Govt aiming to­ward FDI im­prove­ment, invit­ing in­vestors

The Financial Daily - - NATIONAL - Mo­hammed Arifeen

For­eign Di­rect In­vest­ment in­flows into Pak­istan have been de­clin­ing over the past few years. The sharp de­te­ri­o­ra­tion in the in­ter­nal se­cu­rity sit­u­a­tion around 2007 on­wards co­in­cided with rising po­lit­i­cal un­cer­tainty in the coun­try. At the same time, the global fi­nan­cial cri­sis had im­pacted FDI flows world­wide. Lack of good gov­er­nance, po­lit­i­cal tur­moil and com­pli­cated busi­ness reg­is­tra­tion pro­cesses were the ma­jor fac­tors be­hind the fall in FDI.

Af­ter record­ing an all-time high of $5.4 bil­lion in 2007-08, net FDI dropped to a low of $824 mil­lion in fis­cal year 2012. Net FDI fell to a pal­try $87 mil­lion, from $138 mil­lion in the same pe­riod in 2013.The sharp de­cline in FDI comes at a time of global re­cov­ery in out­ward FDI from de­vel­oped economies. Ac­cord­ing to UNCTAD, to­tal out­ward FDI in 2013 amounted to $1.45 tril­lion glob­ally; the share of de­vel­op­ing coun­tries was 54 per­cent or a to­tal in­flow of $778bn. Of this, Pak­istan man­aged to at­tract 0.17pc - far be­low its weight in terms of GDP.

Pak­istan re­ceived FDI of just $169 mil­lion dur­ing July to Septem­ber 2014, which was highly dis­ap­point­ing. This has hap­pened de­spite the fact that many sec­tors of the coun­try's econ­omy in­clud­ing en­ergy, in­fra­struc­ture de­vel­op­ment, agri­cul­ture, oil and gas, min­eral of­fer huge op­por­tu­ni­ties, but the govern­ment could not evolve a bet­ter strat­egy to at­tract po­ten­tial in­vestors due to which the FDI was di­vert­ing to re­gional coun­tries.

On the other hand In­dia FDI has been show­ing a con­tin­u­ous a highly favourable trend. FDI in­flows to In­dia in­creased 17 per cent in 2013 to reach $ 28 bil­lion, as per a United Na­tions re­port. The In­dian govern- ment's has kept a ro­bust busi­ness en­vi­ron­ment so that for­eign cap­i­tal keeps flow­ing into the coun­try. The govern­ment has taken many ini­tia­tives in re­cent years such as re­lax­ing FDI norms in 2013, in sec­tors such as de­fence, PSU oil re­finer­ies, tele­com, power ex­changes and stock ex­changes, among oth­ers. The same year, big global brands such as Tesco, Sin­ga­pore Air­lines and Eti­had lined up to in­vest in In­dia as the govern­ment opened more sec­tors to for­eign in­vest­ment. To­tal FDI in­flows into In­dia in the pe­riod April 2000Au­gust 2014 touched $ 341,357 mil­lion. To­tal FDI in­flows into In­dia dur­ing the pe­riod April-Au­gust fis­cal year 2015 were $ 17,445 mil­lion.

The ser­vices sec­tor ($ 2,336 mil­lion) at­tracted the high­est FDI eq­uity in­flows in the pe­riod April-Au­gust 2014, fol­lowed by the ser­vices ($ 1,086 mil­lion) and drugs & phar­ma­ceu­ti­cals ($ 903 mil­lion) sec­tors. Mau­ri­tius led the share of top in­vest­ing coun­tries by FDI eq­uity in­flows into In­dia with $ 3,934 mil­lion dur­ing April-Au­gust fis­cal year 2015 , fol­lowed by Sin­ga­pore ($ 1,892 mil­lion), the Nether­lands ($ 1,562 mil­lion) and Ja­pan $ 897 mil­lion).In­dia's cab­i­net has cleared a pro­posal which al­lows 100 per cent FDI in rail­way in­fra­struc­ture, ex­clud­ing oper­a­tion. Di­rect In­vest­ment in In­dia av­er­aged $1009.21 mil­lion from 1995 un­til 2014, reach­ing an all time high of $5670 mil­lion in Fe­bru­ary of 2008 and a record low of -$60 mil­lion in Fe­bru­ary of 2014.

In this con­text the ex­am­ple of Bangladesh may be taken into con­sid­er­a­tion. For­eign Di­rect In­vest­ment in Bangladesh in­creased to $1300 mil­lion in 2013 from $1191 mil­lion in 2012. For­eign Di­rect In­vest­ment in Bangladesh av­er­aged $772.25 mil­lion from 2002 un­til 2013, reach­ing an all time high of $1300 mil­lion in 2013 and a record low of $276 mil­lion in 2004. The in­flow of For­eign Di­rect In­vest­ment in Bangladesh has gone up by 24 per­cent in 2013 de­spite the coun­try wit­nessed se­ri­ous po­lit­i­cal un­rest and anti-busi­ness cli­mate dur­ing the pe­riod. The 'World In­vest­ment Re­port' of the Unctad, re­leased, said Bangladesh re­ceived $1,599 mil­lion FDI last year. The coun­try holds sec­ond place af­ter In­dia in South Asia in draw­ing FDI last year.

The largest in­crease in FDI in Ju­lyOc­to­ber 2015 in Pak­istan was in the cat­e­gory of oil and gas ex­plo­ration, which at­tracted 0.5 mil­lion. How­ever, it was 10.6 per­cent less than the for­eign in­vest­ment re­ceived dur­ing the same months of the pre­ced­ing fis­cal year when it to­taled 6 mil­lion. Fi­nan­cial busi­nesses at­tracted .6 mil­lion worth of FDI in Ju­lyOc­to­ber. How­ever, it was down 7.25 per­cent from the cor­re­spond­ing four­month pe­riod of the pre­ced­ing fis­cal year. Other sec­tors of the econ­omy that re­ceived ma­jor FDI in Ju­lyOc­to­ber in­clude chem­i­cals (.7 mil­lion), to­bacco and cig­a­rettes (.1 mil­lion) food (.9 mil­lion), trade (.4 mil­lion), per­sonal ser­vices (.5 mil­lion), tex­tiles (.7 mil­lion), power (.3 mil­lion) and cars (mil­lion).

For the last few months, FDI was on de­cline be­cause of sev­eral do­mes­tic and ex­ter­nal is­sues in­clud­ing en­ergy cri­sis, poor law and or­der sit­u­a­tion and lack of in­fra­struc­ture. FDI is pre­sent­ing an im­proved im­age sup­ported by mas­sive for­eign in­flows in Oc­to­ber 2014. Rising FDI in­flows is a good sign for the coun­try's poor econ­omy.

The govern­ment is re­quired to take some more se­ri­ous steps to at­tract new for­eign in­vest­ment in the coun­try. An im­proved law and or­der sit­u­a­tion, long-term eco­nomic poli­cies and strong in­fra­struc­ture is re­quired to main­tain this up­ward mo­men­tum.

An amount of $350 mil­lion was be­ing ex­pected through pri­va­ti­za­tion of OGDCL; but the fed­eral govern­ment sud­denly sus­pended the OGDCL pri­va­ti­za­tion fol­low­ing a poor re­sponse from for­eign buy­ers as oil prices in the world mar­ket are on de­cline. OGDCL pri­va­ti­za­tion will be done later, when oil prices in the in­ter­na­tional will sta­bi­lize.

FDI is as­so­ci­ated with the tech­nol­ogy trans­fer; pro­duc­tiv­ity gains; for­eign mar­ket ac­cess; higher wages and bet­ter labour con­di­tions. In this con­text, Pak­istan's ex­clu­sion from global FDI flows is trou­bling and but hardly sur­pris­ing.

Pak­istan would like to ex­pand for­eign di­rect in­vest­ment in en­ergy, in­fra­struc­ture, de­vel­op­ment, food, phar­ma­ceu­ti­cal, chem­i­cals, en­gi­neer­ing, agri­cul­ture and agro based in­dus­try min­ing and oil and gas ex­plo­ration. En­ergy sec­tor is the high­est pri­or­ity and the big­gest con­cern. Un­less we over­come the prob­lem of power short­ages swiftly and ef­fec­tively there can be no mean­ing­ful de­vel­op­ment in the coun­try.

Pak­istan is one of the most in­vestor friendly coun­tries in the world. Pak­istan al­low 100 per­cent for­eign own­er­ship with no limit on repa­tri­a­tion of profits div­i­dends or other funds in the cur­rency of the coun­try of ori­gin, the Prime Min­is­ter said while ad­dress­ing the In­vest­ment Fo­rum.

Pak­istan is fo­cus­ing on im­prov­ing the ef­fi­ciency of ex­ist­ing power plants ad­dress­ing prob­lems of power gen­er­a­tion and dis­tri­bu­tion. At the same time Pak­istan has em­barked on a mas­sive pro­gramme of power gen­er­a­tion from all avail­able sources in­clud­ing hydel, coal, so­lar and wind.

The govern­ment ac­cords high im­por­tance to fa­cil­i­tat­ing pri­vate sec­tor en­ter­prises to ex­pand busi­ness in Pak­istan. Pak­istan has com­pet­i­tive, thriv­ing and grow­ing pri­vate mar­kets in the bank­ing and telecom­mu­ni­ca­tion sec­tors. It has an am­bi­tious pri­va­ti­za­tion pro­gramme which aimed to shift the role of pub­lic sec­tor to reg­u­la­tion from man­age­ment.

It is now most im­por­tant time to re­solve all the po­lit­i­cal is­sues for the eco­nomic growth of the coun­try. The Chi­nese Pres­i­dent's ar­rival very soon to Pak­istan will bring a favourable im­age in the world. The calm in­vest­ment cli­mate will en­sure that the coun­try moves rapidly to­wards en­cour­ag­ing For­eign Di­rect In­vest­ment. This will en­sure im­mense em­ploy­ment to the youth and de­velop the econ­omy on solid foun­da­tions.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.