FDI in dire straits

It might seem that the authorities don give a hoot about the gravity of the situation. The latest FDI figures released by SBP speak for themselves. FY12 is approaching its end and it appears that none of the efforts have been materialised, let alone a respite. The country is at its wits end, worried and anxious at investors running for their lives and money. Honestly, the damage is greater than just a falling trend in FDI worldwide. Among the top global concerns like financial instability, rise in protectionism, volatility in oil and raw material prices and currencies going haywire, Pakistan runs an additional peril - security threat - that terrorises investors away. The FDI apathy has continued for long and has particularly worsened from the beginning of FY12 to a total collapse. For 10MFY12, the foreign direct investment has shrunk to alarming depths. From $1.3 billion to a weak $667 million, the fall of almost 50 percent is not likely to provide any relief. In April alone, the foreign direct investment has decreased YoY by more than 50 percent to $67.6 million. Even though the foreign inflows have increased by almost 70 percent MoM in April, this rise has little significance. What makes more sense is the cyclical pattern that FDI has been roughly following over the past 3-4 years. According to the officials at Board of Investment, the peaks and troughs in monthly FDI somewhat correspond to the fiscal year end as receipts are banked. The FDI activity has been skimpy and most of the rise and fall seen are cluttered close to the last part of fiscal year ending in June or half year arrived in December. Despite the improvement in the equity market, portfolio investment also took a plunge of more than a hundred percent. The two components of foreign private investment have been hit markedly by the economic instability the country, poor law-and-order situation and the energy crisis. One of the two most importantly sought factors that attract investors - security - remains highly challenged while the other - infrastructure - is too being victimised. As fiscal year nears its close, the outlook for foreign inflows remains cloudy and uncertain. Notwithstanding any massive irregularities through the rest of the year and looking only at the trend, it seems that the forthcoming months would see a slight ascend in FDI monthly figures. However, how steep is another question, especially with the already-not-so-pleasing estimate of $1 billion for foreign direct investment estimate for FY12 under further pressure against $1.63 billion of FY11.