Globally, foreign direct investment has made a comeback and has returned to pre-pandemic levels in the last couple of months with investments pouring in technology, software, and digital infrastructure sectors as well as the oil and gas sector amid the energy shortages worldwide. Europe has seen a rebound while U.S. companies and US-based investors have found more projects abroad as per FDI Intelligence. India has received record FDI in the last 7 years with the trend likely sustaining, and China too has posted double-digit growth in FDI in the first 10 months of 2021.
On the other hand, the FDI needle is not moving in Pakistan. The foreign investment has continued its declining trend with 4MFY22 net FDI standing 12 percent year-on-year lower led by a 23.7 percent rise in outflows and 3 percent year-on-year decline in inflows.
Country wise data from the central bank shows that FDI from China has continued to decline - falling by 71 percent year-on-year in 4MFY22. Its share in total FDI too came down from over 50 percent in 4MFY21 to less than 18 percent in 4MFY22.
With net FDI from China dipping consistently, and FDI from other countries also remaining weak and debilitating amid the country’s inherent challenges, FDI is in a much more precarious situation today. Where China’s share in total FDI has slipped, net inflows from the US have jumped up from 3 percent to 17 percent year-on-year in 4MFY22. However, the small sum dulls the excitement over the recent year-on-year increase. Sector wise, the power sector shows the largest year-on-year decline; yet remains the sector with the largest net FDI for 4MFY22, showing how FDI in other sectors is minimal.
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