37 percent decline in FDI

RECORDER REPORT

KARACHI: Foreign direct investment (FDI) dropped by 37 percent during the first half (July-Dec) of current fiscal year, mainly due to lack of foreign investors' interest caused by adverse law and order situation, energy crisis, and political uncertainty.

Analysts said that adverse law and order situation, lack of infrastructure and rising energy shortfall were some major reasons of decline in foreign investment. Despite several promises, the government has failed to solve the power crisis and the country is still facing severe energy shortage, they added.

Availability of utilities, standard infrastructure and stable law and order situation are the basic need of new investment, whereas the country lacks all these, they said.

The State Bank of Pakistan said that net foreign investment, comprising foreign direct investment and portfolio investment, narrowed down by 64 percent during July-Dec of fiscal year 2011-12 (FY12). With current decline, net inflows of foreign investment in Pakistan decreased to $386.6 million in first half of current fiscal year as compared to $1.061 billion in corresponding period of last fiscal year, depicting a decline of $675 million.

Although both components of foreign investment were on decline, the portfolio investment was much weaker than FDI, as high outflow of investment was witnessed in portfolio investment FDI stood at $531.2 million during July-Dec of fiscal year 2011-12 compared with $839.6 million in corresponding period of last fiscal year, depicting a decrease 36.7 percent or $ 308.4 million.

The second component of foreign investment, portfolio investment, posted a decline of 165 percent because of high outflow from the country's equity market. Portfolio investment stood in a negative position and an outflow of $144.6 million was registered in July-Dec of FY12 as against inflows of $221.5 million in corresponding period of last fiscal year. Similarly, total foreign private investment with privatisation also posted a decline of 64 percent, to $388 million from $1.071 billion, during the period under review.