KARACHI: For the fourth consecutive year, Foreign Direct Investment (FDI) has posted a massive decline mainly due to energy crisis, adverse law and order situation, lack of infrastructure and instability in the economic policies. FDI narrowed down by 50 percent during the last fiscal year 2011-2012 (FY12) as compared to fiscal year 2010-2011 (FY11).
Notes economists have expressed their serious concern over the declining trend of net foreign investment and term it poor policy-making by the government authorities, which completely failed to attract foreign investors with positive economic policies.
"Massive decline in FDI and portfolio investment reflects that foreign investors have serious reservations over the Pakistan's economic future and adopted wait and see policy", they said.
The State Bank of Pakistan on Monday reported that net foreign investment, comprising FDI and portfolio investment, had registered a decline of 63 percent during FY12. With current decline net inflows of foreign investment in Pakistan has declined to $741.5 million in FY12 compared with $1.99 billion in FY11, depicting a decline of $1.258 billion.
During the last fiscal year, FDI- the major component of net foreign investment has registered 50.3 percent decline, while portfolio investment has posted a fall of over 119 percent. According to SBP, overall FDI has declined to $812.6 million end of the last fiscal year compared with $1.635 billion in FY11, depicting a fall of $822.1 million.
On the other hand, portfolio investment has posted a downfall of 119.5 percent despite some improvement in the country's equity market. On account of portfolio investment an outflow of $71.1 million has registered from the country's stock market in FY 12 as compared to inflows of $364.6 million in FY11.
According to economists, there are many factors behind current decline in the foreign investment and major directly linked with government. "Energy crisis, worst law and order situation, poor infrastructure and unstable government polices are the chief reasons behind this decline", they added. During the last four years, PPP-led government completely failed to announce concrete steps to improve the country's economic situation, they said, adding "some three finance ministers have taken charge, which reflects government's seriousness about economy".
This is the fourth consecutive year, when the country's economy has witnessed fall in the FDI, which stood at $5.7 billion in FY08, declining to $812.6 million in FY12, they pointed out. They urged the federal government to develop long-term and business-friendly economic policies to attract foreign investment as well as local, besides some measures for poor law and order situation as local investors were also reluctant to invest in the country.
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