Govt struggles to lure foreign investment.

Byline: S. KAMAL HAYDER KAZMI

International sources recorded that strategies of host countries have a significant influence on foreign investment decisions. Host countries can adopt strategies of stimulating foreign investment or they can restrict foreign participation in their economies in various ways. It is also recorded that host country strategies and policy pronouncements affect the perception of 'political risk' by transnational corporations (TNCs) and thereby the amount of investment of these companies.

In addition, host country strategies can be instrumental in channeling investment flows toward sectors considered to be of particular importance to the country's development. Given its fragile balance of payments (BoP) position and urgent need to increase industrial production, our country needs to significantly raise its mobilization of foreign resources. However, long-term official assistance will become increasingly scarce, while promoting large portfolio investments is not a proper policy option because of Pakistan's underdeveloped and narrow capital market. Significant increases in commercial borrowings are also not desirable. It is therefore crucial to accord high priority to foreign direct investment (FDI).

According to the State Bank of Pakistan (SBP), FDI coming into Pakistan plummeted by greater than half to $430.1 million in the first 5-month (July to November) of the current fiscal year FY2023. The inflows were recorded $884.9 million during the corresponding period a year ago. The statistics for November identified a similar drop, as FDI plunged 48 percent to $81.8 million from $158.4 million in the corresponding month previous year.

Experts identified that since the beginning of the year, the declining inflows reflect foreigners don't consider the country an attractive destination for investment at current amid economic and political unrest prevailing in Pakistan. Furthermore, a decline in FDI inflows could be challenging for the country, which is already faced with low foreign exchange reserves.

Statistics also showed that the worst signal is the poor foreign exchange reserves held through SBP, which has lost $11 billion in the last 12 months and now has $6.7 billion. The highest FDI inflows came from China during the July-November period, amounting to $102.5 million as against to $124.9 million in the corresponding period of last year. It is also recorded that China is the biggest trading partner of Pakistan and also...