Dreary, weak, dull. That is how one can sum up the FDI situation in Pakistan. Foreign direct investment in the country has not been able to get the much needed boost. FDI in FY22 stood at around $1.87 billion up by 2.6 percent year-on-year. FDI in July 2022 stood at only $59 million, down by 43 percent year-on-year.
Yes, Covid pandemic restricted investment flows but foreign investment in Pakistan has been critically weak for a much longer time. The reasons have been innate structural challenges and external political, security or economic factors that have continued to inflict wounds to FDI flows till today. Net FDI’s share in GDP is peanuts and has remained much below one percent in the last decade. Global factors and geopolitics also affect FDI climate in the country. Recently, war between Russia and Ukraine and the commodity super cycle are the two exogenous factors slowing down investments and then there is the CPEC-related slowdown, which can be seen in falling inflows from China.
In July 2022, FDI was also down by 78 percent month-on-month. That UAE was the largest investor in July with a net FDI of $13 million was as a surprise as China has constantly been the top foreign investor month over month for a long time. FDI from UAE increased by over 4 times, year-on-year. FDI from China during July was 4 million down by percent year-on-year. Nonetheless, power sector continued to attract the most FDI, accounting for 52 percent of total net FDI during the month.
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