Tall Claims Do Not Bring Foreign Direct Investment

Every civilian government of Pakistan has promised to improve Pakistan’s economic growth but has rarely succeeded. Imran Khan’s government promised that it will bring in more Foreign Direct Investment (FDI) by improving Pakistan’s ranking on the World Bank’s Ease of Doing Business Rankings.

However, as an Editorial in The Express Tribune noted, the government has “failed to lure foreign investors to the country” unlike its predecessors. “According to the latest SBP data, foreign direct investment (FDI) has plummeted to $1.395 billion during the July-March period of the ongoing fiscal year as compared to $2.15 billion in the same period of last fiscal. This shows a 35.1% fall in foreign investment flows. The inflows for March 2021 ($167.6 million) suffered a 40% fall in comparison with what had been recorded in March 2020 (to $278.7 million) which is when the economy started to suffer Covid-19 lockdowns.”

Why has Pakistan never been “a go-to destination for foreign investors” because as the Editorial notes, “lack of political stability and security in the country as well as unfavourable business climate marked by absence of tax incentives, high power and gas tariffs, low growth potential, dilapidated transport infrastructure, etc.”

Thus, except for “2007 and 2008 when the country had witnesses historic highs of $5.99 billion and $5.44 billion respectively,” FDI flows “have mostly been less than one per cent of GDP – ranging between $0.86 billion and $2.58 billion over the past decade.”

Finally, with “imports surging by 13.4% year on year in the first three quarters and exports only meagerly high, by 7.1%, in the same period, remittances have been our sole saving grace in the external sector, rising by about 24% over the last 10 months.”

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