The FDI to Pakistan in October 2017 surged by 141 percent year-on-year. It comes on the back of 163 and 148 percent year-on-year growths in the preceding months. The 4MFY18 cumulative net FDI has increased by 74 percent year-on-year. The numbers are impressive, especially when seen in the context of abysmal FDI inflows in the last few years.
Should the trend continue, Pakistan could fetch in excess of $3 billion in FDIs by the end of fiscal year 2018? In the grand scheme of things, this may not be a huge number in terms of GDP, debt or deficits. But that would still be welcome, given that the annual FDI flows last crossed $3 billion way back in FY09.
Encouragingly, the buildup has been rather smooth, as the monthly FDIs have now stayed north of $200 million in every month of the fiscal year so far. It happened only thrice in the entire fiscal year FY17.
Coming to the specifics, it is the same old story. It is China and power sector. The share of Chinese FDI in the total pie stood at three-fourth in October 2017, and a little over two-thirds in FMFY18. Apart from Netherlands at $26 million, there is not even a double digit item in the country-wise FDI flows in October 2017. Not that it should come as a surprise to anyone, as CPEC is what Pakistan asked for and got. Needless to say, a little more diversity would not hurt. It is fast becoming one basket for all eggs, no matter the eggs are growing.
CPEC is all about power and infrastructure. FDI to Pakistan is also almost all about China, power, and construction. Power and construction combined constitute nearly two-third of all FDI in 4MFY18, up from two-fifth in the same period last year. The trend is expected to continue, as a large number of both power and infrastructure projects are at initial stages, or are yet to be commenced.
How much of these FDIs would result in export oriented activities, or help attract more dollars, or create more employment should be an intriguing study – one that needs to be done. From the looks of it, most of it is certainly set to at least result in a heftier import bill, especially in the case of power. Better connectivity though, should yield better results, but that still needs to be quantified.
At the risk of sounding repetitive, growing FDI must not lead to complacency, which seems to have crept in already. While it is time to rejoice the Chinese investment, Pakistan must not forget it has other sectors that had helped it yield billions in FDIs in the yesteryears, and have almost dried up of late, such as E&P. All seems well so far, but a rotten egg or a broken basket, when almost all eggs are placed in one basket, can spell disaster.
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