Pakistan Economy

Foreign Investment

Year wise Foreign Investment inflows in Pakistan

Country wise Foreign Investment Inflows

Country wise FDI inflows

Sector wise FDI inflows

Foreign Investment inflows in Pakistan ($ Million)

Year GreenFieldInvestment

PrivatisationProceeds

Total FDI Private

PortfolioInvestment

2001-02  357.00 128.00 485.00 -10.00

2002-03  622.00 176.00 798.00 22.00

2003-04  750.00 199.00 949.00 -28.00

2004-05  1,161.00 363.00 1,524.00 153.00

2005-06  1,981.00 1,540.00 3,521.00 351.00

2006-07  4,873.20 266.40 5,139.60 1,820.00

2007-08 5,276.60 133.20 5,409.80 19.30

2008-09 3,719.90 0.00 3,719.90 -510.30

2009-10 2,150.80 0.00 2,150.80 587.90

2010-11 (Jul-Jan.,) 947.00 0.00 947.00 -

Total  21,838.50 2,805.60 24,644.10 2,404.90

Note: Pakistan’s Fiscal Year runs from 1st July till 30th June.

Direct and Portfolio Investment ($ Million)

Country 2009-2010 (July-Jan) 2010-2011 (July-Jan)

Direct Portfolio

Total Direct Portfolio

TotalPrivate Public Private Public

USA 248.4 240.6   489.0 142.9 220.1   363.0UK 121.7 45.6   167.3 127.6 36.0   163.6Netherlands 176.4 0.9   177.3 -15.5 4.9   -10.6UAE 122.0 -1.5   120.5 158.3 -0.6   157.7Switzerland 60.5 3.0   63.5 23.3 24.7   48.0Singapore 50.5 1.3   51.8 55.2 0.1   55.3Hongkong -56.4 10.8   -45.6 91.8 10.0   101.8Caymen Island 47.3     47.3 51.3 0.6   51.9Germany 38.0 -0.5   37.5 9.1 -1.6   7.5Luxembourg 1.5 15.0   16.5 3.2 23.2   26.4France 3.2     3.2 2.9     2.9Australia 34.6 -1.1   33.5 9.0 -2.3   6.7Japan 11.2 0.6   11.8 1.1     1.1Bahmas 9.2     9.2 3.6     3.6Mauritius -26.5     -26.5 95.5 3.0   98.5Kuwait -4.5     -4.5 20.8 -0.1   20.7Bahrain 5.3     5.3 -7.7     -7.7Saudi Arabia -2.0     -2.0 5.9 0.1   6.0

Other  287.6 14.8   302.4 168.7 -13.9   154.8Debt Securities     -638.6 -638.6     -69.4GDRs              Total 1,128.0 329.5 -638.6 818.9 947.0 304.2 -69.4 1,181.8

Source : State Bank of Pakistan16.0% decrease in FDI Including Privatisation Proceeds as compared to July-January 2009-10.

Note: Pakistan’s Fiscal Year runs from 1st July till 30th June.

Country Wise FDI Inflows ($ Million)

Country 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-102009-10(Jul-Jan)

USA 92.7 326.4 211.5 238.4 325.9 516.7 913.1 1,309.3 869.9 468.3 248.4UK 90.5 30.3 219.4 64.6 181.5 244.0 860.1 460.2 263.4 294.6 121.7U.A.E 5.2 21.5 119.7 134.6 367.5 1,424.5 661.5 589.2 178.1 242.7 122.0Japan 9.1 6.4 14.1 15.1 45.2 57.0 64.4 131.2 74.3 26.8 11.2Hong Kong 3.6 2.8 5.6 6.3 32.3 24.0 32.6 339.8 156.1 9.9 (56.4)Switzerland 3.6 7.4 3.1 205.3 137.5 170.6 174.7 169.3 227.3 170.6 60.5Saudi Arabia 56.6 1.3 43.5 7.2 18.4 277.8 103.5 46.2 (92.3) (133.8) (2.0)Germany 15.5 11.2 3.7 7.0 13.1 28.6 78.9 69.6 76.9 53.0 38.0Korea (South) 3.7 0.4 0.2 1.0 1.4 1.6 1.5 1.2 2.3 2.3 1.4Norway

41.90.1 0.3 146.6 31.4 252.6 25.1 274.9 101.1 0.4 0.6

China 0.3 3.0 14.3 0.4 1.7 712.0 13.7 (101.4) (3.6) (8.3)Others 76.6 173.9 108.6 369.3 521.9 1,512.2 2,005.2 1,964.2 1,019.6 590.9

Total  including Pvt. Proceeds

322.4 484.7 798.0 949.0 1523.9 3521.0 5139.6 5409.8 3719.9 2150.8 1128.0

Privatisation Proceeds

- 127.4 176.0 198.8 363.0 1540.3 266.4 133.2 0.0 0.0 0.0

FDI Excluding Pvt. Proceeds

322.4 357.3 622.0 750.2 1,160.9 1,980.7 4,873.2 5,276.6 3,719.9 2,150.8 1,128.0

16.0% decrease in FDI Including Privatisation Proceeds as compared to July-January 2009-10.

Note: Pakistan’s Fiscal Year runs from 1st July till 30th June.

Sector Wise FDI Inflows ($ Million)

Sector 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-102009-10(Jul-Jan)

Oil & Gas  80.7 268.2 186.8 202.4 193.8 312.7 545.1 634.8 775.0 740.6 333.7Financial Business (34.9) 3.6 207.4 242.1 269.4 329.2 930.3 1,864.9 707.4 163.0 94.5Textiles 4.6 18.5 26.1 35.4 39.3 47.0 59.4 30.1 36.9 27.8 13.5Trade 13.2 34.2 39.1 35.6 52.1 118.0 172.1 175.9 166.6 117.0 49.3Construction 12.5 12.8 17.6 32.0 42.7 89.5 157.1 89.0 93.4 101.6 63.2Power 39.9 36.4 32.8 (14.2) 73.4 320.6 193.4 70.3 130.6 (120.6) 56.7Chemical 20.3 10.6 86.1 15.3 51.0 62.9 46.1 79.3 74.3 112.1 69.9Transport 45.2 21.4 87.4 8.8 10.6 18.4 30.2 74.2 93.2 132.0 63.6

Communication(IT&Telecom)

NA 12.8 24.3 221.9 517.6 1,937.7 1,898.7 1,626.8 879.1 291.0 111.8

Others 140.9 66.2 90.4 170.1 274.0 285.0 1,107.2 764.5 763.4 586.3 271.8

Total including Pvt. Proceeds

322.4 484.7 798.0 949.4 1,523.9 3,521.0 5,139.6 5,409.8 3,719.9 2,150.8 1,128.0

Privatisation Proceeds

- 127.4 176.0 198.8 363.0 1,540.3 266.4 133.2 0.0 0.0 0.0

FDI ExcludingPvt. Proceeds

322.4 357.3 622.0 750.6 1160.9 1980.7 4873.2 5,276.6 3,719.9 2,150.8 1,128.0

3 Year Moving Total     1605.1 2232.1 3271.3 5994.3 10184.5 14070.4 14269.3 11,280.5  3 Year Moving Average     535.0 744.0 1090.4 1998.1 3394.8 4690.1 4756.4 3760.2  5 Year Moving Total         4078.4 7277.0 11931.9 16543.7 19314.2 19941.1  5 Year Moving Average         815.7 1455.4 2386.4 3308.7 3862.8 3988.2  16.0% decrease in FDI Including Privatisation Proceeds as compared to July-January 2009-10.

Note: Pakistan’s Fiscal Year runs from 1st July till 30th June.

Investment

Foreign direct investment (FDI) in Pakistan soared by 180.6 per cent year-on-year to US$2.22 billion and

portfolio investment by 276 per cent to $407.4 million during the first nine months of fiscal year 2006,

the State Bank of Pakistan (SBP) reported on April 24. During July-March 2005-06, FDI year-on-year

increased to $2.224 billion from only $792.6 million and portfolio investment to $407.4 million, whereas it

was $108.1 million in the corresponding period last year, according to the latest statistics released by the

State Bank. Pakistan has achieved FDI of almost $7 billion in the financial year 06/07, surpassing the

government target of $4 billion.

Pakistan is now the most investment-friendly nation in South Asia. Business regulations have been

profoundly overhauled along liberal lines, especially since 1999. Most barriers to the flow of capital and

international direct investment have been removed. Foreign investors do not face any restrictions on the

inflow of capital, and investment of up to 100% of equity participation is allowed in most sectors (local

partners must be brought in within 5 years and contribute up to 40% of the equity in the services and

agriculture sectors). Unlimited remittance of profits, dividends, service fees or capital is now the rule.

Business regulations are now among the most liberal in the region. This was confirmed by a World Bank

report published in late 2006 ranking Pakistan (at 74th) well ahead of neighbors like China (at 93rd) and

India (at 134th) based on ease of doing business.

Pakistan is attracting an increasingly large amount of private equity and was the ranked as number 20 in

the world based on the amount of private equity entering the nation. Pakistan has been able to attract a

large portion of the global private equity investments because of economic reforms initiated in 2003 that

have provided foreign investors with greater assurances for the stability of the nation and their ability to

repatriate invested funds in the future.

Tariffs have been reduced to an average rate of 16%, with a maximum of 25% (except for the car

industry). The privatisation process, which started in the early 1990s, has gained momentum, with most of

the banking system privately owned, and the oil sector targeted to be the next big privatisation operation.

The recent improvements in the economy and the business environment have been recognised by

international rating agencies such as Moody’s and Standard and Poor’s (country risk upgrade at the end

of 2003).

Foreign Direct Investment (FDI) in Pakistan BY 

MASOOD

 – JUNE 3, 2010POSTED IN: INVESTMENT IN PAKISTAN, M&M SERVICES

Foreign direct investment (FDI) refers to long term participation by  a country A into country B (in this

case Pakistan) . It usually involves participation in management, joint-venture, transfer of technology

and expertise. There are two types of FDI: inward foreign direct investment and outward foreign direct

investment, resulting in a net FDI inflow (positive or negative).

Foreign direct investment (FDI) is a measure of foreign ownership of productive assets, such as

factories, mines and land. Increasing foreign investment can be used as one measure of growing

economic globalization.

WHO CAN BE A FOREIGN INVESTOR?

A foreign direct investor may be classified in any sector of the economy and could be any one of the

following:

An individual;

A group of related individuals;

An incorporated or unincorporated entity;

A public company or private company;

A group of related enterprises;

A government body;

An estate (law), trust or other societal organisation; or

Any combination of the above.

HOW CAN A FOREIGN INVESTOR INVEST HIS FUNDS?

The foreign direct investor may invest in by any of the following methods in Pakistan:

by incorporating a wholly owned subsidiary or company, by acquiring shares in an associated

enterprise

through a merger or an acquisition of an unrelated enterprise

participating in an equity joint venture with another investor or enterprise

WHAT WOULD BE SOME OF THE BASIC REQUIREMENTS FOR COMPANIES CONSIDERING A

FOREIGN INVESTMENT?

Depending on the industry sector and type of business, a foreign direct investment may be an

attractive and viable option. With rapid globalization of many industries and vertical integration rapidly

taking place on a global level, at a minimum a firm needs to keep abreast of global trends in their

industry. From a competitive standpoint, it is important to be aware of whether a company’s

competitors are expanding into a foreign market and how they are doing that. At the same time, it also

becomes important to monitor how globalization is affecting domestic clients. Often, it becomes

imperative to follow the expansion of key clients overseas if an active business relationship is to be

maintained.

New market access is also another major reason to invest in a foreign country. At some stage, export

of product or service reaches a critical mass of amount and cost where foreign production or location

begins to be more cost effective. Any decision on investing is thus a combination of a number of key

factors including:

assessment of internal resources, 

competitiveness, 

market analysis 

market expectations. 

WHY INVEST IN PAKISTAN?

Pakistan over the last few years has developed itself as a potential market for foreign investors with its

liberal investment policy, cheap labour, tax incentives and good return on investments. Following table

demonstrates the FDI in Pakistan over the last decade.

Year GreenfieldInvestment

PrivatisationProceeds

Total FDI 

PrivatePortfolioInvestment

2001-02  357 128 485 -10

2002-03  622 176 798 22

2003-04  750 199 949 -28

2004-05  1,161 363 1,524.00 153

2005-06  1,981 1,540 3,521.00 351

2006-07  4,873.20 266 5,139.60 1,820

2007-08 5,019.60 133.2 5,152.80 19.3

2008-09 3,719.90 - 3,179.90 -510.3

Jul-Mar-10 1,553.9 - 1,553.9 378.6

Total  20,037.60 2,805.20 22,303.22,195.60

 

Note: Pakistan’s Fiscal Year runs from 1st July till 30th June.

WHAT ARE THE FOREIGN DIRECT INVESTMENT INCENTIVES IN PAKISTAN?

The simple answer is that making a direct foreign investment allows companies to accomplish several

tasks:

Avoiding foreign government pressure for local production. 

Circumventing trade barriers, hidden and otherwise. 

Making the move from domestic export sales to a locally-based national sales office. 

Capability to increase total production capacity. 

Opportunities for co-production, joint ventures with local partners, joint marketing arrangements,

licensing, etc;   

low corporate tax and income tax rates in Pakistan

tax concessions/exemptions to particular businesses

special economic zones developed by the government of pakistan

cheap labour in Pakistan

Job training & employment subsidies

Infrastructure subsidies

Research and Development support

Early Entry Advantage.

Pakistan has a very liberal policy on repatriation for foreign direct investors, therefore, investing in

Pakistan may give a foreign direct investors the following added advantages.

Remittance of royalty, technology and franchise fee is allowed to projects in social, service,

infrastructure, agriculture and international chains food franchise.

Minimum share of the local (Pakistani) partner in a joint venture will be 60:40 for the service

sector. However, 100% foreign equity can be owned for first 5 years.

The FBR (Federal Board of Revenue) will not question as to the source of investment; however, the

FBR will only want to know whether the investor has paid requisite Income Tax on that specific

investment. The FBR will not inquire into the source of the funds.

Foreign investors are allowed to invest in industrial project on 100% equity basis without any

permission from the government.

There is no requirement for a No Objection Certificate from the Provincial Government.

In addition to manufacturing sector foreign investment on a repatriate-able basis is allowed in

services, infrastructure and social sectors.

Full repatriation of capital gains, dividends and profits.

The facility for contracting foreign private loans is available to all those foreign investors who make

investment in the approved sectors.

Foreign controlled manufacturing concerns are allowed to borrow on the domestic market

according to their requirements.

Foreign controlled semi-manufacturing and non-manufacturing concerns can access loans equal to

@ 75% & 50%, respectively, of their paid up capital including reserves.

BOI’s (Board of Investment) approval is not required for foreign companies to open a bank

account.

 

INVESTMENT POLICY OF GOVERNMENT OF PAKISTAN

For the purposes of foreign investment in Pakistan, the Investment Policy of Pakistan has formed two

broad groupings i.e. manufacturing and non-manufacturing/ service sector. Salient features of the

Pakistan Investment Policy relating to the manufacturing and services sectors are as follows:

 

MANUFACTURING SECTOR

The entity must be a company incorporated under the Companies Ordinance, 1984.

100% foreign equity is permissible on the basis of repatriation of capital and profits (dividend).

The amount of foreign equity investment must not be less than US $ 0.3 million.

SERVICE SECTOR:

The entity must be a company incorporated under the Companies Ordinance, 1984.

The amount of foreign equity investment must not be less than US $ 0.15 million.

100% foreign equity is permissible on the basis of repatriation of capital and profits (dividend).

 NO GO AREAS (PROHIBITED AREAS)

Government of Pakistan prohibit the following areas for investment:

Arms and ammunition

High explosives

Radioactive substances

Security printing, currency and mint

Alcoholic beverages or liquor

 

CORPORATE STRUCTURES

Various Corporate structures are available for setting up a place of business in Pakistan for which

Masood and Masood, Corporate and Legal Consultants can give you the optimum advice putting into

prospective the current Pakistan Legislation and the individual person/companies position.

In terms of the Investment Policy of the Government of Pakistan, there are three (03) ways, whereby, a

foreign company may have its presence in Pakistan.

Liaison Office;

Branch Office; and

Locally incorporated subsidiary

HOW WILL MY FUNDS GET INTO PAKISTAN AND WHAT WILL BE THE EXIT STRATEGY.

State Bank of Pakistan (SBP) regulates remittances in and out of Pakistan under legislature. There is no

restriction on inward remittances by State Bank of Pakistan (SBP) but any outward remittances

whether be royalty, technical fee and dividend have to have a prior approval from SBP, which the

authorising bank/agent would do on the company’s behalf.  Similarly any contract for any such

remittance needs prior approval of SBP. In case you require any assistance with the approval from

State Bank of Pakistan do let Masood and Masood know and we will  happily complete all the legal

paper work and technical formalities.

WILL A FOREIGN INVESTOR BE TREATED LESS FAVOURABLY ON INVESTMENT IN PAKISTAN?

Foreign Private Investment (Promotion and Protection) Act, 1976 and the Furtherance and Protection of

Economic Reforms Act, 1992 provide legal cover for protection of foreign investors/investment in

Pakistan.

Furthermore, since Pakistan has entered into Bilateral Agreements on Promotion and Protection of

Investment with more than 46 countries. These Agreements provide the following:

The Contracting Parties shall encourage investments in their respective territories by investors of

the other Contracting Parties

Non-discrimination between local investors and foreign investors

Equal/non-discriminatory treatment in case of compensation for losses owing to war, other armed

conflicts or a state of national emergency

Free transfer of investments, and income deriving therefrom including profits, dividends, interest

income, proceeds of sales or liquidation, repayments of loans, salaries, wages and other

compensation, etc.

A dispute settlement mechanism to settle any dispute between the countries with respect to the

interpretation of the respective agreement and a dispute settlement procedure to settle any

dispute between a host country and an investor of the other country

·

DOES MASOOD AND MASOOD HAVE EXPERIENCE IN HANDLING FOREIGN CLIENTS?

Yes, we have successfully managed to assist many multinationals and foreign individuals to invest in

Pakistan and form a place of business to that effect.  Masood and Masood is currently dealing with

various foreign direct investment projects in Pakistan including, but not limited to, the following:

Real estate projects

Power projects

Oil and gas related projects

Development projects

Construction projects

IT related projects

Various manufacturing projects

Service related projects

Non-manufacturing projects

Health related projects

Cosmetics & toiletries related projects 

 DECISION TIME

You are confident that you want to invest in Pakistan or you want a pre investment feasibility report,

you know Masood and Masood, Corporate and Legal Consultants are the people to be called over.

Foreign Direct Investment in Pakistan

Posted by sam in Important Information on 05 19th, 2010 | no responses

Foreign direct investment (FDI) refers to long term participation by country A into country B. It usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward foreign direct investment and outward foreign direct investment, resulting in a net FDIinflow (positive or negative).

1. Oil and Gas:

Pakistan sought proposals from 10 investment banks to advice on a convertible bond sale of Oil & Gas Development Co., the largest stock on the country’s benchmark share index.

Inaugurating a two-day ‘Pakistan Exploration Promotion Conference 2009’, in Calgary, Alberta, Dr. Asim Hussein, Advisor to the Prime Minister on Petroleum & Natural Resources, said the country offers pretty oil & gas investment opportunities with liberal terms as well as a competitive fiscal regime.

Representatives of major oil & gas companies based in Calgary including Shell Canada, EnCana, SNC-Lavalin, Jura Energy etc participated in the conference.

Oil & Gas FDI in $ Million

2005-2006         312.7

2006-2007         545.1

2007-2008         634.8

2008-2009         775.0

Jul 09- Mar10     519.9

2. Financial Business:

A five member delegation from People’s Republic of China headed by Mr. Hui Jinsong of M/s Chengdu, He Hong Investment & Management Co. Ltd., China recently visited Board of Investment to discuss the investment opportunities available in Pakistan, especially in the financial sector. The delegates were informed that the new investment policy of Pakistan allows 100 per cent foreign equity in the major sectors and full repatriation of profits and dividends in all the sectors. Mr. Hui Jinsong appreciated the financial services sector of Pakistan as it has a lot of potential with trained personnel. Chinese companies are ready to make investments in Pakistan including the growing financial sector.

Financial Business FDI in $ Million

2005-2006         329.2

2006-2007         930.3

2007-2008         1,864.9

2008-2009         707.4

Jul 09- Mar10     118.7

3. Textile :

As the result of measures taken under vision 2005, the fiscal year 2002-03 witnessed tremendous inflow of FDI in textile sector in the coursework of last one year has reached to US$4 billion which has led to improvement in productivity, both in terms of quality & quantity, in yarn, fabrics, home textiles & clothes, besides generating over 300,000 new jobs. Foreign direct investment (FDI) in Pakistan’s textile & clothing sector declined in the coursework of the fiscal year 2008 ending June, partly due to political turmoil in the country.

The slump was blamed on increased costs of raw materials, shortage of energy, high inflation, shortage of expert manpower, together with political turmoil over the past seven months.

The country attracted US$30.1m in textile & clothing FDI in the coursework of the year, compared to US$59.4m in the coursework of the earlier year, according to the statistics released by the State Bank of Pakistan (SBP).

Textile FDI in $ Million

2005-2006         47.0

2006-2007         59.4

2007-2008         30.1

2008-2009         36.9

Jul 09- Mar10     18.1

4. Trade:

Accordingly during early 1980s, the government in Pakistan has initiated market-based economic reform policies. These reforms began to take hold in 1988, and since than the government have gradually liberalized its trade and investment regime by providing generous trade and fiscal incentives to foreign investors through number of tax concessions, credit facilities, and tariff reduction and have also eased foreign exchange controls. In the 1990s, the government further liberalized the policy and opened the sectors of agriculture, telecommunications, energy and insurance to FDI. But, due to rapid political changes and inconsistency in policies the level of FDI remained low compared to other developing countries.

Trade FDI in $ Million

2005-2006         118.0

2006-2007         172.1

2007-2008         175.9

2008-2009         166.6

Jul 09- Mar10     65.1

5. Construction:

Construction sector has also been a major recipient of foreign investment during this decade. Pakistan has started building new ports, highways, roads and bridges and oil-rich Middle East investors have ventured into real estate development and construction of housing units. But the average yearly inflow of FDI in construction,

however, fell nine per cent to $87 million during FY08 to FY10 (till March) from $96 million in earlier three years.

“This has happened mainly because the real estate price bubble burst in Dubai and elsewhere in the UAE,” explains an office-bearer of the Association of Builders and Developers.

Traditionally, the FDI inflows have come from the US and the UK, Saudi Arabia and the UAE, Norway, Switzerland and Germany and China, Japan and Hong Kong.

“But going forward Italy, Australia, Turkey, South Korea, Russia, Malaysia, Kuwait, Bahrain, Oman and Iran, or at least some of these countries, would be amongst our top foreign investors,” a BOI official said.

His optimism was based on the growing interest these countries have lately shown in investing in Pakistan’s economy.

“Foreigners are looking for investment opportunities not only in oil and gas, power generation, trade, transport, chemicals and construction sectors but also in agriculture and food processing, livestock and dairy development, freight forwarding, entertainment and retailing.”

Construction FDI in $ Million

2005-2006         89.5

2006-2007         157.1

2007-2008         89.0

2008-2009         93.4

Jul 09- Mar10     77.7

6. Power:

The three other sectors trade, transport and chemicals are now getting more of foreign investment than before. But the pace of FDI inflows in power generation has not picked up as yet.

Officials of Pakistan’s Board of Investment say there has been a shift in the FDI pattern which can be attributed to sectoral growth in line with the national requirements. While the origin-wise changes in inflows reflect how foreign investors

of some countries perceive business growth prospects in Pakistan and whether their own business plans fit into the fast-changing state-to-state relationships.

“For example, both Chinese and American investors are now out to make more investment in Pakistan as both countries have strategic stakes here,” said one official.

The dialogue between the US and Pakistan beginning this month is expected to hammer out details of likely US investment in the energy sector. The Asian Development Bank is also planning investment in this sector.

Power FDI in $ Million

2005-2006         320.6

2006-2007         193.4

2007-2008         70.3

2008-2009         130.6

Jul 09- Mar10     38.2

7. Chemical:

Foreign investment in chemicals averaged around $77 million a year during this period, up from $53 million per year in the earlier three years, showing an annual average growth rate of more than 45 per cent.

Foreign as well as local investments in chemical sector have increased over the years as production facilities of fertilizers, pesticides, caustic soda and soda ash and paints and varnishes continue to expand.

Chemical FDI in $ Million

2005-2006         312.7

2006-2007         545.1

2007-2008         634.8

2008-2009         775.0

Jul 09- Mar10     519.9

8. Transport:

With renewed focus to revamp its transport sector for sustainable economic growth, the country attracted FDI inflows at a faster pace. Average annual inflow quadrupled to $86 million for three years i.e. FY08-FY10 (till March) from below $20 million between FY05 and FY07.

Transport FDI in $ Million

2005-2006         18.4

2006-2007         30.2

2007-2008         74.2

2008-2009         93.2

Jul 09- Mar10     90.1

9. Communication (IT Telecom):

The post-recession trend also shows a gradual shift in investment choices while financial business, IT and telecom and oil and gas sectors continue to attract the bulk of FDI. Between FY08 and FY10 (till March) Pakistan received roughly $2.7 billion in financial business, almost as much in IT and telecom and $1.9 billion in oil and gas exploration and processing.

Communication (IT Telecom) FDI in $ Million

2005-2006         1,937.7

2006-2007         1,898.7

2007-2008         1,626.8

2008-2009         879.1

Jul 09- Mar10     171.0

10. Chemical:

According to official claims, the country is aiming to obtain US$7 billion in foreign direct investment within the current financial year. The government is planning road

shows in Middle East and Europe to inform investors of the many opportunities for investment in the country in manufacturing as well as infrastructure projects.

In this regard, the Privatization Commission has already published its priority list for the year 2007 sale-out. The inflow of foreign direct investment (FDI) also went up significantly during the first two months of the current fiscal year. During July-August 2006-07, FDI reached $375.4 million against $230.8 million during the corresponding period last year, showing a rise of 63 per cent.

Pakistan had received record FDI of about $ 1,540.3 million during 2005-06, including privatization proceeds. Experts believe that high portfolio investments would improve the country’s image abroad and the higher FDI is proof that the country has potential for foreign investment.

Comparative analysis

Of the FDI inflows to Pakistan in 2004-05 and 2005-06, the communication sector had the largest share with $517 million or 34 per cent. This was followed by financial business – 17.7 per cent, oil, gas and petrochemical – 14.3 per cent, power – 4.8 per cent, trade – 3.4 per cent, chemicals – 3.3 per cent and others – 22.5 per cent.

Recently, the government also established an Investors Relations Desk in the Ministry of Finance to keep foreign investors updated on Pakistan’s economy. As per their statistics, Pakistan exhibited an increase of 37.7 per cent in terms of total investment in the first two months of the current fiscal year against the same period last year.

Chemical FDI in $ Million

2005-2006         1,540.3

2006-2007         266.4

2007-2008         133.2

2008-2009         0.0

Jul 09- Mar10     0.0

11. Others sectors

Foreign investment on a reportable basis is now allowed in the Service, Infrastructure, Social and Agriculture Sectors subject to the conditions indicated against each. They

will have to simply register their company with Security Exchange Commission of Pakistan under the Companies Ordinance, 1984 and to inform the State Bank of Pakistan provided the relevant conditionality’s are fulfilled.

(a) Services Sector

FDI in Service Sector is allowed in any activity subject to condition that services which require prior permission/NOC or license from the concerned agencies will continue to get the same treatment until and unless de-regulated by such agencies and will be subject to provisions of respective sectoral policies.

(b) Infrastructure Sector

Infrastructure Projects, including the development of Industrial Zones. The amount of foreign equity investment in the company/project shall be at least US$ 0.3 million. 100% foreign equity is allowed on a reportable basis.

(c)Tourism

Tourism has been given the status of Industry in accordance with Ministry of Industries and Production Circular No. 1-129/99-INV-IV dated 2nd August, 1999. It has been placed under priority Industries i.e. Category “C” of the Investment Policy.