Presently, the State Bank of Pakistan (SBP) reported that total foreign direct investment (FDI) in Pakistan jumped by 137 percent, or $512 million during the first quarter of FY2019-20. The total investment during the July-September 2019 period clocked in at $886 million as against to $374 million during the corresponding period in 2018. Studies revealed that for an investor, the expected relative risk/return ratio is the driving force of investment decisions. Therefore, they tend to invest in countries and projects where they expect the highest returns and the lowest risks relative to alternative investment opportunities. The government officials also recorded that Pakistan’s success in attracting foreign investment thus depends on its competitiveness as an investment location relative to other countries. Boosting Pakistan’s international competitiveness on a global scale will be crucial in reaching Pakistan’s growth targets in general and its FDI targets in particular. Pakistan is widely perceived as a high risks investment proposition. A pro-active campaign will be launched under this FDI Strategy to enhance Pakistan’s international image as an investment location. International investors must be persuaded that Pakistan, despite challenges, offers investment opportunities with risk/return ratios outcompeting alternative opportunities elsewhere. This calls for a strategy concentrating on identifying, developing, marketing and facilitating “Competitive Projects” in Pakistan.
SBP statistics also showed that in a breakup of the total investment, the central bank posted a 51 percent increase in foreign private investment during the period under review. The investment under this head increased to $564 million during the 3-month period in contrast with $374 million during the same quarter previous year. Foreign direct investment (FDI), however, declined by 3 percent during the period under review to $542 million as against to $559 million during the corresponding months previous year. On a month-on-month basis, total foreign investment rose to $622 million during September 2019 as against to $126 million during the same month during 2018. The FDI also rose to $385 million during September as opposed to $182 million during September 2018.
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FDI in statistics
- Global FDI flows declined by 27 percent in 2018 to $ 1097 billion, largely because of the US tax reform. This continues the 2017 trend where FDI flows declined by 16 percent.
- Inflows to the OECD area declined by 23 percent, largely driven by disinvestments from Ireland and Switzerland and reduced flows to UK, the United States and Germany. Outflows from the OECD area declined by 41 percent as US multinationals repatriated large amounts of earnings held by foreign affiliates.
- FDI inflows to non-OECD G20 economies rose by 8 percent while FDI outflows declined by 26 percent as outflows from China decreased for the second consecutive year.
- Japan, China and France were the largest sources of FDI outflows globally. The United States, usually the largest outward investor, recorded negative outflows in the first half of 2018 but regained its position as the main source of FDI outflows globally in the second half of the year.
- FDI flows to and from Special Purpose Entities (SPEs) dropped to negative levels for the first time since 2005, because of large equity disinvestments to and from SPEs in Luxembourg, the Netherlands and Hungary.
- Despite concerns about an economic slowdown, FDI income paid by affiliates in OECD countries to foreign parents rose by 17 percent and FDI income received by OECD parents grew by 9 percent during 2018.
- Financial centres accounted for greater than half of OECD income receipts, but receipts from offshore financial centres dropped during 2017, perhaps in response to tax policies addressing Base Erosion and Profit Shifting (BEPS).
