Foreign investment declines by 25 per cent

KARACHI: Foreign investment has fallen since the beginning of the current fiscal year, and collective decline in the first five months was by 25 per cent over last year.

The State Bank reported on Wednesday that Foreign Direct Investment (FDI) could not improve and fell steeply by 52 per cent.

The official data showed that the country received only $774 million FDI during the first five months of the current year against $1.620 billion in the corresponding period of last year.

This was a decline of over 52 per cent, reflecting erosion of confidence among foreign investors.

However, unlike FDI, the portfolio investment showed reverse trend as it improved against the net withdrawal during the last year.

According to the data, portfolio investment was up by 291 per cent during the five months. The inflows through portfolio during the period were $311 million against the net withdrawal of $162 million.

Analysts said the total investment, which slipped by 25 per cent, was indicative of the un-attractive situation of the local economy.

Analysts said the country’s three main sectors have lost attraction due to terrorism in the country which shook the confidence of both the local as well as foreign investors.

The telecom, oil and gas sector, including power sector and financial sector, became victim of terrorism as well as deteriorating law and order situation in the country.

Researchers of brokerage houses said the inflows would further decline in the coming months as new development has started taking strong grip over the country.

‘The country is facing terrorism but uncertainty regarding corruption cases against some sitting ministers, advisors and members of parliament have created uncertainty among the investors,’ said Abid Saleem, a researcher.

He said recent incident of capturing two oil wells by a former minister and his political affiliates has threatened investment in oil and gas sector.

‘The financial sector, including banks, have been showing bad performance as their profits are falling and non-performing loans are rising,’ said a banker, adding under these circumstances no foreign investment is expected to land in this sector. Banks are the prime target of financial meltdown which started from the United States and which has engulfed the entire world during one and half year.

‘We believe that only telecom sector is performing well and we can hope that more investment can come in this sector but certainly it has shrunk,’ said another analyst of brokerage house.