FDIs: The worst may be over

The just released four-month foreign direct investment numbers show an increase of 4.7 percent year on year in the five months ending November 2013.
But, before you get excited over this modest growth, bear in mind that the growth essentially came on the back of lesser quantum of gross FDI outflow than higher number of gross FDI inflow. Also, on monthly basis, the numbers reveal a decline of 11 percent. In fact the net FDI inflow of $47 million last month was at its lowest level since August 2013.
While all that is a dampener on its own, the slowdown in foreign portfolio investments is even more of a put off. Contrary to all the hype created by boys in the stock market, foreign equity investments dropped 22 percent year on year to about $111.7 million in the Jul-Nov period. Foreign investments in the debt securities market saw a net outflow of about $112 million.
Coming back to FDI, the current pace of growth suggests that total net FDI for FY14 will fall short of FY13 performance. But the tide can be expected to turn in the coming months.
The much-awaited telecom 3G auction is on the cards and one should expect nearly all the targeted $1.2 billion to come from outside Pakistan. That alone should take the FDI number to $1.5 billion by the end of FY14.
Also, oil and gas exploration policy is in the pipelines, and from what one hears the policy will likely offer attractive prices to foreign investors. This means the sector could see better FDI inflows by the end of current fiscal year.
Textile sector FDI may also offer partial support. The sector has so far seen only a nominal FDI inflow of $10.8 million in 5M FY14. But, this does not reflect the purchase of shares in Masood Textile by the China-based firm called Shandong Ruyi Technology-in a deal which may be valued around $25-30 million.
Reportedly, Chinese buyers are eyeing Pakistani textile firms with excitement, especially after the GSP Plus. In fact one source said that the Chinese are almost as if sitting in Faisalabad and shouting "Come hither! Come hither! Come hither!" to any textile player with decent machineries. Market sources have told BR Research that at least two more unlisted textile firms might be up for grabs by Chinese investors.
From what it appears, there is enough, happening out there to be optimistic on the FDI front.