FDI situation in the country should ring alarm bells. But as expected, FDI numbers for November 2020 have not attracted tweets by the government officials. Though foreign direct investment in the country has been miniscule and discouraging, monthly increases up until October have provided officials with some tweetable content. However, data from the State Bank of Pakistan shows that the Net foreign direct investment for November stood at an outflow of $16 million. Total monthly inflows were up by 26 percent year-on-year; however, the outflows during the month were up by a whopping 5.7 times, which resulted in negative FDI for November2020.
Data details show that power sector and the communication sector that accounted for 60 percent of the total inflows recorded a net outflow in November. The single largest outflow of foreign investment during the month came from coal power segment, which came entirely from China, while the outflows in the telecom sector emanated from Norway.
This is the story that has been going on for months if not years. With all eggs in one major basket called the CPEC, and the traditional sectors attracting very small investment due to reasons like global slowdown and weary global investor climate: Inconsistent policies and debilitating tax structure etc. this was bound to happen. 5MFY21 aggregates show that net FDI stood lower by 17 percent due to the same issues.
FDI slowdown is finally showing in numbers now; with CPEC activities slowing since 2018 and other investor countries reeling from the impact of the pandemic, prospects for FDI into the country are bleak. Add to that the non-seriousness of the authorities as far as FDI is concerned, and you have a recipe for a crisis. Not only is there a need for diversification as well as active role of the authorities to promote and woo investors, but there is also a need to simplify as well as redesign investment policies.
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