The FDI in the telecom sector has been falling continuously after the spike in FY20 when 3G/4G came to the country. The declining trend has gone from the high of $623 million in net FDI in FY20 to negative $222 million in FY23. As per the latest data on the central bank’s website, the FDI in the telecom sector stood at a net outflow of $99 million for 1HFY24. This comprised of only $12 million in inflows and $111 million in outflows – although on a year-on-year basis, there was a decline in outflows for the 1HFY24.
FDI in the country has been on sluggish as the economy has been unable to recuperate after the recent economic collapse. And as such, all sectors have been facing challenges in showing growth. Telecom sector has also been under duress. The sector’s share in total (miniscule) FDI in the country has fluctuated between 25 percent and minus 28 percent over the last decade. From the high of 24 percent in FY20, telecom sector’s share in total FDI has come down to 14 percent in FY23. This share stood at around 12 percent in 1HFY24.
Even before the recent macroeconomic turmoil that has extended over the last couple of years, and the COVID slowdown before that, the investment landscape particularly of the telcos has not been yielding. Besides the major frequency spectrum auction, there has been no sectoral development measures and hence FDI in the sector has remained weak. Certain other factors also act as roadblocks in attracting further investment in the telecom sector. The cost of doing business is significantly up. Besides the economy-side challenges like higher corporate taxes and interest rates, structural challenges and political instability, foreign investors especially the OICCI has plead the government of Pakistan to decouple the prices of telecom spectrum from USD. Currently, the telecom license fee is denominated in US Dollar, and their plea came in light of the volatility in currency.
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