KARACHI, OCT 11 – Raising serious concern over the falling trend of foreign direct investment the Friends of Business and Economic Reforms (FEBR) has asked the government to win the confidence of foreign investors amidst deteriorating economic state of affairs in the country, as Foreign Direct Investment (FDI) has declined by 37 percent in Aug 2020 when compared with the corresponding month of 2019.
FEBR President Kashif Anwar, in a statement issued here on Sunday, observed that the FDI volume for Aug stood at $102.9 million against the level of $164.3 million recorded last year but the alarming thing is that the trend is not limited to just one month, as it has experienced a 23 percent cut in July and August – the first two months of the current financial year 2020-21.
According to reports, further bifurcation of this amount reveals that the actual new investment in private sector by foreign investors was $150 million, representing a decrease of $47.9 million against the corresponding period last year. On the other hand, the foreigners invested $59.8 million in government bonds and T-Bills (treasury bills) which is again a 16 percent reduction. Pakistan had reopened its economy from the lockdown for a long time and majority of the sectors in manufacturing and almost entire agriculture sector are operational now.
Kashif Anwar said that foreign direct investment figures of the previous year reflected the same poor scenario, which plunged to a nine-month low at $73.4 million in July 2019. The FDI was 59% lower than the $178.9 million received by different sectors of the economy, particularly construction and power, in the same month of previous fiscal year. The FDI had dropped to half at $1.66 billion in the last fiscal year compared to investment of $3.47 billion in FY18.
The FEBR President said that Pakistan has succeeded to improve its balance of payments with record remittances in FY20 while the FDI witnessed 88% growth last year. China has been the leading investor in Pakistan for few years and was a major contributor to the increase in the size of FDI in 2019-20. However, the new fiscal FY21 may drag down the inflows from elsewhere due to slowdown of economies in the developed countries, he warned.
Kashif Anwar said that Pakistan has remained a potential market for foreign investors, who still have plans to make fresh investment in the country, but they have continued to wait for the return of economic stability. He highlighted uncertainty in the rupee-dollar parity as one of the major concerns of foreign investors. He said that the central bank let the local currency depreciate by 47% to Rs168 against the US dollar during last two years.
He said a slowdown in the economy had badly impacted business confidence. It is must for the authorities concerned to first create an enabling environment for the local businessmen desiring to make new investment. According to reports, China has remained the single largest investor in Pakistan over the last couple of years. It has been mainly investing in power projects under its flagship and multi-billion dollar China-Pakistan Economic Corridor projects.