Anjum Nisar says foreign remittances flows crucial to support account balance

ISLAMABAD, APR 28: The Federation of Pakistan Chambers of Commerce and Industry’s Businessmen Panel (BMP) has said that with energy cost continuing to escalate, the new investment challenges keeping on burdening the already weak economic landscape in the country, as the inflows of Foreign Direct Investment (FDI) in the country has declined by 10 percent during the first nine months of this fiscal year while inflow of overseas workers’ remittances have clocked in at $2.25 billion in Feb 2024, 6.2% lower on a month-on-month basis.

The BMP Chairman and FPCCI former president Mian Anjum Nisar asked the government to take concrete steps to attract foreign investment, as the foreign remittances flows are crucial which can support the country’s account balance amidst low volumes of foreign direct investment and nominal growth of exports.

Overseas Pakistanis living in Gulf should further be motivated to maintain an upward momentum in remittances, as they contributed more than 60 percent of the total inflows during last couple of months.

The State Bank of Pakistan reported that the country fetched FDI amounting to $1.1 billion during July-March of FY24 compared to $1.216 billion in the same period of last fiscal year (FY23), depicting a decline of $118 million. During the period under review, FDI inflows were $1.959 billion against $860 million.

Month-on-month basis, net foreign direct investment settled at $258 million in March 2024, compared to $170 million during March 2023. The FDI inflows in March 2024 are highest since June 2022.

During the first nine months of this fiscal year, portfolio investment was $65 million compared to an outflow of $4.4 million.

During the period under review, the country’s total foreign investment surged by 525 percent. The country attracted foreign investment amounting to $1.264 billion in July-March of FY24 up from $202 million in corresponding period of last fiscal year.

FPCCI former president observed that the focus should be on streamlining the long-standing structural bottlenecks in the investment climate such as streamlining the FDI approval process. At the same time, stability in the country’s economic and political scenario is critical for any resurgence of investment in the country. Mian Anjum said that that with a view to save the economy the government should announce special incentives for a cash-strapped SMEs, which represents more than 90 percent of around 3.2 million business enterprises in Pakistan, contributing 40 percent to the GDP, employing more than 80 percent of non-agricultural workforce, and generating 25 percent of export earnings.

He, expressing dissatisfaction over the financial packages, called for a significant cut in import duties and waiver of sales tax, income tax and additional income taxes which are still being charged in this time of grave economic crisis. He said that other factors have been the holding back of profits and dividends of the MNCs to control dollar outflow, which has left scared away foreign investors tremendously as they see the existing foreign investors unable to repatriate their earnings to their home countries.

Data shows that the FDI outflows have remained between $650 and $750 million when outflows increased specifically from the telecom sector. Moreover, the FDI from China, which continues to be the largest investor in the country particularly in the power sector, has also come down over these years along with rise in FDI outflows.

The BMP chairman said that China has been the leading investor in Pakistan for few years and was a major contributor to the increase in the size of FDI. However, the outgoing fiscal FY24 may drag down the inflows from elsewhere due to slowdown of economies in the developed countries, he warned. He said that Pakistan has remained a potential market for foreign investors, who still have plans to make fresh investment in the country, but they have continued to wait for the return of economic stability. He highlighted uncertainty in the rupee-dollar parity as one of the major concerns of foreign investors. He said a slowdown in the economy had badly impacted business confidence. It is must for the authorities concerned to first create an enabling environment for the local businessmen desiring to make new investment. He advocated the need for raising the country’s tax base so that tax-to-GDP ratio improves from current poor level. He urged the trade officers to explore opportunities to diversify exports of goods and services in their respective areas, asking them to meet the challenges faced by Pakistan in European markets. He also suggested the ministry to devise strategies for promotion of Pakistani products, calling upon trade officers to take advantage of opportunities offered by China-Pakistan Economic Corridor (CPEC). He said that previously, foreign investors mostly poured money into the sectors which did not pose a risk to their profit margins due to rupee depreciation such as the power sector. It is hoped that Pakistan’s economy will now gain growth momentum, which should encourage foreign investors to invest in new projects, he added.