If imminent economist like Dr Kaiser Bengali is to be believed, the governments in Pakistan have been deluding the country’s financially-illiterate masses for more than a decade past.
The ruling politicians and economic managers would soon be found boasting about the 42 percent growth in the much-needed foreign investment flowing into the dollar-hungry country during first quarter of the current fiscal year.
The State Bank was the first to boast Monday that during July-September FY2013-2014 the country received foreign investment worth $ 338.6 million, up $ 99.9 million compared to $ 238.7 million of the corresponding period of last year.
The analysts attribute this 41.9 percent increase to the offshore investors’ quest for safe heavens like Pakistan’s energy sector.
Also, analyst Asfar Bin Shahid believes that the increasing foreign investment was because of the foreign-funded projects that still are under completion thus attracting more dollar inflows.
“Increasing prices of oil and gas in international market provide the foreign investors with a safe heaven in Pakistan’s oil and gas sector,” A.B Shahid added.
Of the total, the Foreign Direct Investment (FDI) swelled by 85 percent to $ 230.9 million as against $ 124.8 million of FY13.
Things, however, are not that rosy for Pakistan as an investment destination as the offshore investors remained risk-averse while trading on the cash-strapped Pakistan’s stocks market that remained volatile during 1QFY14 due to, what AB Shahid viewed, a constantly depreciating rupee.
According to central bank, during the period under review the inflow of foreign private portfolio investment in the country contracted by 60 percent to $ 38.8 million from last year’s $ 96 million.
On the other hand, the flow of foreign public portfolio investment into Pakistan witnessed a whooping growth of 285 percent to stand at $69 million compared to $ 18 million of 1QFY13.
“The foreign portfolio investors remained risk-averse towards the losses they had to incur on account of rupee depreciation at time of withdrawal,” said AB Shahid. The analyst liked increased foreign inflows in Pakistan to a “stable rupee”.
Aqeel Karim Dhedi, a leading stocks broker better known as AKD, was upbeat that Pakistan, being a frontier market, would receive sufficient dollar inflows in the next couple of months.
“The (share) markets globally suffered more outflows in recent months. Even India was no exception,” said he. Dr Kaiser Bengali, renowned economist and former advisor to Sindh chief minister, came up with an eye-opening view of prevailing conventional trends about investments, foreign or local.
Rejecting the governments’ tall claims on increasing foreign investment, the economist basis his comments on the definition of investment that, he said, entails the creation of an asset.
“For more than a decade, since Shaukat Aziz’s era, we are hearing the governments boasting about foreign investment growth,” said Dr Bengali. In economics, he said, investment meant the creation of an asset, something missing in case of investment inflows into Pakistan for the last many years.
“What we have been witnessing (in Pakistan’s case) is what we call ‘hot air investment’,” said the economist adding “Remember how in 2007 the Karachi stocks market had deflated like a balloon?”
Dr Bengali went on to say that no government should claim credit on increase in foreign investment which, he said, was a “statistical phenomenon” depending on a positive development in certain sector of the economy. “Investment is based on a lump sum activity” which increases or decreases in accordance with economic activity.
Keeping up with his intellectual insight, Dr Bengali revealed that the portfolio investment was no investment. “The stocks market investment is no investment as it does not create a new asset,” said the economist.
The former provincial advisor went on to say that even privatization did not eventuate into investment. “Privatization is the change of possession only,” he said.