FDI falls 14pc in July-Dec

Dawn.com

KARACHI: The inflows of foreign direct investment (FDI) declined by 14.5 per cent during first six months of this fiscal year as compared to same period last year.

The State Bank of Pakistan reported on Friday that the country received $828.5 million as FDI during July-December 2010-11 against $968.9 million it received during the same period last year.

For analysts the situation is alarming as the domestic investment has also gone down due to poor performance of the economy.

Banks have been investing heavily in government papers and are not extending loans to the private sector for making fresh investment to expand their businesses.

The State Bank said the portfolio investment fell by 25 per cent while the total private investment declined by 17 per cent during this period.

Analysts said the advantage of low current account deficit which was about $500 million during first five months of the current fiscal year could be lost if the FDI kept falling.

"The poor FDI reflects the deteriorating law and order situation of the country. Foreign and domestic investment requires political and economic stability," said Mohammad Imran, a researcher on investment.

The SBP figures showed that the FDI from the developed countries plunged 46 per cent to $340 million in the six months under review.

The FDI from European Union fell to $127 million from $303 million, a decline of 113 per cent.

While the FDI from developing economies rose sharply by 290 per cent to $393 million during July-December compared to $100 million in the same period last year.

The FDI increased to $97 million and $275 million from Africa and Asia respectively. This substantial increase helped to increase the inflows by 290 per cent from developing economies.

Oil and gas sector received slightly higher inflows of $269 million which was 5.5 per cent higher than the previous year. FDI for telecommunications fell by 39 per cent to $111 million and financial business rose by 26.5 per cent to $105.5 million.

Exporters said the situation was not encouraging for the investors while the lower FDI would cast a negative image of the country.