Pakistan’s Ambassador to the US Masood Khan is urging US investors to step up their presence in the market as the country grapples with lower FDI levels in 2023.

The call for increased investment arose during Khan’s speech at the Conference on Resilience and Reform in Pakistan, organised by the US-based think tank Atlantic Council in Washington DC.

According to Khan, Pakistan and the US have conducted several discussions in the past year on trade, investment, energy, climate change, health, science and technology, defence, counterterrorism and counternarcotics.

“I would say this is a good time for US businesses to increase their investments in Pakistan and Pakistani traders and entrepreneurs to enhance their exposure in the US markets,” he said. “A question will be asked during this conference whether Pakistan is investible. My answer to that question is that Pakistan is already attracting foreign investment, and some of the new and additional investments are maturing right now.”

The call for investment comes after the Office of the US Trade Representative reported lower American FDI levels in Pakistan in 2022. Just $127m in FDI projects reached Pakistan last year, 59.3% down from 2021.

Conversely, Pakistani FDI in US stock was $144m in 2022, although that was still 14.3% lower than in 2021.

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Lower US investment in the Middle Eastern country is reflected in a wider trend involving Western companies, which have significantly downscaled their interest in Pakistan following Islamabad’s rapprochement with China.

According to GlobalData’s FDI Projects database, the number of FDI projects coming from companies headquartered in either Europe or North America has been steadily decreasing since last year, going down from 12 projects in Q3 2022 to only two counted in Q3 2023.

At the same time, Chinese FDI reached $432.7bn from July 2022 to June 2023, according to the State Bank of Pakistan.

Deepti Aggarwal, Production Manager of FDI at GlobalData, says Pakistan is actively looking for increased FDI from the US due to ongoing problems within the China-Pakistan Economic Corridor (CPEC). The corridor is a 3000km Chinese infrastructure network project meant to enable quicker passage of energy imports from the Middle East to China.

“This corridor has historically been a significant source of investment for Pakistan,” Aggarwal explains. “However, China’s participation in various CPEC projects has waned due to Pakistan’s deteriorating economic situation and China’s own economic slowdown. Consequently, Pakistan is now exploring alternative avenues of investment to bolster its economic growth and development.” 

According to Aggarwal, Islamabad is particularly interested in attracting FDI in critical sectors such as automotive, food, metals and minerals, and communication and media, which previously received significant Chinese investment.

“Additionally, Pakistan is eager to engage in the software, business, and professional services sector, where the US takes the lead. This move is expected to create employment opportunities for the educated youth of Pakistan,” she says. “Historically, the US, alongside the UK, has been one of the primary sources of FDI for Pakistan. As such, Pakistan views the US as a key partner in driving economic growth and development in these strategic sectors.”

Pakistan is grappling with significant financial constraints, as well as political uncertainty and general elections next year. Aggarwal adds that the outcome of the elections could “potentially impact the inflow of foreign investments.”