It is heartening to hear that foreign direct investment (FDI) has jumped 163 per cent to $222.6 million in July on a year-on-year basis, as per central bank data. Pakistan received $2.4 billion in 2016-17, the highest figure since the incumbent government came to power four years ago. In contrast, FDI was $1.45 billion in 2012-13. The highest inflow in July was from Malaysia, which invested $91.6m. It was followed by China that invested $72.7m. Other important sources of FDI in July were the United Arab Emirates and Japan, which contributed $16.2m and $12.2m, respectively.
Growth in FDI is promising, though the main contributor to net inflows has been China, which is investing heavily under the China-Pakistan Economic Corridor (CPEC). After years of flat foreign direct investment, it has taken China’s pledges of billions to get overseas companies to start looking beyond Pakistan’s negative headlines on security challenges and power outages. It may well be said that China’s vote of confidence in our country has gone a long way in boosting investor confidence.
Foreign investment helps Pakistan reach its economic potential by providing capital to finance new industries and enhance existing industries, boosting infrastructure, productivity, and employment opportunities in the process. Foreign investment has other benefits beyond injecting new capital. By bringing in new businesses with connections in different markets it opens up additional export opportunities, boosting our overall export performance. It also encourages competition and increased innovation by introducing new technologies and services to the market.
Even though FDI has finally started to make progress, certain dynamics such as security, energy shortages, and corruption have proven to be great obstacles to its advancement. Not to burst the bubble of optimism, but what makes foreign investors ever reluctant is the element of unpredictability in our political climate. As long as this exists, there may always be some kind of delay in anticipated progress.