Overseas Investors Chamber of Commerce and Industry (OICCI) under its banner ‘The first port of call for foreign investors’ has rolled out ‘Pakistan’s FDI Pulse’ under its signature ‘OICCI Insight’ publication of March 2025.
The FDI Pulse 2025 is a pointer to the changing demographic pattern of FDI in the country, Pakistan’s FDI standing against its peers in the region and the reasons for Pakistan’s fallback in achieving FDI. Some rather disturbing realities have emerged out of the report worked out by OICCI.
China, since the last few years, has taken the lead as the largest foreign direct investor in Pakistan with a share of 40 percent of the total foreign investment in the country with an average investment of $ 650 million a year in the last four years.
The demographic pattern of investors is quite a reverse of what it used to be just a few years back when the traditional foreign investors from the USA, UK and Europe were in the lead. The figures therein presented lay bare a sad reality that the investment by these traditional foreign partners is drying out.
It brings to surface that while in pursuit of investment from China, driven by CPEC under its global ‘Belt and Road’ Initiative’, Pakistan did not maintain a balanced approach of maintaining the presence of the traditional partners from the West by addressing their grievance - the foremost being unavailability of level playing field, compromised regulatory framework, and unavailability of an enabling business environment in accordance to fair business practices.
The OICCI report draws a fair comparison between Pakistan’s FDI trajectory against its peers in the region and moves the pointers towards the reasons of Pakistan’s fallback against its peers. Taken into consideration in this column is a comparison with India and Vietnam on account of the historical backgrounds concerning the three.
In the year 2007-2008 Pakistan, India and Vietnam were rated as the fastest economies in the region with a GDP growth hovering at 6 percent. A fast track to 2024 shows that while India and Vietnam continued with their growth trajectory Pakistan got held back.
India consistently maintained an annual growth of 6 % thereby recording an FDI of $71bn in the year 2024, whereas, Vietnam at times exceeded an FDI growth figure of 6 percent reaching an FDI intake of $25bn in the year 2024. However, Pakistan’s FDI in the same period significantly dropped down to an average of $2bn a year.
The report put under focus the ‘country security challenges’ and the ‘country key risk factors’ and rightly so as these two factors put together determine the inflows of FDI in a country and invoke investors’ first level of decision to “Go” or “Not Go” to the country to make investment.
For the security challenges the ‘Global Terrorism Index of 2025’ has been taken into consideration; according to which, the rating of Pakistan stands at 8.4 (least safe to invest), India at 6.4 (invest with caution), and Vietnam at 0 rating (safest to invest)
The country ‘key risk factors and challenges’ are more complex. The factors taken into consideration on this account are: political instability, currency volatility, bureaucracy/red tape, security risk, infrastructure gaps, and policy consistency.
In case of Pakistan, the rating respectively is high, high, complex, elevated and uncertain. In case of India and Vietnam the rating is almost similar, which respectively is low, low, moderate, low, strong whereas in case of policy consistency the rating is ’improving ’ in case of India and ’stable“ in case of Vietnam.
For the short-term FDI outlook (2025 - 26) the OICCI Pulse rates:
Pakistan: FDI constrained by policy, currency and security risks;
India: FDI shows strong momentum in IT, semiconductors, infrastructure and retail; and
Vietnam: FDI marks a surge in manufacturing, electronics and green technology.
The outlook indicates that both India and Vietnam are moving into high end selective markets driven by innovative technologies.
The FDI Pulse also brings forth the configuration of FDI in Pakistan for the year 2024 which comprises of: $464 million in the financial sector, $800 million in energy sector, $48 million in IT industry, $100 million in industry and $100 million in tobacco, food and beverages.
This by no standard is a growth-oriented configuration. The FDI inflows into industry is low and the investment in IT industry is low and not as the potential merits.
The takeaway for Pakistan from the subject analysis is to mitigate security concern of the investors, bring out a significant improvement in the laid out country risk factors, which is primarily an issue of state governance and woo back the traditional investors from the West into the Pakistan market and strike a balance between all venues of investments.
Copyright Business Recorder, 2025
The writer is a former President of Overseas Investors Chamber of Commerce and Industry (OICCI)
Comments