UAE, Saudi Ara­bia lead FDI re­vival in Pak­istan

The Pak Banker - - COMPANIES/BOSS -

The UAE and Saudi Ara­bia are fol­low­ing in China's foot­steps in chan­nelling for­eign di­rect in­vest­ment (FDI) into Pak­istan. Ac­cord­ing to a re­port, a ma­jor chunk of th­ese in­vest­ments are go­ing into en­ergy projects. As th­ese en­ergy projects go on stream, they will have a mul­ti­plier ef­fect on the Pak­istan econ­omy.

Over sev­eral years, the whole coun­try and the econ­omy in par­tic­u­lar was badly hit by en­ergy short­ages. World Bank es­ti­mates show that pro­longed out­ages of elec­tric­ity and nat­u­ral gas sup­plies to ma­jor in­dus­trial units in Pak­istan had eroded the econ­omy by a re­duc­tion of up to two per cent in the an­nual gross do­mes­tic prod­uct (GDP).

The State Bank of Pak­istan (SBP), the cen­tral bank, re­ported that FDI into Pak­istan rose by 4.8 per cent dur­ing July-Fe­bru­ary pe­riod of the cur­rent fy-2016. The net FDI in­flow dur­ing th­ese eight months was $750.9 mil­lion as com­pared to $716.2 mil­lion in the cor­re­spond­ing pe­riod of fy-2015.

The gross in­flow of FDI dur­ing this pe­riod was $1.3 bil­lion, while the out­flow was $583 mil­lion, the cen­tral bank said. The out­flows mainly com­prised repa­tri­a­tion of div­i­dends and prof­its earned by for­eign in­vestors.

The UAE came se­cond only to China, with an in­vest­ment of $111 mil­lion. Saudi Ara­bia com­mit­ted $105 mil­lion and Hong Kong $101 mil­lion dur­ing the July-Fe­bru­ary fy-2016, the SBP said. Ac­cord­ing to re­port, Ah­san Iqbal, min­is­ter for plan­ning, de­vel­op­ment and re­forms, who is also the key per­son on the Chi­naPak­istan Eco­nomic Cor­ri­dor (CPEC) projects, in­formed Par­lia­ment that out of the to­tal Chi­nese fund­ing of $46 bil­lion, $35 bil­lion are com­mer­cial loans which will be in­vested in Pak­istan by the Chi­nese pri­vate sec­tor. The re­main­ing $11 bil­lion are con­ces­sional loans. The SBP also re­ported that credit take­off by Pak­istani busi­ness­men has gone up but it was mainly used as work­ing cap­i­tal to raise in­dus­trial out­put. It is a good sign for the econ­omy, with ex­portable sur­pluses get­ting big­ger.

"At the re­cently-con­cluded Tex­tile Asia Ex­hi­bi­tion at Karachi, 400 for­eign, mainly Euro­pean, and 300 Chi­nese busi­ness del­e­gates par­tic­i­pated. Sev­eral of them ex­pressed in­ter­est to in­vest in the Pak­istani tex­tile sec­tor or do­ing much big­ger busi­ness than their cur­rent op­er­a­tions," Khawaja Arif Kapoor, one of the or­gan­is­ers and chair­man of Pak­istan Chem­i­cals and Dyes As­so­ci­a­tion, said. For­eign fund in­flows are im­prov­ing and pro­jected to go up in the com­ing months. This is in­di­cated by the fact that Fe­bru­ary fund in­flows rose to $103 mil­lion - up from $89.1 mil­lion in Fe­bru­ary 2014.

The amount may look small but it is sig­nif­i­cant con­sid­er­ing low in­ter­na­tional oil prices which have hit de­mand for prod­ucts in key ex­port mar­kets, re­duced for­eign trade vol­umes and low­ered the level of in­vest­ment funds glob­ally. Se­nior an­a­lysts in the cap­i­tal mar­ket at­tribute this in­crease in FDI in­flow to im­prov­ing for­eign in­vestor con­fi­dence in the Pak­istani econ­omy and fresh ef­forts by the govern­ment to re­duce the cost of do­ing busi­ness.

"We are now ben­e­fit­ing from the low­est com­mer­cial bank rates dur­ing the last 11 years. It means the cost of our prod­ucts is be­com­ing more com­pet­i­tive in­ter­na­tion­ally, our ex­ports will grow and ben­e­fit the econ­omy," Ashraf Mah­mood Wuthra, gov­er­nor of SBP, said. He hopes the present easy mon­e­tary pol­icy, which has brought down the in­ter­est rate to six per cent, and low in­fla­tion would help the econ­omy and at­tract more FDI. Khawja Asif, min­is­ter for wa­ter and power, said: "More en­ergy is the key to solve our eco­nomic prob­lems.

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