Foreign investment down by 15.4pc

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KARACHI – The flow of foreign investment in the “instable” Pakistan has declined by 15.4 percent to $1.05 billion during the first half of the current fiscal year, Pakistan Today learnt on Friday.
According to the State Bank of Pakistan (SBP), the net inflow of foreign investment in during July-December 2010-11 stood at $1.05 billion against $1.24 billion in the corresponding period last year, registering a dip of $191 million on a year-on-year basis.
Analysts see uncertainties on the politico-security front and the resultant high-risk economy as a major attributable factor for decrease in the foreign investment.
The SBP figures show that net foreign investment in all three categories, including Foreign Private Investment (FPI), Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI), remained downward during the period under review.
The SBP calculated that during July-December 2010-11 the net inflow of FPI, FDI and portfolio investment in the country stood, respectively, at $1.060 billion, $828.5 million and $232.2 million against $1.279 billion, $968.98 million and $310.5 million in same period last year. That means foreign investment in all three categories registered a respective decline of 17.1, 14.5 and 25.2 percent during the first half of the fiscal year 2010-11.
In monetary terms slump on the three fronts amounted to $218 million, $140.4 million and $78.3 million. Khurram Shehzad of InvestCap Research said multiple factors like political instability, deteriorating law and order, the lingering circular debt issue, energy crisis, high interest rate and a double-digit inflation kept the foreign investors away.
“Perhaps, the FDI will go down further and would remain the same until we improve the (overall) situation,” he speculated. The analyst, however, said whereas long-term investment would keep witnessing a downward trend the flow of short-term investment in the country’s equity market would remain on the high side.
“The investors are prone to invest in the emerging markets (like Pakistan) which are more attractive in terms of margins,” Khurram told Pakistan Today. The analyst said the balance would remain in the same way between the FDI and portfolio investment.