State Bank (July): FDI tumbles down by 80pc

Foreign direct investment (FDI) dropped drastically in the first month of this fiscal year, reflecting the government’s failure to rebuild the country’s positive image and to attract foreign investors regardless of bulk of unused liquidity in the international market.
On Monday, the State Bank reported that the FDI plunged down from $119m to just $24 million in July, in the same month last year. This 80 percent decline in the FDI could further break the confidence of foreigners willing to invest here, particularly while the neighboring India looks more eye-catching with $28 billion FDI in 2013.
Seemingly struggling hard to invite foreign investors, the government has already completed 14 months in power, but the result seems extremely unfortunate so far.
Currently, the two large public demonstrations in Islamabad, protesting and demanding wrap-up of the entire government and the parliament for fresh general elections makes the existing month more troubled for the country. An unwelcoming picture is visible from investors’ point of view. Aamir Aziz, a manufacturer and exporter of textile goods said, “Not only foreign investors but the foreign importers are also reluctant to place fresh orders for goods and services.”
The exports of the country may have to face a serious indentation and it could even get worse if this ambiguity prevails for another two to four weeks.
As the dollar has crossed Rs100 in the exchange rate, we can clearly see the impact of uncertainty reflecting. Panic is visible in the inter-bank market while the importers feel that the greenback may rise further if uncertainty persists.
“Dollar supply into Pakistan has fallen, and exporters are also in the race to cash the situation as they stopped to bring export proceeds,” said Malik Bostan, chairman of the Exchange Companies Association of Pakistan.
He said pressure is intensifying in the inter-bank market due to importers’ rush and exporters’ delay to furnish export proceeds, whereas the open market is better. Currency dealers and experts said the foreign investment dropped in July because the sit-in in Islamabad was announced the same month.
However, the State Bank reported that the portfolio investment countersigned a sharp increase in July, jumping to $69m paralleled to $15m in the same month last year. Nonetheless the equity market is disheartened at the moment as foreign investors have started exiting from Pakistan.