
Foreign Direct Investment
According to UNCTAD's 2022 World Investment Report, FDI inflows to Pakistan stood at USD 2.1 billion in 2021, stable compared to one year earlier. In the same period, the total stock of FDI reached USD 32.9 billion, around 9.5% of the country’s GDP. The financial sector is the primary recipient of FDI in Pakistan, followed by the chemicals industry and construction. In regards to countries, China is by far the biggest investor in Pakistan; however, recently, the United Kingdom, South Korea and Japan have stepped up their investments. According to the latest data released by the State Bank of Pakistan, the country attracted FDI amounting to USD 1.86 billion in FY 2022, resulting from USD 2.622 billion in inflows as against an outflow of USD 754.7 million. Despite dropping by 29% due to a slowdown in China-Pakistan Economic Corridor (CPEC) related projects, Chinese investment was still the most consistent, accounting for about USD 531.6 million, followed by the U.S. (USD 249.6 million) and Switzerland (USD 146 million). Most FDIs were directed towards the energy (USD 737 million), financial services (USD 405 million), and oil and gas (USD 195 million) sectors.
The potential attractiveness of Pakistan for investment remains lower than neighbouring India but equal to Sri Lanka and Bangladesh. Pakistan's attractiveness improves, albeit very slowly, against a backdrop of a challenging security environment, electricity shortages, and a burdensome investment climate that also hinder investments. Foreign investors (except Indian and Israeli citizens/businesses) can establish, own, operate, and dispose of interests in most types of businesses in Pakistan, except those involved in arms and ammunition; high explosives; radioactive substances; securities, currency and mint; and consumable alcohol. Pakistan allows companies to remit the proceeds of disinvestment to their foreign shareholders without prior approval from the State Bank. The country ranks 87th out of 132 in the 2022 Global Innovation Index and 140th out of 180 in the Corruption Perception Index. Furthermore, Pakistan ranks 73rd out of 82 countries in the Economist Business Environment ranking.
Foreign Direct Investment | 2019 | 2020 | 2021 |
FDI Inward Flow (million USD) | 2,234 | 2,057 | 2,102 |
FDI Stock (million USD) | 31,430 | 32,365 | 32,931 |
Number of Greenfield Investments* | 30 | 8 | 15 |
Value of Greenfield Investments (million USD) | 3,858 | 233 | 911 |
Source: UNCTAD - Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Pakistan | South Asia | United States | Germany |
Index of Transaction Transparency* | 6.0 | 5.8 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 7.0 | 5.0 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 6.0 | 7.4 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
