The FDI to Pakistan in August 2017 inched up by 148 percent year-on-year. It had gone up by 162.8 percent last month. If percentage growths were a thing, Pakistan would end up attracting a little over $6 billion by the end of FY18. Only that, year-on-year growth rates are not necessarily the right way to look at FDI numbers.
That said, $234 million FDI in August consolidates the momentum that started building in the last quarter of FY17. The 12-month moving monthly FDI has been hovering in the vicinity of $200 million, inching up gradually. The growth in the recent past has been rather solid, without one-offs, and makes a case of strong consolidation, and could well see Pakistan fetching in excess of $3 billion by the end of FY18.
These are by no stretch massive numbers when seen in the context of overall GDP, but the signs, nonetheless, are encouraging. Pakistan would gladly take anything near $3 billion as annual FDI, given the dismal performance this decade.
Moving on to the specifics, 80 percent of FDI came from China in August 2017. And expectedly so, CPEC related investments keep coming. The share of Chinese FDI has been two-third of the total pie since January 2017, which is up from a little over-one third in the preceding six months. Barring, one-off investments in telecommunication or FMCGs, the eggs seem well placed in the Chinese basket. And Pakistan cannot complain either, as this is what Pakistan seems to be readying itself for.
Among sectors, power sector continues to fetch the bulk of FDI, with a 66 percent share in August 2017. It was followed by construction at 15 percent, and all else was in single digits. Power sector is the new E&P, in terms of FDI in Pakistan. A lot more has to come as CPEC related power projects are well spread out and are likely to continue attracting sizeable investment in the future.
Telecommunication sector sits third on the list with 9 percent share for Jul-Aug. Trade sector fetched just one percent for the same period. The SBP seems to have corrected what could now be termed as an ‘honest’ mistake in the July numbers. Recall that it had put $91 million under the ‘trade’ category in July. That led to a round of rumours and guesses, as most fingers were pointed towards the Malaysian investment aimed at acquisition of Tanzanite Tower Private Limited.
That still seems to be the case, only that the investment should have been categorized under the ‘telecommunication’ category. Also, a clarification right after the mistake should have done rather nicely, instead of adjusting it in the numbers a month later, without even acknowledging the mistake.
It goes without saying that one sector – one country, could well backfire, should anything go wrong with either China or the power related policies. Pakistan would do well to revive investments in other potential areas, of which E&P is one, to have a slightly diversified portfolio. But for the sake of optimism, Pakistan would not mind continue fetching however much it can in the power sector from China.
Comments
Comments are closed.