The government’s first year in office yielded only 14 percent rise in net FDI as compare to FY13; What about FY15? Improving investment climate, stabilising macro-economics, mobilizing investors, steadying security situation and the apparent government efforts in the same direction should have at least shown some respite. But all seem to be in vain as foreign direct investment has taken a nosedive in FY15. Unfortunately, net FDI in FY15 is even less than FY12 figures amid tall claims about investment being one of the priorities for the government.
Net Foreign Direct Investment Net FDI – gross inflows minus outflows – has dropped by over 58 percent year–on-year in FY15 to $0.709 billion, the released SBP data shows. Breaking down the numbers clears the situation further; gross FDI inflows slipped by around 20 percent year-on-year to $2.279 billion in FY15 versus $2.847 billion in the previous year. At the same time, the outflows further supported the declining FDI, growing by 36.6 percent year-on-year to $1.57 billion.
Net FDI in the last month of FY15 alone saw a plunge from net inflows of $189 million to net outflows of $93.9 million in June 2014. Gross inflows fell by 52 percent year-on-year, while the outflows increased by more than 2.5 times in June 2015.
One of the key reasons for the sharp decline foreign inflows was the higher FDI from 3G auction last year FY14, and the absence of the same in FY15 that resulted in a decline in telecom FDI by 72 percent year-on-year. Where Telecom sector is the second largest contributor to the miniscule FDI in FY15, the oil and gas sector continued to the key segment for investment in the country. The largest fall in net FDI for FY15 was seen in the cement sector.
From the FDI numbers at FY15 close, it would not be wrong to assume that the foreign investors want more. OICCI’s president, Atif Bajwa has reportedly said that foreign investors want to see further evidence of improvement in policy implementation, transparency in governance and sustained stability in the security environment.
The government should live up to its promise of all efforts to attract investment in the country. The key risks that loom for FDI in the Pakistan include the reversal of the fall in oil price, and continuation of a troubled domestic energy sector, political unrest, security situation, governance, and slow privatization process.
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