The net Foreign Direct Investment (FDI) in telecom sector witnessed a growth of 219 percent during the financial year of 2015-16 with $210 million net FDI compared to previous year’s $65.7 million, according to data from the State Bank of Pakistan (SBP).
Pakistan’s telecom sector has become a major contributor of Foreign Direct Investment (FDI) with inflows reported to reach $286 million in the closing financial year of 2015-16 mainly due to purchase of 4G spectrum and license by Telenor Pakistan in the month of June 2016.
The telecom sector FDI outflows stood at $75.7 million because of investments made by Pakistan companies in different countries, hence the net FDI stood at $210.4 million in the full financial year.
The growth in FDI was seen in the month of June in which $138.5 million investment landed in telecom sector from Norway, the headquarter of Telenor Pakistan.
Telenor Pakistan won 4G spectrum at the base price of $395 million in June. The Norwegian cellular operator was awarded 4G license after it made 50 percent payment to the government including withholding tax.
Telenor deposited half of price, i.e. $197.5 million which means the operator contributed $59 million itself through its profit/revenues whereas it received a big amount of $138.5 million from its headquarter, Telenor Group.
Since the remaining 50 percent will be paid in five equal annual installments along with mark-up, FDI inflows from Norway could be expected in coming months.
FDI in Different Sectors and Countries
Telecom sector is the third biggest contributor of FDI after Power and Oil and Gas sectors which received an overall net FDI of $566.6 million and $261.6 million respectively during the financial year 2015-16.
According to SBP, $593.9 million in FDI was received from China whereas $172 million FDI was received from Norway, which is second biggest contribution to FDI in Pakistan from any other country.
It was followed by UAE with $164 million FDI to Pakistan and Hong Kong with $130 million FDI.
The overall net FDI stood at $1.28 billion in the closing financial year of 2015-16 which is 35% higher than previous year in which FDI stood at $922 million.
The growth in direct investment was mainly triggered by telecom sector after inflows were made in June 2016.
FPI Declines
Despite bullish trends in stock exchange, the Foreign Portfolio Investment (FPI) declined significantly. It saw an overall outflow of $9 million in the financial year of 2015-16 as compared with 2014-15 in which it received $927 million FPI.
Hence, the net FDI plus net FPI translated into a decline of 65% overall FDI in Pakistan which stood at $952 million in 2015-16 as against of $2.76 billion in 2014-15.
Taxes growth too (on Telecom) – Sales Tax, VAT, Income Tax and CESS in 2016.