July-March FDI down 28 percent

The Foreign Direct Investment (FDI) has slumped by 28 percent during the first nine months of current fiscal year mainly due to energy shortfall and an adverse law & order situation related to the fight against extremism. Although, the FDI has crossed one billion dollar mark during July-March of FY11, however it is much lower than the same period of FY10.
The State Bank of Pakistan on Thursday said the FDI stood at $1.082 billion during the first nine months of current fiscal year as compared to $1.503 billion in corresponding period of last fiscal year, depicting a decrease $421 million. On the other hand improvement in the country's equity market attracted some $235.5 million portfolio investment during the July-March of current fiscal year as compared to outflow of $182.6 million in the same period of last fiscal year.
"Continuous decline in the FDI is a negative indication for economy and reflects that the foreign investors' confidence is still not restored and they have reservations over Pakistan's economic performance," economists said. They said the FDI continued to perform poorly for the second consecutive year and no new privatisation programme is also a key factor for this decline.
Earlier, there were some expectations that the FDI will improve in the second half of FY11, however the third quarter statistics revealed that the FDI, at the end of current fiscal year, will be lower than last fiscal year, they said. They hoped that improved economic indicators such as less than the target current account deficit, high forex reserves and massive increase in exports would attract investment in future, however they urged the government to solve energy crisis for increase in investment inflows.
"With the current trend we are expecting that the country's FDI would be around $1.5 billion by the end of current fiscal year," they added. Similarly, net foreign investment, comprising the FDI and portfolio investment, has dropped by 0.3 percent during the first nine months of FY11.
With current decline, net inflows of foreign investment in Pakistan reached $1.318 billion in July-March 2011 against $1.321 billion in the corresponding period of FY10, depicting a decline of $3.4 million. Total foreign private investment with privatisation posted a decline of 29 percent to $1.387 billion during the period under review against $1.96 billion in corresponding period of FY10.