Qudsia Bano

As a promising sign for the economy, the foreign direct investment (FDI) increased substantially 17.3 percent to $87.7 million in July FY2024 as against $74.8 million in the same period last year, reports WealthPK. Notably, the FDI surge is attributed to diverse sources. China, one of the world's economic powerhouses, has played a pivotal role in driving this growth. The FDI received from China alone amounted to $18.0 million, constituting 20.5 percent of the total inflow. This reflects the deepening economic ties between the two nations. Hong Kong, with $16.9 million (19.2 percent), the Netherlands with $12.1 million (13.8 percent), and Switzerland with $10.1 million (11.5 percent) have also made substantial contributions to the country’s FDI landscape. This diversified portfolio of foreign investments is a testament to the growing confidence of global investors in the local market. A closer look at the sectors that attracted the FDI reveals some interesting trends. The power sector emerged as the most attractive destination for foreign investors, receiving a lion's share of $45.1 million, which accounts for 51.4 percent of the total FDI.

This substantial investment in the power sector signifies a growing interest in the country's energy infrastructure. Oil and gas explorations also garnered significant attention, securing $15.2 million (17.3 percent) in FDI, while the communication sector attracted $8.0 million (9.1 percent). These investments signal a commitment to advancing key sectors crucial for the nation's economic development and energy security. Apart from the FDI, the portfolio investment landscape also exhibited a remarkable growth during July FY24. The foreign private portfolio investment recorded a net inflow of $16.3 million, highlighting the confidence of global investors in the local stock market. Additionally, it experienced a net inflow of $6.0 million, reflecting a positive sentiment among international investors. The total foreign portfolio investment, including both private and public investments, recorded a substantial inflow of $22.3 million during July FY24.

This remarkable growth is in stark contrast to the $13.9 million outflow witnessed during the same period last year. These figures underline the resilience and attractiveness of the local market, even in uncertain global economic conditions. Talking to WealthPK, Uzma Zia, Senior Research Economist at the PIDE, said the substantial FDI increase during the first month of FY24 was a positive sign for the economy, demonstrating the growing confidence of both regional and international investors in the stability and potential of the country’s market. “The diversification of FDI sources is particularly encouraging, as it reduces dependency on a single investor and strengthens our economic resilience,” she said. “Significant investments in key sectors such as the power industry, oil and gas exploration, and communication are crucial for our economic development and energy security.

These investments will not only drive job creation but also enhance our infrastructure and technological capabilities. “Furthermore, the robust performance of portfolio investments, both private and public, reflects a healthy financial market environment. It's clear that global investors are viewing our stock market as an attractive destination”, she said. “However, it's imperative that we continue to foster a business-friendly environment, streamline regulatory processes, and ensure policy consistency to sustain and expand this positive momentum. By doing so, we can harness the full potential of these investments to drive long-term economic growth and prosperity for our nation,” added Uzma.

Credit: INP-WealthPk