Business
Shift in FDI Needed to Break Reliance on Energy Sector – SUCH TV
The Pakistan Industrial and Traders Association Front (PIAF) has cautioned that Pakistan’s overdependence on energy-focused foreign investment is holding back broader economic growth, calling on policymakers to expand investment opportunities in mining, manufacturing, IT, and other underdeveloped sectors.
PIAF Patron-in-Chief Mian Sohail Nisar said that heavy concentration of foreign capital in a single sector is concerning.
“Foreign investors continue to channel funds primarily into energy, but Pakistan has far greater potential in mining, information technology, and value-added manufacturing,” he said.
Over the past 10 years, FDI into Pakistan has ranged from $2 billion to $3 billion annually, with roughly 35% directed to the power sector, underscoring the need for diversification.
According to the State Bank of Pakistan (SBP), Pakistan attracted total foreign direct investment (FDI) of $2.46 billion in fiscal year 2024-25, a year-on-year increase of around 5%.
China remained the leading investor with $1.23 billion, nearly double its investment from the previous year, registering a 91% jump.
Other significant contributions came from Hong Kong with $470 million, the United Arab Emirates with $283 million, Switzerland with $203 million, and the United Kingdom with $202 million.
Sector-wise, the power sector continued to dominate inflows, receiving $1.17 billion, much of it in hydel projects, while financial services attracted $702.2 million.
Oil and gas exploration, electronics, IT, food, petroleum refining, and textiles were among other sectors that managed to secure a smaller share of investment.
Representatives of the business community noted that while the overall numbers for FY25 show an improvement, the gains remain fragile and heavily skewed.
They emphasised that credible projects, transparent regulations, and genuine economic opportunities are necessary to convert investor interest into broader inflows.
Without reforms, they warned, Pakistan risks remaining stuck in a narrow energy-focused pattern of investment.
A Lahore-based industrialist, Ashraf Javed, pointed out that countries in the region are moving ahead quickly.
“India and Bangladesh are attracting billions across diversified sectors like IT, manufacturing, and e-commerce, while we continue to depend on power projects,” he said. “We need stable policies, simplified regulations, and consistent tax frameworks if we want to bring long-term investors to other industries.”
Mining has emerged as one of the most promising areas for Pakistan, given the substantial reserves of copper, gold, coal, and rare earth minerals in provinces like Balochistan and Khyber-Pakhtunkhwa.
Several foreign companies, including those from the United States, have shown interest in this sector.
However, business leaders argue that without practical steps such as modernising mining laws, ensuring security for investors, and cutting red tape, interest will not translate into commitments.
Independent economists have also voiced similar concerns. Syed Afaraz Ahmad, an analyst, observed that Pakistan’s reliance on debt-driven growth makes diversified FDI more important than ever.
“Energy-related investment may keep the lights on, but it does not generate large-scale employment or strong export earnings.
Mining, technology, and manufacturing are the sectors that can change the economic outlook,” he said.
The business community stressed that Pakistan’s geographic position at the crossroads of South and Central Asia gives it a natural advantage for becoming a regional investment hub.
But they warned that without deregulation, predictability in policy, and efforts to improve ease of doing business, foreign capital will continue to bypass the country.
“The potential is there; however, the challenge is whether Pakistan can create the conditions that convince investors to move beyond energy and bring real value to the economy,” said Javed.
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At around 8.25 am, the benchmark US oil contract, West Texas Intermediate (WTI) climbed 4.06% to US$96.73 per barrel.
International oil benchmark Brent North Sea crude rose 3.62% to US$105.63. Both eased back in the following minutes.
Oil prices have soared since Israel and the US attacked Iran on Feb 28, and they have kept inching up due to the uncertainty over whether war will resume.
As the clock ticked for a return to the war that has engulfed the region, US President Donald Trump had said Tuesday he would maintain the truce to allow more time for Pakistani-brokered peace talks.
Iran said it welcomed the efforts by Pakistan but made no other comment on Trump’s announcement.
Wall Street stocks gained ground following President Trump’s unilateral ceasefire extension in the Iran war.
All three major US stock indexes advanced, with tech shares helping to put the Nasdaq out front, while gold advanced and the dollar edged higher.
The S&P 500 and the Nasdaq reached record closing highs.
“Despite the energy shock and headlines that have inundated investors, the macroeconomy, corporate fundamentals, and consumer spending remain strong,” said Bill Merz, head of capital markets research at US Bank Wealth Management in Minneapolis.
“Investors are taking the stance that the Strait of Hormuz will open before too much damage is inflicted on the global economy.”
Iran’s Revolutionary Guards seized two vessels for maritime violations just hours after Trump agreed to extend the ceasefire until negotiations are concluded.
About a fifth of the world’s oil and liquefied natural gas (LNG) supplies normally pass through the strait.
US stocks, initially battered by the war, have since made a full recovery, with the S&P 500 and the Nasdaq having reached all-time closing highs in recent sessions.
But geopolitical uncertainty lingers, and a prolonged period of elevated oil prices remains a threat.
About two-thirds of the S&P 500 companies that have reported quarterly earnings since the beginning of April have voiced concerns about energy prices in their analyst conference calls, according to a Reuters review of transcripts.
“Anytime there’s a global event like the conflict in the Middle East, and it grabs so many headlines and captures attention, it will crop up in earnings commentary,” Merz added. “But we’re not seeing it significantly impact behaviour yet.”
First-quarter earnings season is well underway amid lofty expectations. Analysts currently estimate year-on-year S&P 500 earnings growth of 14.4% for the January-March period, according to the most recent LSEG data.
The Dow Jones Industrial Average rose 341.27 points, or 0.69%, to 49,490.52, the S&P 500 +gained 73.90 points, or 1.05%, to 7,137.91, and the Nasdaq Composite was up 397.60 points, or 1.64%, to 24,657.57.
European shares ended lower for the third straight session as the Middle East strife continued to weigh on markets and investors assessed a raft of corporate earnings.
Dozens of international firms have withdrawn guidance or signalled price hikes since the war began.
MSCI’s gauge of stocks across the globe rose 4.52 points, or 0.42%, to 1,070.98.
The pan-European STOXX 600 index fell 0.35%, while Europe’s broad FTSEurofirst 300 index fell 8.58 points, or 0.35%.
Emerging market stocks fell 9.41 points, or 0.58%, to 1,606.07. MSCI’s broadest index of Asia-Pacific shares outside Japan closed lower by 0.6%, to 822.27, while Japan’s Nikkei .N225 rose 236.69 points, or 0.40%, to 59,585.86.
The dollar rose amid lingering geopolitical worries.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.26% to 98.63, with the euro down 0.32% at $1.1704.
Against the Japanese yen, the dollar strengthened 0.12% to 159.56.
In cryptocurrencies, Bitcoin gained 4.13% to $78,866.74. Ethereum rose 3.48% to $2,398.37.
US Treasury yields increased, rangebound amid choppy trading.
The yield on benchmark US 10-year notes rose 1.2 basis points to 4.304%, from 4.292% late on Tuesday.
The 30-year bond yield rose 1.1 basis points to 4.9091% from 4.898% late on Tuesday.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 2.1 basis points to 3.8%, from 3.779% late on Tuesday.
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