Declining FDI, Falling Exports: Pakistan’s Embrace of Geo-Economics Has Changed Nothing

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Pakistan’s economy remains in doldrums despite IMF loans and loans from friendly countries like Saudi Arabia, UAE, and China. Prime Minister Imran Khan and his advisors loud claims about geo-economics are belied when one looks at the hard facts.

 

According to the World Investment Report 2021 of the United Nations Conference on Trade and Development (UNCTAD), Foreign Direct Investment (FDI) in South Asia rose by 20 percent to $71 billion in 2020. However, most of this was driven by strong mergers and acquisitions in India. In India, FDI increased 27 percent to $64 billion despite Covid-19’s impact on the Indian economy. By contrast, FDI in Pakistan reduced by 6 percent to $2.1 bn.

 

According to the report “FDI flows to India have grown by a whopping 45pc from $44.5bn in 2016 to $64bn in 2020. Pakistan on the other hand found FDI contract by almost a fifth from $2.5bn to $2.1bn in the same period, the more than 30pc growth in inward flows to South Asia to $70.9bn notwithstanding.”

 

Not just India, even Vietnam ($15.8 billion) and Indonesia ($18.6 billion) received higher FDI inflows than Pakistan. However, not only has the annual FDI flow into Pakistan declined over the years but there has been a decline in FDI stock over the last five years. “The FDI stock in the country has fallen from $41.9bn to $35.6bn in five years to 2020. Bangladesh on the other hand has built its FDI stocks from $14.5bn to $19.6bn and India from $318.3bn to $480.3bn in the same period.”

 

According to analysts quoted in Dawn, “the problem is that Pakistan is not seen as a place where rule of law and agreements are respected. We have great potential to woo FDI; but we need to learn to respect our commitments, pursue consistent policies and keep politics out of business.”

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Author: Adam Ahmad