July-February: Country receives 18% more foreign investment

[Devil Soul]

July-February: Country receives 18% more foreign investment
By Kazim Alam
Published: March 15, 2014

KARACHI:
Foreign direct investment (FDI) in Pakistan rose 17.9% in the first eight months of the current fiscal year, standing at $606.3 million compared to the corresponding period of previous year, according to data released by the State Bank of Pakistan (SBP) on Friday.

More significantly, FDI increased sharply in February as it amounted to $79.2 million. In contrast, there was an outflow of $14 million in the same month of the preceding fiscal year.

In the first half of 2013-14, FDI stood at $416.1 million, which was 26.8% lower than the amount invested in the corresponding six months of previous year.

Pakistan received FDI worth over $1.4 billion in 2012-13.

The oil and gas sector attracted the highest amount of FDI in the July-February period. It attracted a net investment of $296.2 million. However, it was 12.8% lower than the investment of $339.7 million it got in the corresponding period a year earlier.

Sectors of the economy that received major FDI inflows during the last eight months include financial business ($102.8 million), chemicals ($71.6 million), tobacco and cigarettes ($55.5 million), food ($75.1 million) and beverages ($23.7 million).

In contrast, a major dip in FDI was registered in the telecommunications sector, where the net outflow of investment was $131.4 million. Other sectors that recorded a considerable net outflow were petroleum refining ($11.6 million), electrical machinery ($11.3 million), trade ($8.5 million) and transport ($5.2 million).

As for foreign portfolio investment (FPI), which includes foreign public investment, Pakistan attracted $118.3 million during the July-February period, down 28.8% from $166.2 million in the comparable period of previous year.

Countries that brought significant amounts of FDI into Pakistan during the period under review include Switzerland ($178.3 million), United States ($161.9 million), Hong Kong ($144.9 million), United Kingdom ($76.2 million), Italy ($50.8 million), France ($47.6 million), Oman ($35.3 million) and Austria ($32.2 million).

Countries that took major investments out of Pakistan are Norway ($47 million), Qatar ($38.9 million), Saudi Arabia ($32.8 million) and Singapore ($31.1 million).

Published in The Express Tribune, March 15th, 2015.

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[PakPrinciples]

This is good but I want to advise anyone reading this article that FDI accounts for a very small percentage of overall investment in any country.

Most investment within a countries economy will come from internal sources.

Let's take China for example which had a gross capital formation of 49% in 2012 according to the world bank. FDI inflows accounts for just 6% of total overall investment but when you subtract outflows from that overall FDI only accounts for about 3.5% of overall investment within the country.

Pakistan's gross capital formation has never exceeded 22.5% when it needs to be close to 40% in order to grow 10+% a year (which is essential to meet employment demands of a growing population and improve overall standards of living). This will happen when Pakistan's government does it's job and raises the tax to GDP ratio which requires increasing the VAT collection efficiency and getting people to file and pay personal income tax (ex. three times more people own passenger cars than those who actually file taxes, 30 times more people have access to the internet than those who file taxes and somewhere around 130 times more people own a cellphone than pay taxes - how are these people disenfranchised?) which forms the bulk of a governments tax revenues particularly in industrialized countries.

It's very easy to triple the size of Pakistan's economy every 10 years but it'll only happen if the government does it's job and instead of concentrating on useless garbage like MFN/NDMA for India concentrates on raising tax revenues to cover both the budget and investment back into industry.

Pakistani's pay way too much attention to FDI which is an unreliable source of investment and totally forget that tax revenue collection, which requires them to file and many to actually pay their taxes, and investment into industry and social services is what will actually play the most significant role in making their lives better.

 

[Albatross]

Its a good news.