July-January period: foreign investment up 44 percent to $1.18 billion

For the first time during the current fiscal year, a significant improvement has been witnessed on the investment front as the Net Foreign Investment in Pakistan rose by 44 percent to $1.18 billion during July-January period. Net foreign investment in the country during the current fiscal year was on the decline since July, registering a fall of 15.4 percent during the first half (July-December 2010).
Net inflows of foreign investment in Pakistan stood at $1.05 billion in the first half of FY11 relative to $1.241 billion in the corresponding period of FY10, depicting a decline of $164 million. However, with some improvement in portfolio investment, net foreign investment in Pakistan rose by 44.3 percent during July-January of FY11 as compared to the same period of last fiscal year.
The State Bank of Pakistan on Tuesday said the net foreign investment has reached $1.181 billion for July-January of FY11 relative to $818.9 million during the same period of FY10, depicting an increase of $363 million. Foreign Direct Investment (FDI) registered a decreased of 16 percent or $181 million to $947 million during first seven months of current fiscal year relative to $1.128 billion during the same period of last fiscal year.
Portfolio Investment (PI) stood at $234.8 million during the July-January period as compared to a negative $309.1 million in the corresponding period last fiscal year. In addition, total private investment posted a decline of 14.2 percent or $206.3 million to $1.251 billion in July-January of current fiscal year as compared to $1.457 billion in the same period of last fiscal year. Analysts said current improvement has been witnessed due to portfolio investment, as during the last fiscal year a massive outflow of portfolio investment was noted. While this year some increase has been registered in portfolio investment, they added.
The State Bank has already pointed out that political instability, bureaucracy, poor infrastructure and friendly business environment are the chief factors behind determining the level of Foreign Direct Investment (FDI), which posted a decline of 40 percent during the last fiscal year.
Political stability is instrumental in building the confidence of foreign investors as it ensures consistency in the economic policies. Unfortunately, political instability in Pakistan has not only been associated with administrative changes but also with the changes in economic policies, which deterred the flow of FDI in Pakistan, analysts said, adding that "economic policies needs to be consistent and in line with global practices."