FDI in Pakistan: Vicious trap of China?

The State Bank of Pakistan (SBP) on September 18,  reported that the Foreign Direct Investment (FDI) inflows jumped by 155 per cent to $457.2 million during the first two months of this fiscal year against $179.4m in the corresponding period of last year.

Investment from China grew rapidly to $259.4m during July-August period against $48.4m in the corresponding period last year, which is 56 per cent of the total FDI received during the period.

The data showed that Chinese invested $210m in the power sector during the period mainly in coal-based electricity projects, which attracted $171m. In the same period of previous fiscal the coal projects attracted $82.6m. The coal power projects are under severe criticism from the environmental agencies since coal-based electricity generation is being abandoned the world over due to its health and environment hazards.

The second highest inflow of FDI was from Malaysia with $110.8m during the July-August period. The Malaysian interest was new because the previous year investment was just $1.3m.

Telecommunications attracted $92.5m during the first two months of this fiscal year a significant increase from $23.6m in the corresponding period of last year. The construction sector attracted $55.7m foreign investment during the July-August period against a meagre $1.6m in the same period last year. The sector started receiving FDI from the second half of last fiscal year. Oil and gas exploration attracted $30.6m FDI in the period under review against $14.2m in the same period last. The details showed that almost all important sectors received higher foreign investment inflows during the period.

Against an inflow of $41m as foreign portfolio investment (FPI) during July-August period of 2016-17, the country witnessed a net outflow $105.7m in the first two months of 2017-18.

The United States appeared as the biggest investor as its’ portfolio investment rose to $189m in July-August while its FDI was just $13m. Luxemburg withdrew $76m as FPI, Hong Kong $70.3m, Egypt $70.6m and UK $53.5m during the period.