RIZWAN BHATTI
KARACHI: Foreign Direct Investment (FDI) posted an increase of 12 percent during the first nine months of this fiscal year supported by mergers and acquisitions.
The State Bank of Pakistan (SBP) Monday revealed that Pakistan attracted FDI amounting to $ 1.602 billion during July-March of FY17 compared to $ 1.425 billion in the corresponding period of last fiscal year (FY16), depicting an increase of 12.4 percent or $ 176 million. During the period under review, FDI inflows stood at $ 1.890 billion against the outflow of $ 288.4 million.
Month-on-month basis, with an increase of 39 percent or $ 84 million, FDI stood at $ 297 million in March 2017 against $ 213 million in March 2016. During March 2017, FDI inflows were $ 329.5 million against the outflows of $ 32.3 million. The second component of foreign investment, ie, portfolio investment continued to register a downward trend and declined by 3.3 percent in first nine months of this fiscal year. Portfolio investment stood negative at $ 362 million in July-March of FY17.
Similarly, net foreign investment in Pakistan, comprising FDI, portfolio investment and foreign public investment increased by 116.4 percent to $ 2.232 billion in July-March of FY17 compared to $ 1.032 billion in the same period of last fiscal year.
Economists said despite a significant increase in the current account deficit during this fiscal year, pressures on the overall external sector have been contained due to sufficient volume of foreign exchange loans and FDI. “A pick-up in foreign investment inflows (both public and private) and continued bilateral and multilateral funding, were able to finance the growing current account gap,” they added.
According to SBP’s recent report, at the global level, the recent surge in foreign investment has been dominated by mergers and acquisitions (M&A). Pakistan seemed to be missing out of this trend earlier on, however presently Pakistan is also getting a slice of global M&A activity.
“This dynamic seems to have changed in FY17 and multiple M&A deals have been concluded, indicating that professionally managed and innovative Pakistani firms are now also on the screens of foreign investors looking to gain a foothold into this 194-million strong market,” it added.
The SBP has mentioned that two major foreign acquisitions of local companies were completed during the second quarter of FY17 that led to a net inflow of $ 588 million foreign investment into the country.
Importantly, foreign investment from countries other than China is now also trickling into the country, reflecting investors’ favorable outlook about the country’s growth prospects, it maintained.
FDI from China is not just limited to power and infrastructure projects anymore as Chinese firms have either concluded or are in the process of striking deals in industries as varied as financial services, Pakistan Stock Exchange, glass manufacturing and packaging materials, it added.
