Pakistan’s FDI dilemma: Challenges and the way forward

[GlobalVillageSpace]

Global Village Space


Foreign Direct Investment (FDI) is one of the key drivers of economic growth in developing economies as it brings much-required financial and knowledge capital to these upcoming markets. Pakistan receives one of the FDI among emerging markets and developing economies.


According to the State Bank’s Annual Report 2019 – 2020 on State of the Economy, Pakistan received US$ 2.6 and 1.4 billion as FDI in 2020 and 2019 respectively (The 9-month figure for July to March 2021 was $1.4 billion). It includes CPEC related investments and licenses renewal fees from telecom companies during 2020.



In comparison, according to World Bank data for 2019, countries like Myanmar (US$ 2.3 billion), Cambodia (US$ 4 billion), Malaysia (US$ 7.7 billion) Egypt (US$ 9 billion), and Vietnam (US$ 16 billion) fared better than us. India received almost US$ 50 billion as FDI in 2019.


This is despite the fact that we have a fairly liberal investment regime, strong domestic market, improved security environment, and international image. If we look at the FDI numbers over the last decade, the picture doesn’t look attractive either, although we have experienced brief phases of decent economic growth after every few years. So the question arises, what prevents international institutional investors from coming into Pakistan?


Foreign Direct Investment (FDI) is one of the key drivers of economic growth in developing economies as it brings much-required financial and knowledge capital to these upcoming markets. Pakistan receives one of the FDI among emerging markets and developing economies.


Read full article: Pakistan’s FDI dilemma: Challenges and the way forward

 

[nahtanbob]

I thought CPEC was $62 billion spread out over 7 years
Isn't a good part of CPEC FDI ??

 

[HostileInsurgent]

Global Village Space


Foreign Direct Investment (FDI) is one of the key drivers of economic growth in developing economies as it brings much-required financial and knowledge capital to these upcoming markets. Pakistan receives one of the FDI among emerging markets and developing economies.


According to the State Bank’s Annual Report 2019 – 2020 on State of the Economy, Pakistan received US$ 2.6 and 1.4 billion as FDI in 2020 and 2019 respectively (The 9-month figure for July to March 2021 was $1.4 billion). It includes CPEC related investments and licenses renewal fees from telecom companies during 2020.



In comparison, according to World Bank data for 2019, countries like Myanmar (US$ 2.3 billion), Cambodia (US$ 4 billion), Malaysia (US$ 7.7 billion) Egypt (US$ 9 billion), and Vietnam (US$ 16 billion) fared better than us. India received almost US$ 50 billion as FDI in 2019.


This is despite the fact that we have a fairly liberal investment regime, strong domestic market, improved security environment, and international image. If we look at the FDI numbers over the last decade, the picture doesn’t look attractive either, although we have experienced brief phases of decent economic growth after every few years. So the question arises, what prevents international institutional investors from coming into Pakistan?


Foreign Direct Investment (FDI) is one of the key drivers of economic growth in developing economies as it brings much-required financial and knowledge capital to these upcoming markets. Pakistan receives one of the FDI among emerging markets and developing economies.


Read full article:Pakistan’s FDI dilemma: Challenges and the way forward

India recorded highest ever FDI inflow of over $81 billion in FY21

The boost in FDI inflow in FY21 comes in the backdrop of a series of policy steps taken to improve ease of doing business and to attract investments into domestic manufacturing capacity and an ambitious infrastructure project pipeline.

www.hindustantimes.com

This will only grow as our startups and MSMEs are booming, this year alone we produced more than a dozen Unicorns and dozens of soonicorns and a lot money is being raised by them. Plus Reliance and various other big companies are planning big in India. Good days ahead!


Plus FATF GreyList is the reason why FDI is not coming to Pakistan and what is coming is coming from China, so to get FDI ya’ll need to come out of greylist.

 

[Desprado]

India recorded highest ever FDI inflow of over $81 billion in FY21

The boost in FDI inflow in FY21 comes in the backdrop of a series of policy steps taken to improve ease of doing business and to attract investments into domestic manufacturing capacity and an ambitious infrastructure project pipeline.

www.hindustantimes.com

This will only grow as our startups and MSMEs are booming, this year alone we produced more than a dozen Unicorns and dozens of soonicorns and a lot money is being raised by them. Plus Reliance and various other big companies are planning big in India. Good days ahead!


Plus FATF GreyList is the reason why FDI is not coming to Pakistan and what is coming is coming from China, so to get FDI ya’ll need to come out of greylist.

In 2014 Pakistan was in FATF grey list as well so that is not an excuse plus PTI has only excuse.

To get to good FDI, the main back bone of it is to get stable PKR because when someones invest it needs confidence in the local currency, which has not been seen since 2018.

 

[Mk-313]

In 2014 Pakistan was in FATF grey list as well so that is not an excuse plus PTI has only excuse.

To get to good FDI, the main back bone of it is to get stable PKR because when someones invest it needs confidence in the local currency, which has not been seen since 2018.

No, not necessarily. FDI is heavily dependent on security of investment, market cap, and consumer demand.

No one wants to invest in infrastructure if it means there’s a chance the building/infrastructure can get blown up. Workers in the said invested company can get kidnapped. Shooting etc etc. the point is investor won’t pour money into your country if there is a slight risk on instability when the competing emerging market doesn’t pose that risk

2. whatever venture a foreign investor picks must have substantial demand for it and a growing customer for his venture. This is mostly gauged by gdp growth every year. But when you start having instances where 1 year gdp is positive next year gdp goes into negative. Some year the growth is less or more . It shows an inconsistent Image of the consumer base and may dissuade FDI to be spent

If ur currency goes down it’s true that the price of the product will go up if it uses imported material but likewise the salaries of the workers will go down as well so some sort of equilibrium is still established and won’t affect as much

At the end of the day the investor wants a profit on his investment and keep his orignal investment safe. Any factors that jeopardizes that will spook them and get the money flowing into the next country which shows a better return and safe investment

 

[HostileInsurgent]

In 2014 Pakistan was in FATF grey list as well so that is not an excuse plus PTI has only excuse.

To get to good FDI, the main back bone of it is to get stable PKR because when someones invest it needs confidence in the local currency, which has not been seen since 2018.

Indian currency is no good, in India businesses were promoted by BJP government as soon as they came to power, compared to Congress era socialism, that‘s why a lot of investment proposals is coming to India apart from FDI, Pakistan needs a pro business and pro money government then only it can help as I saw the highest valued startup in Pakistan is Zameen.com at 29.5 million dollars as per this source:

The Most Well Funded Tech Startups in Pakistan (Updated 2022)

Considering that, I decided to look at some of the most well-funded startups in Pakistan and how much money they have raised. In this post, I highlight the 7

techshaw.com

While India‘s most valued startup is Byju’s an edtech company at 16.6 billion dollars which is more than 500 times Zameen.com, and India’s startup ecosystem is 3rd largest in the world after USA and China so it’s is obvious that India will attract a lot of FDI.

Hence Pakistan should emphasise on businesses to attract FDI.

 

[_NOBODY_]

Indian currency is no good, in India businesses were promoted by BJP government as soon as they came to power, compared to Congress era socialism, that‘s why a lot of investment proposals is coming to India apart from FDI, Pakistan needs a pro business and pro money government then only it can help as I saw the highest valued startup in Pakistan is Zameen.com at 29.5 million dollars as per this source:

The Most Well Funded Tech Startups in Pakistan (Updated 2022)

Considering that, I decided to look at some of the most well-funded startups in Pakistan and how much money they have raised. In this post, I highlight the 7

techshaw.com

While India‘s most valued startup is Byju’s an edtech company at 16.6 billion dollars which is more than 500 times Zameen.com, and India’s startup ecosystem is 3rd largest in the world after USA and China so it’s is obvious that India will attract a lot of FDI.

Hence Pakistan should emphasise on businesses to attract FDI.

Pakistan's highest valued startup is Daraz, it was bought by Alibaba in 2018 for around $200 million.

 

[HostileInsurgent]

Pakistan's highest valued startup is Daraz, it was bought by Alibaba in 2018 for around $200 million.

Even I thought the source was not good but other websites were not loading, anyways the simple solution is a pro business economy.

 

[_NOBODY_]

Even I thought the source was not good but other websites were not loading, anyways the simple solution is a pro business economy.

Strongly agree, I also plan on founding my own startup in the future. I am currently studying computer science.

 

[HostileInsurgent]

Strongly agree, I also plan on founding my own startup in the future. I currently studying computer science.

Problem Indian startups face is lack of funding, and innovation as only a few are tech based, most go to BPO etc. In India there are decent number of Incubators. What’s the scene in ?

 

[Mav3rick]

I thought CPEC was $62 billion spread out over 7 years
Isn't a good part of CPEC FDI ??

Evidently not.

There are surprises which have been hidden in the fine print of CPEC sweets that have been spread around for years such as bringing in Chinese manpower instead of using local resources and thus increasing employment, direct investment of Billions by GoP and indirect investment (security, raising of dedicated units) etc.

I am still optimistic that CPEC will eventually produce results in our favour. However, I was, and still am, also optimistic about IPI (Iran, Pakistan & India Gas Pipeline).......

Problem Indian startups face is lack of funding, and innovation as only a few are tech based, most go to BPO etc. In India there are decent number of Incubators. What’s the scene in ?

It's slow but gradually increasing.

 

[HostileInsurgent]

I thought CPEC was $62 billion spread out over 7 years
Isn't a good part of CPEC FDI ??

FDI is not what you may think, if I invest 1 billion dollars in Pakistan from India for setting up a smartphone factory then it will not be counted as FDI, FDI will mean when I acquire a stake in a Pakistani company for 1 billion dollars. So CPEC related investments are not counted in FDI afaik.

 

[Mk-313]

FDI is not what you may think, if I invest 1 billion dollars in Pakistan from India for setting up a smartphone factory then it will not be counted as FDI, FDI will mean when I acquire a stake in a Pakistani company for 1 billion dollars. So CPEC related investments are not counted in FDI afaik.

Thats not true. FDI means foreign investment. In investment you trade your investment for equity. The money that the foreign entity invested does not have to be paid back so the new money stays in the country

Therefore if I want to build a smart phone factory . Whatever dollars I brought in was traded for the land ... steel.:: windows etc. so there is a net inflow of dollars into the country. And that will be counted as FDI

CPEC is designed as a loan. The dollars the CPEC will bring in to “invest” have to be paid Back in the exact amount. So there is no net inflow of dollars into the country. Therefore it doesn’t count as FDI

 

[_NOBODY_]

Problem Indian startups face is lack of funding, and innovation as only a few are tech based, most go to BPO etc. In India there are decent number of Incubators. What’s the scene in ?

I am not much familiar with the business incubator scene in Pakistan but I know two huge incubators called Extreme Commerce and Enablers. Sunny Ali, founder of Extreme Commerce is currently considered a folk hero in Pakistan and has a lot of fans in India as well. Saqib Azhar, founder of Enablers is also seen as a folk hero by many Pakistani entrepreneurs. Both of them have very active groups on Facebook, you should check them out.

Enablers | Amazon FBA Trainings, eCommerce Boot Camps, Courses in Pakistan

Enablers is Pakistan's Largest eCommerce Platform - Build Amazon Business, be expert International Online Seller with Enablers providing Best Digital Marketing, Skills Development Courses from the industry-leading expert trainers.

www.enablers.org

Enablers | Facebook (Page)
eCommerce by Enablers | Facebook (Group)

https://ec.com.pk/
Extreme Commerce | Facebook (Page)
Extreme Commerce by Sunny Ali | Facebook (Group)

 

[_NOBODY_]

The startup boom in Pakistan
Usman Hanif | July 06, 2021
Startups receive $85 million in venture capital funding this year

Fintech companies have received about a fourth of the total venture capital investment in the past six months.

KARACHI: Record levels of funding are pouring into Pakistan-based startups, boosting hopes for a brighter economic outlook for the world’s fifth-most populous country.

Startups have received $85 million in venture capital (VC) funding so far this year, outpacing the $66 million raised in 2020, and venture firms continue to build their war chest.

“A surge in venture capital investment in 2021 augurs well for innovation in the country,” said HBL COO Sagheer Mufti while talking to The Express Tribune.

“In particular, the focus on fintech and partnerships with banks provide immense opportunity for driving consumer choice and ease, employment, financial inclusion and economic growth. HBL’s investment in Finja was in this spirit,” he added.

Fintech companies have received about a fourth of the total VC investment so far this year. They are finding plenty of overseas investors eager to tap the world’s third-largest unbanked population in what is being called a “fintech revolution”.

In Pakistan, 71% of adults do not have a bank account, one of the highest rates in the world.

Islamabad-based fintech SadaPay raised $7.2 million - reportedly the largest seed round ever in the country - for a personal debit card and e-wallet that still awaits regulatory approval.

Trading app KTrade - dubbed the “Robinhood of Pakistan” - raised $4.5 million after amassing 200,000 users since its launch in 2019.

US-based mega-firm Kleiner Perkins made its first investment in the country - a $17 million round for Tajir, a B2B marketplace based in Lahore that enables small business owners to buy from manufacturers and wholesalers.

Another B2B marketplace, Bazaar, raised $6.5 million in seed capital. Abhi raised $2.1 million for its early wage access platform and is headed to Y-Combinator (along with TAG).

There is plenty of action in other sectors as well.

“The news of Pakistani tech startups receiving foreign funding is certainly a cause for celebration and marks the hopeful onset of brighter horizons owing to our massive population; we have incredible potential for growth within us,” said SI Global CEO Noman Ahmed Said while talking to The Express Tribune.

Fintech - an amalgamation of finance and technology to enhance and automate financial processes, in particular - has brought in a significant chunk of this funding.

“Pakistan’s fintech wave is just starting,” remarked TAG Innovation Founder and CEO Talal Gondal as the Islamabad-based startup announced $5.5 million in seed funding to become the country’s first digital bank.

During the recent Pakistan Startup Cup - Pakistan’s largest startup competition, an app for moms called “Scaryammi” took home the grand prize. Second place went to a building visualisation company, ‘mimAR’, and third went to an AI-based career counselling tool for high-school students called ‘MeraFuture’.

All the momentum led investor Khailee Ng to conclude earlier this year, “There will be unicorns from Pakistan”.

“With this newfound funding, we must collectively focus on bringing Pakistan at par with the Western world,” added Said. “There is absolutely no doubt that Pakistan is positively brimming with talent.”

He was of the view that as leading professionals in the tech world, it was up to them to revolutionise Pakistan’s technological landscape by honing this talent, guiding and shaping it.

“This work should begin at the university level; final projects and thesis submission should focus on upbringing creativity and new ideas that may be brought to life with support from the likes of us,” the CEO added.

The tech expert stated that IT manufacturing, in particular, should be an area of focus and encouraged by local education boards so that locally manufactured products may begin to be employed.

“Pakistan faces a severe shortage in terms of tech manufacturing and hence, it is important to maintain international standards of quality,” he emphasised.

While giving suggestions, he said that the government and State Bank of Pakistan could also encourage IT manufacturing initiatives by handing grants to the deserving projects and supporting technology companies in their efforts.

Exports of information and communication technology (ICT) and telecommunication services from Pakistan grew by an astounding 46% in the first 10 months of 2020-21 compared to the same period of last fiscal year.

“Pakistan is set to make about $2 billion from its IT exports,” he said, adding that this was also due to the facilitation and keen interest of the government in the expansion of this sector.

In comparison, India witnessed the highest-ever exports in the first quarter of financial year 2021-22 and recorded over $50 billion in tech exports. It was the world’s second-largest exporter, he said. “Keeping these statistics in mind, we must rise to the challenge and work on expansion so that we too become prominent in the tech world,” he said.

@HostileInsurgent @Goenitz