Foreign Investment in Pakistan Went Down by 46% - by Noor-us-Sabbah
Foreign investment in Pakistan plunged, recording a significant drop of 46% during the first three quarters of the current FY 2007-08, compared to that recorded during the same period of the FY 2006-07. Pakistan had attracted a record high foreign investment back then during the first three quarters of FY 2006-07. But later in the last Quarter of FY2006-07, political turmoil began in the country following the disposal of Chief Justice of Pakistan Supreme Court on March 9, 2007. Incidents like Lal Masjid, Brutal killing of innocent people in Karachi by political opponents, suicide bombing, and assassination of former Prime Minister Benazir Bhutto, happened one after another to drive the flow of international investment away from the country. Though democracy has been restored in the country after successful general elections held on February 18, 2008, the foreign investors are still to be allured by the Government and business sector in order to increase the meager figures of FDI in Pakistan.
The current statistics announced by the State Bank of Pakistan (SBP) give us an idea about the insufficient foreign investment that the country attracted in March 2008. It was stated that net foreign investment during nine month period of FY2007-08 from July to March stood at $2.98 billion only, which showed a 46% dip of $2.57 billion as compared to $5.55 billion foreign investment recorded during the same period under review of the last FY 2006-07. Portfolio investment showed the most disappointing figures, with a significant decline of 103 per cent, falling from $1.69 billion recorded during the first three quarters of the last FY2007-08, to with a decrease of $53 million during the first nine months of the current fiscal year, compared to an investment of $1.69 billion during the corresponding period of fiscal year 2007-08.
Disappointingly, the foreign investment was recorded to be only $300 million after the new Government took charge of the country’s economy. This amount is far less than what economic experts expected and predicted lately, as the political situation of the country had also been improving gradually since the day new government got elected. People of Pakistan are quite happy with the new Government up till now but it seems that the new Government has failed to charm the international investors as yet. In order to recover economy, it will have to prove its worth internationally in the coming months.
The current unhealthy growth in foreign investment is not going to help the Government meet adequately the ever escalating current account deficit, which has now reached to record high of $11 billion. The Government has to be relying on the loans yet again in 2008. According to Asian Development bank’s report, Pakistan was the largest borrower in 2007 with loans worth $2 billion, which equals to 20% of the total loans ADB extended during 2007. It’s quite alarming.
To do the trick, the government of Pakistan does have a few plans in making for the last quarter of the current fiscal year 2007-08. After the successful issuance of Global Depository Receipts (GDR) of Oil and Gas Development Company Limited in December, 2006 at London Stock Exchange, the government is again all set to issue GDRs of National Bank of Pakistan (NBP) and Kot Adu Power Company (KAPCO) to attract foreign investment worth $1 billion at least.
Analysts are hoping that overall foreign investment may reach somewhere around $4 billion by the end of FY 2007-08, with an average foreign investment per quarter of $ 1 billion. However, if the Government is able to issue GDRs of NBP and KAPCO in the international equity markets successfully, then total foreign investment could surpass five billion dollars mark by the end of FY 2007-08.