Amir Khan

A closer look at the numbers for October indicates a less optimistic trend as far as foreign direct investment (FDI) is concerned, as FDI experienced only a marginal 1.4% year-on-year growth and a concerning 29% month-on-month decline. Elaborating on the "grim" FDI numbers, Dr Muhammad Afzal, an economic adviser at the Planning Commission, told WealthPK that in the first four months of the ongoing fiscal year 2023-24 (4MFY24), Pakistan witnessed a notable uptick in FDI, amounting to an impressive half a billion dollars, reflecting a robust 7.1% year-on-year growth. According to the State Bank of Pakistan, net FDI during 4MFY24 stood at $524.7 million.

"Despite the recent surge in net FDI, the overall foreign investment climate in the country remains fragile. Political instability and a lack of investor-friendly policies pose significant hurdles for potential investors," he explained. He pointed out that structural challenges, ranging from the complexity of regulatory policies to high transaction costs, taxes, and trade barriers, continued to impede the acceleration of FDI.

However, he said the recent agreement with the International Monetary Fund and the establishment of the Special Investment Facilitation Council (SIFC) were being viewed as positive steps. Afzal pointed out that China had emerged as a prominent player in Pakistan's FDI landscape, notably in the power sector. "Diversifying the sources of FDI is crucial, especially given the current global uncertainties stemming from geopolitical tensions and conflicts."

The Planning Commission's official highlighted that China's outbound FDI had reached record highs, particularly in greenfield projects. "Sectors such as renewable energy and electric vehicles are at the forefront of Chinese investments abroad." He emphasised that in the context of the prevailing global economic uncertainties, the influx of FDI from China offers a window of opportunity. "In the present scenario, channelling efforts towards the renewable energy sector could serve as a catalyst for fostering foreign investments and spurring economic growth in Pakistan," emphasised the Planning Commission official.

Credit: INP-WealthPk