FDI increases despite global crisis

[LahoreEstate]

KARACHI: Pakistan attracted higher foreign investment despite severe global financial crisis during the first seven months of the current fiscal year.

The inflows reached $2.588 billion and were slightly higher by 1.3 per cent as compared to the corresponding period of last year.

However, portfolio investment remained negative and an outflow of $356 million was recorded during the seven months and it was much higher than the outflow of $0.4 million in same period last year.

Details showed that foreign direct inflows came from various regions and countries. The trend of inflows did not change except that inflows from the North America witnessed a sharp fall.

Foreign investment dried up in most of the countries as liquidity crunch in the banking industry of the developed economies left no option for flow of credit across the globe.

Most of the large scale industries were getting help from government in the form of funds to continue their operation or minimise their losses.

However, in case of Pakistan foreign investment continued to land in focused areas, like telecommunications, oil and gas exploration, power sectors and financial business.

The State Bank reported that foreign investment without privatisation proceeds increased by 6.1 per cent during the first seven months. Till last year, $133 million were coming in as privatisation proceeds of the PTCL.

The telecommunications sector attracted a total of $708.5 million compared to $665.8 million during the period.

Oil and gas exploration sector attracted a total of $418 million which was 14 per cent higher than the investment made during the same period of the preceding year.

FDI was 112 per cent higher in power sector as inflows reached $80 million compared to about $38 million in this period last year.

It may be surprising for many financial experts that while the financial meltdown engulfed highly developed economies, Pakistan attracted $635 million in financial sector during the seven months.

This inflow was seven per cent less than the same period of last year, but showed the potential in this sector.

Latest reports showed that Pakistani financial system performed well during the calendar year 2008 despite mounting pressure on global financial system prevailing since 2007. Most of banks booked profit during 2008.

One more attraction was witnessed in the packaging sector where over $100 million FDI landed during the seven months.

The region-wise FDI shows that inflows from North America fell by 46 per cent to $524.5 million during the period while it was $970 million in the same period of last year.

Investment from other regions, like Middle East, Europe and others, remained almost same with slight variation in the amount of investment