The inflows of foreign investment in Pakistan have been extremely variable in nature. An analysis of the data from 1999-2000 onwards reveals pronounced cycles in the inflows. There was a full cycle from 1999-2000 to 2011-12.

As the economy achieved buoyancy with GDP growth rate of 3 percent in 1999-2000 to 8 percent in 2004-05, the inflow of foreign investment rose substantially from only USD 543 million in 1999-2000 to USD 6,959 million in 2006-07. Thereafter, the inflow declined sharply with the fall in the GDP growth rate to 3 percent to only USD 760 million by 2011-12.

A second cycle of inflows is observed up to 2022-23. They grew rapidly as the GDP growth rate improved up to 6 percent in 2017-18. A peak of USD 4,990 million was achieved, facilitated by investment by Chinese companies in electricity generation.

However, there has been a drop after 2019-20, reaching almost a twenty-year low level of USD 342 million in 2022-23. This was the year when Pakistan came perilously close to a default and the SBP had to stop the profit and dividend repatriation. There has only been a modest recovery in 2023-24 and 2024-25.

The size of the multinational presence in economic activities in Pakistan is significant. For example, the OICCI has 208 member companies from 30 countries. Almost half a million workers are employed in the foreign manufacturing companies. The contribution to tax revenues is sizeable of over one-fifths of the total tax revenues. New foreign investment in Pakistan is over 10 percent of total private investment in good years.

Two conclusions are........

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