KARACHI (December 16, 2010) : Despite the fact that some improvement has been witnessed on the economic front, foreign investors are still reluctant to invest in Pakistan due to worst law and order situation and unstable policies. The State Bank of Pakistan (SBP) on Wednesday revealed that Foreign Direct Investment (FDI) is continuously on the decline for last few months and has posted a decline of 22 percent during the first five months of current fiscal year.
According to SBP, FDI registered a decline of $157.1 million or 21.5 percent during the first five months (July-November) of current fiscal year 2010-11. With current decline, FDI fell to $573.3 million in July-November of current fiscal year as compared to $730.4 million in same period last fiscal year.
The country's equity market remained on positive side as KSE-100 index crossed 11,000 mark. However, the portfolio investment has registered a decrease of 45 percent in July-November 2010. Overall portfolio investment stood at $172.5 million in first five months of fiscal year 2010-11 relative to $311.3 million in the corresponding period of fiscal year 2009-10, depicting a decline of $138.8 million.
With a decline of 28.4 percent net foreign investment comprising foreign direct investment and portfolio investment declined to $745.8 million in July-November of current fiscal year as compared to $1.041 billion in corresponding period of last fiscal year.
Total private investment including privatisation proceeds stood at $750.7 million during the period. It fell by $298 in first five months of current fiscal year. Economist said that the country has failed to capitalise the improvement of economic side in attracting more foreign investment. "Domestic shocks like power shortage, worst law and order situation and uncertainty on the political front is largely hurting the foreign direct investment," they added.
Economists said that after the financial assistance from the International Monetary Fund (IMF), investors have rejoined Pakistan's equity market by investing their capital, however it is still lower than last fiscal year. Poor infrastructure, energy crisis and non-availability of utilities are also major reasons for the decline in the FDI, they said.
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