KARACHI: Foreign direct investment (FDI) did not show any significant improvement during the first half of this fiscal year, though inflows from China rose significantly.
FDI increased by just 2 per cent year-on-year to $624 million during July-December 2015. Though $400m of this amount came from China, it did not reflect the expected inflows under the $46bn China-Pakistan Economic Corridor (CPEC).
The Chinese investment was just $180m during the same period of last year. This also reflects that FDI from other countries has dried up this year.
Pakistan and China have signed agreement for $46bn investment, but no time frame is available. Moreover, political differences among the provinces have deepened over the investment pattern under the CPEC.
The details showed that the inflow of FDI drastically reduced to $1bn during the six-month period under review from $1.78bn a year ago. However, the low outflow helped the country to retain $624m.
FDI has been a benchmark for developing economies that measures the prospects of economic growth in any country. Pakistan is the poorest among the regional counties regarding FDI while the government looks settled with the situation depending entirely on Chinese promises for $46bn. Political use of the CPEC in Pakistan is much bigger than the actual result, which is not very encouraging so far.
The State Bank of Pakistan reported that the overall foreign private investment fell by 49pc to $385m due to negative (outflow) figure of portfolio investment. The portfolio investment during July-December 205 was minus $373m.
The United States and the United Kingdom, which are major investors in the country, have changed their minds this year. In fact, the US emerged as a country which was willing to disinvest instead of investing in Pakistan. It disinvested $94m compared to $112m investment during the same period of last year.
In case of the UK, the investment remained positive, but fell sharply to $54m from $105m during the same period of last fiscal year. Other major investors were the United Arab Emirates, Hong Kong and Italy as their six-month investments were $86m, $73m and $54m, respectively.
Published in The Banker Pakistan, January 16th, 2016.