Researchers say that the economic performance and economic growth of a country is influenced through multiple factors. For economies in general and developing economies in particular, Foreign Direct Investment (FDI) has been believed and argued as a significant determinant, basically made to acquire lasting interest in an enterprise operating in an economy other than that of the investor, for the purpose being an effective voice in the management or control of that enterprise.
| Net FDI in Pakistan ($ Million) | |||||||
|---|---|---|---|---|---|---|---|
| Country | 2013-14 | 2014-15 | 2015-16 | 2016-17 | 2017-18 | Jul- Jun FY19 (R) |
Jul-Nov FY20 (P) |
| Oil & Gas | 502 | 300.5 | 248.9 | 146 | 372 | 323.3 | 61.9 |
| Financial Business | 192.8 | 256.4 | 289 | 296.1 | 400.3 | 286.5 | 131.1 |
| Textiles | -0.2 | 43.9 | 20 | 15.5 | 49.7 | 76.8 | 22.8 |
| Trade | -3.2 | 50.5 | 26.8 | 32.7 | 143 | 76.3 | 19.1 |
| Construction | 28.8 | 53.5 | 46.7 | 465.9 | 708.9 | 335 | 7.5 |
| Power | 71.4 | 282.2 | 1159.2 | 700 | 1,203.00 | -253.6 | 53.7 |
| Chemicals | 94.9 | 60.3 | 88.5 | 5.4 | 48.9 | 134.5 | 12.1 |
| Transport | 2.7 | 6.2 | 70.2 | 57.6 | 56.9 | 37.1 | 6.2 |
| Communication (IT & Telecom) |
434.2 | 40.1 | 246.8 | -41.9 | 113 | -55.7 | 291.6 |
| Others | 375.2 | -105.7 | 109.2 | 1,069.30 | 375.5 | 707.8 | 244.1 |
| Total | 1,698.60 | 987.9 | 2,305.30 | 2,746.80 | 3,471.20 | 1,668.00 | 850.1 |
According to the data released by State Bank of Pakistan (SBP), in Pakistan presently FDI surged to US $850 million in July-November (2019-20) as against to the investment of $477.3 million registered during corresponding period, a year ago, explaining a growth of 78.1 percent. On year-on-year basis, however, the FDI declined to $200.1 million in November 2019 against $285.4 million registered during the same month of previous year. In total, the foreign investment in Pakistan surged by 1,267 percent to $2.006 billion in July-November this year as against to the investment of $146.7 million during corresponding period of previous year.
The economists urged that economies all over the world, in their pursuit for economic growth depend on both domestic and foreign investments. The above assertion is derived from the fact that different scholars have organized the positive link between investment and economic growth. Economic growth is a continuous rise in any country’s productive capacity measured as the percentage raise in Real GDP; whereas, investment is the placement of capital in anticipation of deriving income or profit from its use.
Some experts in Pakistan urged that FDI invariably flew in for catering local demand. The Government of Pakistan presently is trying harder to attain FDI, but the focus should be on efficiency seeking (for creating exportable surplus). During December 2019, there were talks about having FDI from an Egyptian financier in housing. The emphasis here is to focus on FDI in exporting sector. It is of utmost importance for coming out of the so called 4-year growth cycle.
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Different sources showed that in FY2003-07, the boom was by foreign flows and deregulation of a few industries. FDI came mostly in telecom, banking and oil and gas. Employment opportunities were generated as foreign expertise in newly deregulated sectors generated a new era of growth. The middle class boomed (to an extent), and that routed ways for an era of investment in retailing– both by domestic and foreign investors.
Furthermore, during 2015, the China-Pakistan Economic Corridor (CPEC) was inked and the Government of Pakistan entered into another growth era based on foreign flows. But growth was hollow and not sustainable. The energy infrastructure was built. A number of IPPs either through Government of Pakistan herself or under CPEC were installed. Investment came and went out in no time. The financing was from outside the country, plant and machinery ere imported and now the profits are being repatriated. The experts revealed that the biggest world mobile company invested around $700 million in the country a few years back. On the other hand, in one of the leading foreign fast food firms, almost Rs300 million investment is required to make one outlet; out of it 80-90 percent is spent on imports for buying equipment and machinery from approved vendors of the company. Not to mention the royalty for every burger sold is also repatriated.
According to the SBP, the country-wise data shows that net foreign investment from China recorded a growth as it increased to $141 million during the period under review as against to the investment worth of $90 million registered during same period of previous year. Furthermore, the foreign investment from Norway registered a big rise as it increased to $334 million in July-November FY2019-20 as against to investment of pessimistic $74.2 million in the corresponding period of previous year. Investment from United States also rose to $34.9 million in first 5-month of current fiscal year against investment worth of pessimistic $95.2 million in the corresponding period of last year while foreign investment from UK also rose from $67.7 million to $100.8 million in 5-month of the year FY2019-20. The FDI from UAE fell to $9.9 million in Jul-November (2019-20) from $42 million previous year, whereas investment from Turkey recorded a slight fall as it went down from $23 million to $20 million in the same period of current fiscal year.
From Switzerland, statistics also explained that FDI rose to $13.5 million as against to the investment of $3 million during the corresponding period of the previous year, whereas investment from Malaysia also rose to $35.5 million in the period under review as against to the investment of $12.7 million previous year.
Investment from Saudi Arabia decreased from $7.2 million last year to $4.4 million during July-November FY2019-20. Netherlands invested $23.3 million during the corresponding period of current year as against to investment of $14.7 million during the corresponding period previous year. Investment from Hong Kong declined to $32 million in July-November FY2019-20 as compared to the investment of $44.3 million made during corresponding period of last year, whereas Germany’s investment increased to $24.3 million this year from $19 million previous year.