According to the World Investment Report 2014 released by the United Nations on Wednesday, foreign direct investment (FDI) in Pakistan rose in 2013 to $1.3 billion from $859 million in 2012 due to industrial growth particularly telecommunications. India attracted the highest amount ($28 billion) of FDI in the South Asian region, followed by Bangladesh ($1.5 billion) in 2013. Overall investment in the region was $35.5 billion during the year.
FDI stocks (inward) in 2013 for the region were estimated at $316 billion with India accounting for $226.7 billion and Bangladesh in third position with $8.5 billion. Pakistan witnessed only two cross-border mergers and acquisitions of $2 million compared to India's $1619 million. In Pakistan, $686 million was recorded under Greenfield investment while India registering a $14.7 billion Greenfield investment.
In 2013, FDI inflows to South Asia rose by 10 per cent amounting to $36 billion. The sub-region's total amount of cross-border mergers and acquisitions surged by 70 per cent, while that of recorded Greenfield investments dropped by 38 per cent. Outflows from the region slid by nearly three-fourths, to only $2 billion, owing to the prolonged decrease of outflows from India.
India experienced an increase of 17 per cent in FDI inflows to $28 billion in 2013 but macroeconomic uncertainties remained a major concern for investors. The opening up of multi-brand retail in 2012 has not generated the results expected.
Bangladesh continued to experience growth in FDI inflows, with manufacturing accounting for a major part of inflows and contributing significantly to employment creation. The garment industry has been the major beneficiary for the country, but continues to face serious challenges with respect to labour standards and skill developments. In Pakistan, inflows surged to $1.3 billion, and foreign investment is projected to grow in industries such as telecommunications.
Corridors linking South Asia, East and South-East Asia are being established - the Bangladesh-China-India-Myanmar Economic Corridor and the China-Pakistan Economic Corridor. These would help improve connectivity between Asian sub regions and provide opportunities for regional economic co-operation. The initiatives are likely to accelerate infrastructure investment and improve the overall business climate in South Asia.
After the 2012 slump, the investment report states that global FDI returned to its position, with inflows rising by 9 per cent in 2013, to $1.45 trillion. UNCTAD projects that FDI flows could rise to exceptional levels of $1.6 trillion in 2014, $1.7 trillion in 2015 and $1.8 trillion in 2016, with relatively larger increases in developed countries. Fragility in some emerging markets and risks related to policy uncertainty and regional instability may negatively affect the expected upturn in FDI. Developing economies maintained their lead in 2013. FDI flows to developed countries increased by 9 per cent to $566 billion, leaving them at 39 per cent of global flows, while those to developing economies reached a new high of $778 billion, or 54 per cent of the total.
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