FDI in telecom sector showing declining trend

ISLAMABAD: The telecom sector in the country has attracted merely $79.1 million Foreign Direct Investment (FDI) in the fiscal year 2010-11, showing a declining trend as compared to previous years.

The share of telecom sector in overall FDI has contracted to 5 percent in the previous fiscal year against 17 percent of the share recorded in the year 2009-10.

The FDI in telecom sector was $1824 million in 2006-07, $1438 million in 2008-09, $815 million in 2008-09 and $374 million in 2009-10, falling with the each passing year.

According to a telecom news website quoting official statistics reported on Thursday that the overall telecom sector including Long Distance International (LDI), cellular, broadband and various class value-added service providers have brought only $79.1 million FDI during 2010-11.

The telecom industry that contributed highest in the Foreign Direct Investment (FDI) among all different industries has failed to continue its spending on infrastructure and technology, as telecom operators are reluctant to invest in the country where their returns are constantly squeezing against their increasing operational expenses.

The FDI level is the lowest since year 2003-04 in the telecom sector as FDI continued to increase till 2009-10. The sector used to be considered highly potential as landing billion dollar investment with host of economic activities.

In 2005-06, the telecom sector brought $1.905 billion with 54 percent share in the overall FDI, the figures showed.

Meanwhile, an official said that the cellular sector had invested huge money on the telecom infrastructures over the past couple of years, expanding their network more than 90 percent throughout the country.

The FDI volume has witnessed significant cut in the previous fiscal year, however, FDI is still landing in the country on upgrading of network and introduction of value-added services, he added.

The revenues of the cellular operator declined substantially owing to stiff competition, which made investors reluctant to refrain from investing more capital.

He said the telecom operators have curtailed to send revenues to their headquarter countries whatever they earned in Pakistan and re-investing their earnings on their operations and businesses.

The official said the cellular operators' have adopted cautious approach to invest money on technology and trying to adjust their growing expenses with cost-cutting strategies.

Copyright APP (Associated Press of Pakistan), 2011