FDI flows amid Covid-19.

Covid-19 has disrupted international trade and investment flows all over the world. According to the United Nations Conference on Trade and Development (UNCTAD), global FDI flows were down by 49 per cent in the first half of 2020. Greenfield investments have been hit especially hard, falling by 37pc in the first nine months of the year.

Despite this bleak picture globally, FDI inflows into Pakistan have been quite resilient. This continues a trend of generally strong performance in attracting inward FDI in the years immediately preceding the emergence of Covid-19. Between 2015 and 2019, FDI inflows into Pakistan expanded from $1.67 billion to $2.22bn. As of 2019, the value of inward FDI stock into Pakistan had reached $34.8bn. Even amid the onset of the pandemic, Pakistan's inward FDI flows increased by 9pc in the first half of 2020 on a year-on-year basis.

The greater resilience of FDI inflows into Pakistan in the face of Covid-19-related shocks is in stark contrast to the general picture globally and in Pakistan's regional neighbours, including key Commonwealth comparator countries in Asia. Overall FDI inflows into Asia declined by 12pc in the first half of 2020 compared with the same six-month average for 2019. In contrast, Pakistan has bucked the trend.

The greater resilience of inward FDI in Pakistan is because of the central role of Chinese investment in the country through the Belt and Road Initiative

The greater resilience of inward FDI in Pakistan may be due to the central role of Chinese investment in the country through the Belt and Road Initiative (BRI) and the China-Pakistan Economic Corridor (CPEC). Pakistan is the largest recipient of FDI under the BRI. FDI linked to the BRI is likely to have been committed long in advance of the emergence of Covid-19 and seems more resilient to such external shocks given its focus on long-term infrastructure development projects. Moreover, it reflects the strength of China-Pakistan economic relations.

Although overall FDI flows into Pakistan have been resilient, greenfield investments into the country have taken a significant hit since the Covid-19 pandemic began. This is in line with the evidence globally where, according to UNCTAD, new greenfield investment announcements, along with cross-border mergers and acquisitions, declined by more than 50pc in the first few months of 2020. Covid-19 has created simultaneous supply, demand and policy shocks, affecting all aspects of FDI. As a result...