncertainty in the first six months of this fiscal year, the FDI was also affected. “CPEC projects may also have been delayed. So this small drop in FDI in the first half is not of great concern. We expect FDI to accelerate in the next six months”.
Published in Daily Times, January 17th 2019.