Pakistan’s investment climate has shown remarkable resilience and attractiveness amid global economic challenges, as evidenced by the 12 percent growth in Foreign Direct Investment (FDI) in November 2023. According to the data released by the State Bank of Pakistan, the FDI inflows reached $131.4 million in the month under review, compared to $117 million in the same month of the previous year.
The increase in FDI reflects the growing confidence of foreign investors in Pakistan’s economy, which has been supported by various reforms and initiatives. The FDI inflows in November 2023 were mainly driven by the Power sector, which received $92 million, followed by the Financial Business sector with $22 million and the Oil & Gas Explorations sector with $12 million. These sectors represent the diverse and dynamic opportunities that Pakistan offers to foreign investors, contributing to the country’s economic development and growth.
The FDI outflows, on the other hand, witnessed a significant decline of 37 percent in November 2023, reaching $62.2 million, down from $98.5 million in the same month of the previous year. This indicates that foreign investors are retaining their profits and reinvesting them in Pakistan, rather than repatriating them to their home countries.
The leading sources of FDI in Pakistan for November 2023 were China, the United Kingdom, and Hong Kong, which invested $76 million, $25 million, and $23 million respectively. These countries have shown a consistent and strong interest in Pakistan’s market, especially in the fields of energy, infrastructure, and technology.
The cumulative FDI during the first five months (July – November) of the fiscal year 2023-24 also showed a commendable growth of 8.1 percent, reaching $656 million, compared to $607 million in the corresponding months of the previous fiscal year. This demonstrates that Pakistan’s FDI trend is on an upward trajectory, despite the global economic slowdown and uncertainty caused by the COVID-19 pandemic. Pakistan’s FDI performance is expected to improve further in the coming months, as the country continues to implement reforms and policies that enhance its business environment and competitiveness.
However, the FDI level in Pakistan is still far below its potential, according to the Overseas Investors Chamber of Commerce and Industry (OICCI). The OICCI pointed out that, excluding the COVID-19 affected year, Pakistan’s net FDI in November 2023 was the third lowest in the last decade. Similarly, the net FDI for the first five months of the current fiscal year was the third lowest in the past 10 years, even when considering the challenging COVID-19 period.
The OICCI urged the government to take urgent steps to improve Pakistan’s investment climate and attract higher FDI. The OICCI suggested that Pakistan needs to implement consistent and transparent policies, long-term strategic planning, effective country branding, and a robust environment for Intellectual Property Rights (IPR) protection. These measures, they argued, are essential for enhancing Pakistan’s appeal as a destination for foreign investment and fostering sustained economic growth.
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