Profit Repatriation Higher Than FDI Inflows in Pakistan in H1 FY 17-18

Foreign, multinational companies and investors have repatriated a handsome dividend of $1.202 billion to their headquarters, which is greater than the overall Foreign Direct Investment (FDI) received by Pakistan during the same period.

Pakistan is an attractive country for multinational companies and foreign investors, offering lucrative profits for these companies which not only make money from its soil but manage to send a handsome part of their earnings to the respective countries as well.

SBP’s Stats

According to the statistics released by State Bank of Pakistan (SBP), overall foreign and multinational companies and overseas investors (in local companies) have sent a profit of $1.202 billion in the first half of the financial year 2017-18.

Compared to that, FDI landing in the country was recorded at $1.055 billion during the same half year period of the same financial year. This shows a difference of $147 million between the profit repatriation and investment by these companies and the net investments.

Profit repatriation of foreign investors increased by 29 percent from last year, which stood at $928 million in the corresponding period of last fiscal year. On the contrary, FDI inflows from different countries were slightly up by 2.3 percent during the current financial year.

Doubling Down

Foreign companies and investors are usually involved in profit repatriation more or less but it is not always the case. Sometimes companies having invested in Pakistan in the past make their repatriation in the coming years whereas companies making investment avoid repatriation for the next several years to strengthen or expand their local expression.

The increase in the pace of profit repatriation is due to stability in the business climate of the domestic market.  Improvement in the security situation and local consumption have stirred up growth in economic activities. As a result, the revenue streams of multinational and local companies have also settled on the track of growth.

Higher prospects of profit earning and repatriation will not only increase the inducement of investment from existing foreign companies but will also attract new players in the local market in coming years, especially in the context of China Pakistan Economic Corridor (CPEC).

Sectors with Higher Profit Repatriation

Financial sector including banks, insurance etc companies topped the charts in profit repatriation, with $175 million sent to their headquarters during the period of July to December 2017. It was followed by the telecom sector with $166 million, backed up by a strong revenue stream due to higher uptake of 4G services by their customers.

Other sectors include power with profit reparation of $141 million, oil and gas exploration and production sector with $130 million and food sector with $129 million. These sectors are also major contributors to FDI in Pakistan with growing operations and business.

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