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2016 Left With a Massive FDI Jump – State Bank of Pakistan Reports

This week the State Bank of Pakistan released data and reported that the Foreign Direct Investment (FDI) in Pakistan has progressed remarkably over the course of recent years. After displaying sluggish growth continuously for five months, the FDI has finally managed to improve as inflows have augmented up to 10% year-over-year and crossed the $1 billion milestone in the period from July-December. Inflows have increased from $139 million to an astonishing amount of $595 million in a period of one year i.e. December 2015-16. It was reported by the State Bank that FDI has shown an annual growth of 10%.

Even though the foreign direct investment from China had been declining, the major contributor to the growth of FDI turned out to be dutch investment by Netherlands. The heavy investment came through in December. Netherlands invested $459.5 million and this amount played the main role in upheaving the FDI’s progress in December. Moreover, this investment was made by Friesland Campina, a Netherland-based company. 55% of the inflows were increased just in December due to this investment while the other 45% was recorded during July-November that too combined.

Other countries such as China and UAE also contributed in the progress of Pakistan’s FDI. China invested $47.6 million while the UAE invested an amount of $45.6 million.

Top Three Contributors to FDI

Netherlands was on the top of the list of countries with the highest FDI in Pakistan. Comparing the progress of FDI in the fiscal year 2015-16 to 2016-17, foreign direct investment inflows from Netherlands reached $464 million in the period of 2016-17 while it was only $9.2 million in the previous one.

The second biggest investment was made by China with total FDI inflows of $211 million during the first six months. China invested $453 million during the same period of last year, showing a decrease of 53% in the current year.

Third position was taken by Turkey as it increased its investments from $8 million in the previous year to whopping $129 million in the current one.

Investment from the United States was recorded to be $38 million. Britain also invested $44 million in the first six months but it was recorded as a 50% decrease.

Potential Sectors

The food sector made the biggest mark in the growth of the FDI as it invested $467 million with an outflow of only $30 million. Netherlands has been the biggest country in FDI in Pakistan as a dairy company from Netherlands bought about 51% of shares in Engro Foods Pakistan at a rate of $448 million.

The electronics sector was the second organization responsible for the jump in FDI. Pakistan received $134 million during July-December 2016-17 while it received only $30 million in the same period of last year. This was mainly due to the investment of Turkey in a major electronics company in Pakistan.

The Not So Good Ones

The power sector failed to make a mark in FDI as it only generated $211 million, 54% less than $457 million generated during the same period of last year. Likewise, oil and gas sector also went from $151 million to a very low amount of $86 million.

Even though foreign direct investment has finally started to make progress, certain factors such as security issues, energy shortages, political issues, and corruption have proven to be great hurdles in its progress. As long as these are present there will always be some kind of lag in the progress of both; FDI and Pakistan.

Source: ET, Dawn

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