It's amazing what hype can do, and in this particular case the CPEC hype. With the Chinese corridor gradually taking off, the archetypical foreign investors - those from the Anglo-Saxon and the European world - are now queuing up; their local diplomats are increasingly curious about the CPEC after investors from the western world were caught sitting on the fence while China came and scooped the deal right in front of their eyes.
The latest in this context (though it hasn't been explicitly advertised under CPEC banner) is the second session of Pakistan-Italy Joint Economic Commission (JEC) held on Monday this week. Recall that the bilateral JEC had first met in the inaugural session of March 2006. Since then, Italy's interest in Pakistan has been precious little.
At this point, a few quick stats wouldn't probably hurt. Between FY85 and 4MFY17, Pakistan received about $38 billion in net FDI inflow from around the world. Italy's share in that was mere 2 percent, even though she is the third largest economy in the Euro zone, and is among the top 10 of the world. Since the first session of Pak-Italy JEC, FDI inflows from Italy to Pakistan have totalled $738 million or 3 percent of total FDI inflows between FY07 and FY16.
Most of Italian FDI has been in the oil and gas exploration sector (about 95 percent in fact). Between FY10-FY16, Italian FDI in Pakistan's oil and gas exploration has equalled about 20 percent of total FDI inflows in the sector during this period, though her share is increasing by the year as overall FDI flows in that sector has been on the decline in the wake of weak global oil prices.
This stems from the fact that the inaugural session of JEC had formed four working groups: energy and infrastructure development, trade and joint venture, agriculture & agro industries, and information technology collaboration. Of these, energy was the most important component.
In contrast, Italian FDI flows to India have been growing consistently since 2006, reaching to a FDI stock of about $5 billion by 2012, the last available bilateral FDI data at Unctad. Before 2006, Italian stock of FDI in India was equal to that in Pakistan: nearly zero. Pakistan does not feature prominently in Unctad's 2012 database of Italy's outward FDI stock, because about 97 percent of total Italian FDI flows to Pakistan came FY12 onward.
Italian FDI in India has been concentrated in automobile industry/transportation (more than 54% as of 2012), whereas other top sectors that have attracted Italian FDI in India are food processing, metallurgical industry, textiles, electrical equipment and others.
The India-Italy JEC has joint working groups in: infrastructure, tourism, railways, food processing, renewable energy, information technology and agriculture.
When it comes to attracting FDI, one country's sectoral priorities will indeed differ from another, but it's time Pakistan begins to strategize how to attract FDI from one of the world's leading economies, in a wide array of sectors. In an interview with Sindh Board of Investment, its boss Naheed Memon mentioned Italy as an interested party to the work being done at Karachi's Marble City which is in the process of tendering.
The Italian interest exists and must be exploited in a handful of industrial and development projects provinces are taking up. Likewise Italian embassy would do well to bring more of its delegations to Pakistan; there are good values to be hunted in this country.
