51pc decline in foreign investment

KARACHI : Foreign investment during last fiscal year (2008-09) registered a massive decline, of 51 percent, due domestic and external shocks and massive outflow of portfolio investment mainly due to political uncertainty. The State Bank of Pakistan (SBP) on Tuesday issued statistics of foreign investment (FDI) and portfolio investment for the fiscal year 2008-09, which shows that constantly for the second time the country witnessed a massive decline in foreign investment.

FDI declined by 31.2 percent during the year, while portfolio investment posted a dip of 2,730 percent. The State Bank report showed that overall, decline of some $2.7814 billion occurred in foreign investment during the year. With current decline overall foreign investment stood at 2.6685 billion dollars in fiscal year 2009 as compared to 5.4499 billion dollars in fiscal year 2008.

FDI stood at 3.7218 billion dollars in fiscal year 2009 as against 5.4098 billion dollars in fiscal year 2008, depicting a decrease of 1.688 billion dollars. "Domestic shocks like worst law and order situation, negative economic indicators, power shortage and future uncertainty have largely hurt the foreign investment and, ahead of these factors, foreign investors were more reluctant to invest in Pakistan," economists said.

Although, Pakistan was the most favourite country for foreign investors in the wake of high profitability during last five years (2002-2007), yet since 2008 foreign investors have been reluctant to invest in Pakistan due to the discouraging economic indicators, poor law and order situation, operation in northern areas and global economic meltdown, they added.

Economists said that rising power shortage has also played a vital role in the hampering foreign investment. They said: "On domestic side, reduction in private credit supply is clearly reflecting that presently local investors are not doing new investment due to the poor infrastructure". Foreign investors were expecting political stability after general elections in Pakistan in February 2008, but despite the constitution of a political government the country is still not out of political uncertainty.

They said that the country's overall foreign investment, which was in positive side in the initial months of current fiscal year, was constantly on decline for last few months and lastly it posted over 50 percent decline in fiscal year 2009. Major dip was witnessed in portfolio inflows as foreign investors withdrew millions of dollars investment from equity market due to uncertainty on the political front, they added.

"Foreign investors have adopted wait and see policy and stopped new investment till the economic situation could not clear on domestic and external front," economists said. Similarly, portfolio investment stood in a negative position of 1.053 billion dollars in last fiscal year over an investment of 40.1 million dollars in fiscal year 2008. Including privatisation proceeds, total private investment depicted a decline of 40.8 percent to 3.2126 billion dollars in fiscal year 2009.


(BRecorder)