IT sector update: A Major Decline Witnessed in FDI

According to statistics released by the State Bank of Pakistan (SBP), $27.7 million inflow and $5.8 million outflows was registered in the information technology sector during July-June (2018-19). The net FDI remained at $21.9 million during this period.

Information Technology sector fetched $27.7 million Foreign Direct Investment (FDI) in June-July 2019 compared to $34.6 million in the corresponding period of last fiscal year, depicting a decline of around $7 million.

IT sector update: A Major Decline Witnessed in FDI

The overall communications sector comprising (telecommunication, information technology, and postal & courier services) registered negative $55.7 million net FDI with $263.2 million inflow and $318.9 million outflows.

Net FDI in software development remained at $7.9 million, with $8.1 million inflow and 0.2 million outflows. Hardware development received $2.3 million net FDI with $4.6 million inflow and $2.3 million outflows.

FDI inflows for IT services remained at $15 million and outflow at $3.3 million thus registering $11.7 million net FDI.

The net FDI in Pakistan has declined by 50 percent during the last fiscal year (July-June 2018-19) due to slowdown in China Pakistan Economic Corridor (CPEC) inflows. According to State Bank of Pakistan, the country has fetched FDI amounted to $1.737 billion in July-June FY19 compared to $3.471 billion in the same period of FY18, depicting a decline of 50 percent or $1.734 billion.

The drop was more pronounced in power and telecommunications, which were previously the flagship of the CPEC and key recipient of FDI. The power sector, which remained the single largest recipient of the CPEC-related FDI over the last few years, witnessed an outflow of $ 254 million during FY19. This was due to the repayment of an inter-company loan of around $530 million by a powerful entity to its parent company in October 2018.

In addition, some outflows from telecommunications also dragged down the overall investment during the last fiscal year. Telecom firms operating in Pakistan also made principal loan repayments to their parent companies abroad. The FDI posted a $77.6 million outflow from telecommunication.


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