FDI, exports, remittances and talk of war
A frightful drop of 53% in foreign direct investment (FDI) in the first two months of the current fiscal year is yet another number to add to an already worrisome economic outlook. The report released by SBP comes just a week after some very embarrassing export numbers were released.
The fact that China alone was responsible for 47% of FDI in the last fiscal year shows how narrow our FDI base really is. Availability of energy, poor governance, red tape and lack of security make it difficult to bring in new investors and retain existing ones.
Remittances figures for the first two months in this fiscal year are also down. A global drop in oil prices has forced countries like Saudi Arabia – our biggest contributor to the remittance number – to close down construction projects causing massive layoffs of Pakistani workers.
Our current economic predicament is a result of our increasing dependence on hand outs like a one off $1.5 billion ‘gift’ from Saudi Arabia, lucky breaks such as a fall in international oil prices and ‘easy money’ like remittances.
The business community is also worried about the war hysteria that has escalated on both sides of the border since the Uri attack. Although it has not yet reflected in numbers, there is still a concern that if there is no ease in tensions soon, the global community’s perception of Pakistan would worsen and hurt existing and potential investments in the country.
We need to address out internal shortcomings to develop international confidence. Our short sighted revenue generation policy has to be replaced by long term tax reforms to create more conventional streams of revenue. Talks of war will always hurt a weak economy like ours not a powerhouse like India. Hence we have more to lose in what is already a bleak economic picture which is why a concentrated effort should be made on our part to de-escalate the situation with India.
