FDI: Not all about China yet

Granted that net FDI is up about 13 percent in the fiscal year to-date, but the quality of that number isn't exactly something to cheer about. A historical analysis of FDI data released by the State Bank of Pakistan makes one thing pretty clear: if it weren't for the fall in gross FDI outflows, the mandarins in Q-Block would have been far more worried than they should be.

Speaking of mandarins, there is no doubt that FDI inflow from China holds the biggest weight in total FDI received in the ten months ending April 2017. But Chinese FDI isn't driving the year-on-year increase in FDI so far.

In dollar terms, net FDI rose by $195 million in 10MFY17 over 10MFY16. Compared to that, the incremental inflow from China was only $82 million, whereas that from Netherlands, Turkey and France has been $439, $117 million and $96 million respectively. Japan, which is setting up a 'Make in India' fund, driven by ambitious expansion plans of Suzuki and Toyota, is visibly missing from the action in Pakistan.

In the light of recent OBOR summit, Chinese euphoria can be expected to increase in Pakistan. But when would that translate into big dollar inflows is anybody's guess. Meanwhile, the latest survey by the Overseas Investors Chamber of Commerce and Industry (OICCI) suggests that players in the wider economy aren't too hopeful about the future outlook (See: BR Research column: 'Cautiously Delusional', May 15, 2017).

According to the OICCI's latest survey, the New Investment Index has literally tanked in the last twelve months. Whether that index is a good indicator of future FDI flows is a question that hasn't been studied by local academia.

On the face of it, however, average FDI flows have followed the general trend in OICCI's new investment index, save for the latest reading. But that may because OICCI is mainly a non-Sino club, dominated by the Anglo-Saxon and Eurpean boys, which means that their surveys do not reflect the views of Chinese investors.

With growing number of Chinese firms in Pakistan, it is about time somebody tracks their contribution and views in the form of periodic reports, surveys and indices. Could a Chinese Chamber of Commerce and Industry be on the cards? More on that later!