Foreign direct investment, plays a very important role in development of economy of any country as it brings foreign funds as well as technical know how , which can be very helpful for the recipient country, other than that it is also helps to create Foreign exchange reserves.
In last 2 years Pakistan’s performance in FDI (Foreign Direct Investment) sector has been miserable and Pakistan only attracted FDI (Foreign direct investment) of about US $ 2030 Million in the period (July-April) of the present fiscal year.
Pakistan showed excellent performance in the era spanning from 2002-2007, in which our FDI rose from meager US $ 485 Million to healthy US $ 5.11 Billion, even performance in the year 2007-2008 was excellent, when we got US $ 5.152 Billion Investment, but after that ,somehow we lost our way and now our FDI is standing at dismal $ 1,772.9 figure.
Where we performed badly…
We saw a major decline of FDI in Telecommunication sector (decline of US $ 607 Million and financial services (drop of US $ 548 million) for the period of July-April 2009-2010, as compared to same period in last year, in last year we had investment of US $ 681 in financial services sector and in Telecommunication sector we got US $ 829.2; Another bad development was disinvestment of IT sector amounting to US $ 95 million for the year.
As far as overall performance in FDI is concerned, 12 industries showed higher performance, while 24 industries performed lower ,as compared to the last year.
What were Reasons for our bad performance?
1. Pakistan Government has failed miserably to provide a healthy environment for investors, Law and order situation is not so good since the present Government has taken charge in March 2008.
2. Political uncertainty i.e. Judiciary vs. Government clash is creating confusions in minds of investors as they don’t know what will happen next and they are fearing a clash between institutions.
3. Global recession has also played its part in this scenario; according to International institute of Finance (IIF) global flows of Foreign Direct Investment (FDI) have dropped 32 percent in the year 2009.
4. Government has failed to solve the problem of energy crisis, although current political setup gave deadline of 31st Dec 2009, for complete eradication of Load shedding, but unfortunately they failed to catch up with their deadline and this crisis is really creating problems for the economy.
Some good signs….
There are some good signs as some industries showed good results in FDI i.e. Oil and gas exploration got US $ 605 million investment and transportation industry got US $ 104 million investment.
We should focus on….
Pakistan board of investment and especially Pakistan Government has to work really hard to bring investment in Textile industry where we always got insufficient investment even in heydays ; Investment in textile industry is very important because, this industry is backbone of our economy and healthy investment in this area can really bring industrial revolution.
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