FDI plunges by 50pc in FY12
July 17, 2012 by Shahid Iqbal
The power sector which still has vast potential for growth, witnessed a net withdrawal of $85 million, compared with FDI inflows of $156 million last year. – File photo
KARACHI: Foreign Direct Investment in Pakistan fell by 50 per cent to $812 million in 2011-12, compared to $1.634 billion in 2010-11, the State Bank reported on Monday.
The lack of inflows of FDI was aggravated due to heightened tension with the United States after the Salala incident in November 2011, as Pakistan stopped Nato supplies to Afghanistan, analysts said.
However, the share of US investment in total foreign investment in Pakistan is still greater than any other country.
Pakistan received $233 million FDI from USA, $201 million from Italy, $142 million from UK and $121 million from China.
Other big investors included Switzerland and Hong Kong, with inflows in Pakistan of $127 million and $80 million respectively.
Pakistan’s trade balance is in favour of Arab countries and while the United Arab Emirates is the biggest trading partner, the FDI from UAE was limited to just $36 million.
Some outflows were also witnessed during the fiscal year as Norway withdrew $275 million and Saudi Arabia withdrew $20 million.
The lack of FDI from neighbouring and brother countries also reflects their serious lack of confidence on Pakistan’s economic environment.
Out of the total FDI of $812 million, 75 per cent was directed to oil and gas exploration and most of the popular sectors for foreign investment were ignored or investments were withdrawn.
The power and telecom sectors, which are usually the most attractive sectors for FDI, received meagre investments.
In fact, highest disinvestment was noted in telecom sector. The SBP reported that a total of $361 million was withdrawn from this sector, which had attracted billions of dollars a few years ago.
Last year the sector received $79 million in FDI.
The power sector which still has vast potential for growth, witnessed a net withdrawal of $85 million, compared with FDI inflows of $156 million last year.
Pakistan’s worsening economic environment has put-off long term investors while analysts said that the deteriorating law and order situation and poor relations with the US and Nato countries continued to be the biggest hurdles for FDI in Pakistan.
