Chinese FDI rise offsets fall in non-Sino inflows

The story of foreign direct investments (FDI) in Pakistan in November 2017 is little changed from what happened in first few months of the current fiscal year. That story has two parts: the good and the bad.

First, the good part. FDI has grown consistently in the fiscal year to date. For the five-month period the growth stands at 57 percent, which is a refreshing change from recent years. Continuing its trend in the year to date, the net inflow for November 2017 was more than $200 million. If this trend continues the full year number could land around $3 billion. That would also be a refreshing change from yester years, albeit it would still fall short of what the country needs – as percentage of GDP – given low domestic savings rate. 

The rest of the story is following the trends that began in tandem with the progress on the CPEC. In terms of country-wise FDI, net inflows from China dominate the scene. So do inflows in power and construction sector. And while profit repatriation have grown about 21 percent year-on-year in 4MFY18, as percentage of net FDI inflows profit repatriation has finally stabilized on the back of rising FDI.

Onto the bad part. Non-Sino FDI has dropped 40 percent year-on-year in the five months ending November 2017. In terms of geo-political rebalancing it may or may not be a good strategy to shift the focus from the Anglo-Saxon world to China, especially considering its clout in the region. But in terms of economics, it’s surely never a good strategy to rely on a single-source for investments.
For the moment, one can perhaps take heart from the market noise that abuzz with non-Sino FDI prospects. Sources close to American consulates in Karachi and Islamabad say that US investors are eyeing Pakistan now, having been caught on a fence in the pre-CPEC era. Likewise, the recent visit by London’s

Mayor who came along a business delegation offers some hope.
Specifically, the auto industry is buzzing with prospects as well: Kia, Renault, Hyundai in the car segment whereas a host of players in the trucking sector, including Scania, Iveco, Volvo, Man and two Chinese players are reportedly exploring Pakistan prospects at the moment. But these are all ‘plans’, ‘potential’ and ‘promises’ on the table. Knowing Pakistan, best not to count chicken before they are hatched.