Violence eradicating investment optimism

Fiscal year 2012-13 is no exception when it comes to the inflow of foreign investment into terrorism-hit Pakistan. According to central bank, during the first three months of FY13, July-September, the troubled country could attract net foreign investment of $ 200 million only.
Last year too was not that fascinating as the corresponding months in FY12 had seen a meager inflow of $ 217.2 million, registering a decline of 7.9 percent or $ 17.2 million when compared with this year’s figures. The ever worsening security unrest happens to be the major attributing factor for the foreign investors shying away form Pakistan.
“Owing to law and order situation and unrest in Pakistan, US companies are often reluctant to come to Pakistan,” James Fluker, senior commercial counsellor at the US Embassy in Islamabad, told the traders and industrialists at Karachi Chamber of Commerce and Industry (KCCI) here Wednesday. The US official said several American firms were in contact with US Overseas Private Investment Corporation (OPIC). His government, in collaboration with private sector, however, had planned to pool a special $ 80 million fund, Pakistan Private Investment Initiative Fund, for assisting the Small and Medium-Size Enterprises (SMEs) in Pakistan.
To be managed by the USAID, Fluker said funding under the fund was likely to be increased upon working well. The Foreign Direct Investment (FDI) appeared to be the worst affected. Foreign investment under the above head dropped to $ 87.2 million from last year’s $ 263 million during the months in review. This shows a decrease of $ 176 million or 67 percent over the same period of FY12.
According to State Bank, the review period saw $ 287 million FDI inflows against the $ 200 million outflows. The same months in FY12 had marked $ 580 million and $ 317 million flowing in and out of the country, respectively. The portfolio investment, however, was an upset. The private portfolio investment rose by $ 143 million or 305 percent to $ 96.3 million against negative $ 47 million of last year’s corresponding period.
The international investment in equity securities from public sector also marked an upsurge of $ 15.5 million or 1354 percent over the same quarter of FY12. During July-Sep FY13 the country’s equity market received portfolio investment worth $ 17 million against $ 1.1 million of the first quarter of FY12.
The economic observers believe that the current downward trend in foreign investment was very critical for the resource-constrained country.
They said the inflow of international investment was the only permanent factor that could rid the dollar-hungry Pakistan of its balance of payment woes that are ultimately to be addressed through a fresh IMF debt package.
Intensified by the post-May 2 diplomatic entente between Washington and Islamabad, the investment climate in the terror-stricken Pakistan has long been non-conducive with a deteriorating law and order and ever-present political instability being the permanent reasons for the negative.