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That the FDI continues to spiral down is nothing surprising. There will be no respite in plummeting foreign investment in the country until some political and economic certainty is achieved. Extreme volatility is known to push investors away. And current uncertainty has sent the already weak and fragile foreign investment to its bare minimum. As highlighted in this space, foreign investors are extremely skeptical because of the delays in the repatriation of dividends and other payments to the foreign shareholders of companies – so much so that they are not even ready to invest in the expansion of existing businesses, let alone any greenfield projects.

On the whole, FDI in 5MFY23 was half of what it was in 5MFY22 – at $430 million only. Not only has there been a rise in outflows, but the foreign direct investment inflows have fallen significantly, leading to a precarious situation. During the four months of FY23, FDI inflows in 5MFY22 were $681 million – down by 36 percent year-on-year. On the other hand, FDI outflows during 5MFY23 were up by 39 percent year-on-year. During November 22 alone, net FDI wasn’t even $100 million. Foreign direct investment in November 2022 was seen dropping to only $82 million by 47 percent year-on-year. On a month-on-month basis, FDI was down by 13.7 percent on November 22.

The minuscule FDI continued to be led by China – even though there has been a massive decline in inflows from China and a rise in outflows as well. FDI from China during 5MFY23 was down by 21 percent year-on-year. Similarly FDI was largest in the power sector. In 5MFY23, FDI in the power sector stood at $204 million (almost half of the total FDI of $430 million).

The significance of FDI cannot be overemphasized. But priorities must also be set for sectors. Even though FDI in the power sector has increased by 27.5 percent in 5MFY23, the investment remains short of what is required. Other sectors too are attracting inadequate foreign investment.

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Syed Tanwir Hasan Dec 25, 2022 08:05am
Gloomy picture.
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