Chinese Investments in Pakistan decreased by 29.27% in last 2 Years

ISLAMABAD, Pakistan: The Chinese Investments in Pakistan has decreased by 29.27 percent in last two Fiscal Years (FY2021-FY2022), the Senate was told on Friday.

In a written reply to a question by Senator Bahramand Khan Tangi, the Minister Incharge of the Prime Minister’s Office Chaudhry Salik Hussain shared the details of Chinese investment in Pakistan during the last two years FY 2021 and FY 2022 with the House.

The House was told that the Chinese Investments in Pakistan has decreased by 29.27 percent in last two years for various reasons as follow;

• COVID-19 outbreak caused a sharp decline in global economic, activity. As majority of Chinese Investments fall under the CPEC ambit, the economic disruptions and social restrictions caused by COVID-19 also impacted the pace of CPEC, thus impacting the overall Net foreign direct investment (FDI).
• The decrease in Chinese investments in the last two years is mainly due to the conclusion of CPEC Phase-I which has overall impacted the outlay of Chinese investments in Pakistan. Most of the early harvest projects under the first phase of CPEC relating to power and infrastructure have completed and CPEC is now set to enter the second phase which focuses on Industrial Cooperation which is a long-term endeavour and dependent on industrialization through industrial relocation from China, particularly in the Special Economic Zones (SEZs).
• However, it’s very encouraging that with the operationalization of most of the SEZs in the past two years, and increase in investor interest to establish industry therein, besides other investors many Chinese origin companies have entered SEZs as enterprises thereby committing realization of investment within two years, as is stipulated in the SEZ Law.
• The decrease in Chinese investments in the last two years is also due to decrease in the FDI Inflows in the manufacturing sector; Electrical Machinery (-73.96 percent) and Rubber and Rubber Products (-44.73 percent) being the top two sectors with major decline. It may be noted that due to COVID-19, the manufacturing sector has been affected globally.
• To capitalize on the economic commonalities between the two Countries, the focused three-year rolling strategy is under development to connect the industrial potential of Pakistan with the Chinese counterpart. Within the framework of three-year rolling strategy, the Board of Investment’s (BOI) role is to attract efficiency seeking foreign investments that will help in knowledge, transfer and export promotion.

Despite all the aforementioned facts, the Country-wise FDI data confirms that China has the largest share of foreign investment in Pakistan.

The details of FDI trends of Pakistan with respect to China as received from the State Bank of Pakistan (SBP);

The details of sector-wise Chinese Investment of top five sectors during the last two years are A as per the SBP data;