The current temporary improvement in the country’s external accounts, whereas, appears to have brought enough comfort for economic managers for the time being, the ever-present security concerns and the resultant downturn in the flow of foreign investment into Pakistan is posing a permanent threat to the ailing economy.
The State Bank of Pakistan (SBP) data shows that the net inflow of foreign investment, which the economic observers believe should be the only permanent positive for a country’s external accounts, in the terrorism-stricken Pakistan has consistently followed a declining trend for the last four years.
An SBP summary on foreign investment, released on April 14, reveals that the country had attracted a meager $1.318 billion as foreign investment during the first nine months of the current financial year. It was just four years back in July-June FY07 when, SBP figures revealed, the net inflow of foreign investment in Pakistan aggregated to over $8.428 billion.
This shows a mammoth and uninterrupted slump of 84.3 percent or $7.11 billion over a period of four years. None of the following financial years, FY08, FY09 and FY10 including the current FY11, could convince the investors abroad to make an upset in terms of investment. During the said period, the inflow of foreign investment in the country kept shrinking to $5.475 billion in FY08, $2.665 billion in FY09 and $2.086 billion in FY10.
Analysts attribute this negative trend to the ingraining security concerns that have long been deterring the foreign investors. “Security situation is being considered as one of the biggest hurdle for foreign investors in Pakistan,” said Furqan Punjani of Topline Research. The analyst said that a war-like situation in the country’s terrorism-hit north and attacks on the security personnel and other law enforcement agencies were not uncommon in Pakistan.
Punjani said, though, the overall security situation had improved in 2010 that saw total terrorist attacks declining by five percent as compared to 2009, but the condition had deteriorated in first four months of 2011 although suicide attacks had been under control. “However, contrary to common perception 91 percent of the blasts are still confined towards insurgent areas of Khyber Pakhtoonkhwa and Balochistan which is far away from main business activities,” the analyst quoted the South Asian Terrorism Portal (SATP).
As per the SATP, he said, the attacks were on a rise as a total of 230 blasts had taken place at different places across the country in January-April 2011, compared to 141 blasts in the last corresponding period. “This translated into a massive increase of 63 percent due to the ongoing operation in border part of Pakistan and Afghanistan,” he added. According to the analyst, the other way to analyse the data was the nature and intensity of the bomb blasts occurring during the period under review.
“In this subset, according to SATP data, suicide attacks have declined by 16 percent from 19 to 16 blasts. This could be linked to stricter security measure in urban areas by security agencies,” Punjani said. He went on to say that, as seen in late 2010, the targets of extremists had started to shift towards southern part of the country. “Though the frequency of the incidents in absolute terms is still lower in Sindh compared to other provinces (six percent of total attacks), but attacks in southern Pakistan makes a larger impact due to higher concentration of population,” the analyst said.
Security concerns shrink foreign investment by $7.11b
