Downing FDI: a focus of interest for economic boost.

Byline: S. Kamal Hayder Kazmi

World investment report 2018 released by UNCTAD revealed that the worldwide foreign direct investment (FDI)flows declined by 23 percent during 2017, to $1.43 trillion from a revised $1.87 trillion in 2016. The fall is in stark contrast to other macroeconomic variables, like GDP and trade, which saw substantial improvement during 2017. A fall in the value of net cross-border mergers and acquisitions (MandAs) to $694 billion from $887 billion during 2016, contributed to the decline. The report also revealed that the value of announced greenfield investment - an indicator of future trends - also declined by 14 percent, to $720 billion. FDI flows declined sharply in developed economies and economies in transition while those to developing economies stayed stable.

As a consequence, developing economies accounted for a rising share of global FDI inflows during last year, absorbing 47 percent of the total, as against with 36 percent during 2016. Even discounting the volatile financial flows, large one-off transactions and corporate restructurings that inflated FDI numbers in 2015 and 2016, the 2017 fall was still sizeable and part of a longer-term negative cycle.

In the developing countries like Pakistan, State Bank of Pakistan (SBP) statistics showed that FDI during July-September FY19 clocked in at $439.5 million as against to $765 million previous year. The Government of Pakistan desperately requires foreign exchange inflows to cap the growing current account deficit. The fall in inflows comes at a time when the country's depleting foreign exchange reserves have already fallen to alarmingly low levels at $14.6 billion counting SBP's $8.089 billion offering enough only for 2 months of import cover.

Different sources recorded that all Pakistani governments have always been keen to attract FDI and have tried to launch reforms for enhancing the investment environment. Focus stayed on how to enhance the business condition in the country. Despite the tall claims, the government's condition is still bad and the business community particularly foreign investors are hesitant to invest in Pakistan. Doing business in the country is one of the tough tasks, there are many gaps on account of transparency, policy and ranking of key indicators for doing business is very low.

Sources also recorded that the present Government of Pakistan has officially approached the International Monetary Fund (IMF) to borrow $12 billion to meet...