Foreign Direct Investment In line with a sharp decline in global flows of Foreign Direct Investment (FDI), which fell

32 percent in 2009 according to estimates of the International Institute of Finance (IIF), direct investment from this source saw a steep reduction in Pakistan. For the period July to April 200910, FDI totaled US$ 1.8 billion as compared to US$ 3.2 billion in the same period of FY09. This represents a decline of 45 percent. A large part of the decline in FDI for the period was recorded under Telecommunications (a net decline of US$ 607 million), and Financial Services (a fall of US$ 548 million). Combined , the decline in these two sectors, which related to a few lumpy transactions last year, amounted to 81 percent of the overall reduction in FDI in 200910. Investment levels in some sectors remained healthy, including in Oil and Gas exploration (FDI of US$ 605million), Communications (US$ 222 million), Transport (US$ 104 million), Construction (US$ 86 million), and Paper and Pulp (US$ 81 million). Despite a steep decline, inflow of FDI into Financial Services was recorded at US$ 133 million for the period. A worrying development was the large net disinvestment recorded under the IT Services sector for the year (amounting to US$ 95 million). Overall, out of the major industry categories, 12 recorded higher FDI for the period, while 24 industries witnessed a net reduction in FDI inflow. Foreign Direct Investment (FDI) According to UNCTAD, the global inflows of foreign direct investment declined by close to 40.0 percent in year 2009 due to global financial and economic crises. The impact of this crisis transmitted in the global FDI through decline in the firms tendency to invest due to its falling profitability, higher uncertainty & risk aversion behaviour and reduced availability of finance to firms globally thereby many companies reduced their investment plans. Pakistan also witnessed the declining FDI according to global FDIs trend during the period under review. As after growing at an average rate of 61.0 percent per annum for four years, Pakistans FDI declined abruptly by 31.2 percent in 200809 compared to same period last year. This situation further deteriorated in the current fiscal year owing to a combination of internal factors like energy crises and law & order situation along with external factors of global economic slowdown. FDI in the country declined by 44.7 percent during the period of JulyApril 200910 compared to same period last year (seeFig5). Oil and Gas Exploration remained the major attractive sector for investment as due to its share of 34.1 percent in overall FDI in JulyApril 200910. However, investment in oil and gas explorations witnessed negative growth rate during JulyApril 200910 over the comparable period last year. This performance mainly resulted due to law and order situation for oil and gas exploration.