While the situation at external front has been improving, the foreign direct investment climate is dreary as usual. Where COIVD-19 pandemic has adversely affected FDI flows across the globe including Pakistan, the situation at home has been worrisome much before the pandemic hit. The continuous decline in FDI since after FY17 is the evidence.
Central bank’s latest data shows that net flows in March 2021 was down again year-on-year – though it was able to break the continuous month-on-month decline streak of the previous four months. At $253 million, net FDI was down by 40 percent year-on-year, while up by 32 percent sequentially. FDI during the 9MFY20 overall was down by 35 percent year-on-year. With the pandemic putting a hold on new investment decisions and foreign investors waiting for the rough patch to ger over, Pakistan continued to attract majority of the FDI from China – 46 percent year-on-year in 9MFY21.
Compared to 9MFY20, the recent nine-month period has seen no significant change in composition as far as the sectoral FDI is concerned – except communication sector. Chinese FDI continues to be concentrated in the power sector. However, the growth here in power sector inflows were offset by the higher outflows with resultant net FDI remaining flat year-on-year. Other conventional sectors like oil and gas, construction, financial business, transport, and electrical machinery saw marginal change. Communication sector – which not only saw a significant outflow but a 77 percent decline in inflows for 9MFY21 – had negative contribution to FDI. In essence, the telecom sector was completely missing in a conventional FDI mix.
A weaker economic growth in the last couple of years plus the global Covid event have been a double whammy for the FDI flow in Pakistan. The policy makers and the BOI should now be preparing a policy that considers how to attract investor interest as they rise up in the post inoculation times – the developed countries will reach their targets soon, and as economies work full throttle and investor hustle, it would be unfortunate if we miss the boat – yet again.
