141 percent surge in US investment
KARACHI (June 19 2010): Net foreign investment by USA in Pakistan has surged by 141 percent during the eleven months of current fiscal year mainly due to high investment in equity market. According to the State Bank of Pakistan (SBP), net foreign investment by US investors registered remarkable increase of $563 million, to $961 million, in July-May of fiscal year 2010 as compared to $398 million in same period of last fiscal year.
Net foreign investment has posted massive surge on the back of portfolio investment, while foreign direct investment (FDI), an important tool for foreign exchange earning, was on decline. "Despite being a strategic partner in war against terrorism USA investors did not prefer Pakistan for long term investment, which resulted in decline in FDI," economists said.
Pakistan is facing billions of rupee losses due to participation in the USA war against terrorism, which compelled the government to raise the defence expending. US investors, like other countries, have also become conscious and reluctant to invest in Pakistan due to poor law and order situation followed by war against terrorism," they added.
"Sub prime mortgage crisis has also a chief reason of decline in FDI. However, we think the US should be give a preferable country status to boost its investment and make Pakistan stronger," they added. According to SBP, FDI by US investors posted a decline of 35.3 percent during July-May of fiscal year 2010. With current decline overall FDI by USA in Pakistan has declined to $522 million in first eleven months of fiscal year 2009-10 as compared to $806 million dollar in same period of last fiscal year, depicting a decline of $284 million.
However, USA investors have come back in Pakistan's equity market because of some improvement in share market and invested some $439 million during the July-May of 2010. Portfolio investment by US investors posted an increase of 207 percent to $439 million during the period as compared to withdrawal of $408 million in corresponding period of last fiscal year.
In addition US is still on the first position with an investment of $961 million in the foreign investing countries, while European Union is on second number with $666 million investment. In 2001-02 fiscal year, when war against terrorism was started, US investment in Pakistan stood at 324.7 million dollars and it touched new peak of 1.748 billion dollars in fiscal year 2008.
Similarly, United Kingdom (UK) investment posted an increase of 69 percent during the first eleven months of current fiscal year. UK invested $280 million in July-May of 2010 as compared $166 million dollar in corresponding period of last fiscal year. UK's FDI stood at 263.4 million dollars in the last fiscal year relative to 460.4 million dollars in fiscal year 2008, showing a decrease of 42.8 percent, while portfolio investment stood at a negative position of 77.7 million dollars.
UAE invested $208 million, Switzerland $161 million, Netherlands $272 million, Singapore $105 million, Malaysia $11.8 million and Hong Kong made $28 million investment in first eleven months of current fiscal year. Total foreign investment witnessed a decline of 14 percent to $1.89 billion during July-May of current fiscal year as compared to an investment of $2.22 billion in fiscal year 2008.