First eight months of FY21: FPCCI concerned over 30pc fall in foreign direct investment

LAHORE: Raising serious concern over the falling trend of foreign direct investment (FDI), the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has said that the FDI has fallen by 30 percent in the first eight months of FY21, reflecting foreign investors’ poor confidence in the country’s investment environment.

The State Bank of Pakistan (SBP) data showed that the overall foreign private investment during eight months of FY21 dropped by 43 percent to $1.04 billion compared to $1.83 billion in the same period last year, said Mian Anjum Nisar, FPCCI’s ruling group BMP Chairman.

The Chinese investment remained at the top of the list of countries invested in Pakistan but the inflows from Beijing also dropped to $493 million during eight months of FY21 despite the fact that for last several years China has been the top investor in the country. While the country is getting extra support from remittances being sent by the overseas Pakistanis, it looks still hard to improve the foreign investments and exports to any significant level.

He said that statistics showed that the country received $1.3 billion in FDI during July-Feb 2020-21 compared to $1.85 billion in the same period of last year, a decline of 29.9 percent, indicating that the government has failed to win the confidence of foreign investors in the national economy due to multiple reasons. Moreover, the inflow of FDI in February has registered a steep fall of 44 percent to $155 million against inflow of $ 277.5 million in Feb 2020. It is fact that the entire world has been witnessing falling inflows of FDI due to the Covid-19 pandemic.

He said the Covid-19 pandemic has eroded the trust of investors in investment, which has an adverse impact on every step of FDI, including input supplies, increasing uncertainties and liquidity constraints for the multinational firms, he said and added there are also other external factors out of the government’s control.

It is unfortunate that the portfolio investment also presented a dark picture as it noted a net outflow of $256 million during FY21 compared to an outflow of $26.3m in the same period last year.

The FPCCI former chief said that economic fundamentals are not strong and fast-changing dynamics of geopolitics demand too much from the country if it wants to attain sustainable economic growth and development. These two factors, combined with the Covid-19 triggered recession in major economies, make it difficult to accelerate growth of foreign investment.

Copyright Business Recorder, 2021