FDI flow into Pakistan doubles

FDI flow into Pakistan doubles
By Farhan Bokhari in Islamabad
Published: June 30 2007: Financial Times

Foreign direct investment into Pakistan has doubled to more than $7bn in the financial year ending today, the privatisation and investment minister said yesterday.

Zahid Hamid said the growth in FDI, which in-cludes portfolio investment, showed that foreign investors were unperturbed by political agitation since March when opposition parties began protesting against the suspension of the country's top judge.

"Despite what people may have called the political noise, foreigners are continuing to come to Pakistan," said Mr Hamid. "These in-vestment numbers show the momentum is continuing."

Mr Hamid said enthusiasm among foreign investors had been raised by the privatisation programme, which had boosted confidence.

The ministry has received $2bn (€1.48bn) in the 2006-07 financial year, compared with a target of $1.25bn to $1.5bn. Most FDI has been in sectors such as banking, telecommunications, oil and gas. Economists said foreign investors appeared to be setting aside concerns that the political turmoil might slow the recovering economy - even though national elections, expected before the end of the year, are likely to be turbulent.

"Foreign investors so far appear to be comfortable with Pakistan risk," said Sakib Sherani, chief economist for Pakistan at ABN-Amro.

"As long as General Pervez Musharraf [Pakistan's president and military ruler] stays in power, foreign investors are likely to stay the course."

But Mr Sherani pointed out that while the scale of foreign investment had gone up, it was still concentrated largely in the service sector, which does not necessarily produce the same job opportunities as manufacturing.

"The types of investments coming in are largely those that will eventually repatriate capital from Pakistan. What you need are investments that create exports so that there aren't pressures from outflows and you need to create jobs," he said.

Copyright The Financial Times Limited 2007