47. Pakistan Economic Survey 2011-12 - Consultancy Services in ...

Growth and Stabilizationsavings required to meet investment demand. Therequirement of foreign savings needed to financethe saving investment gap, reflects the currentaccount deficit in the balance of payments.National savings are 10.7 percent of GDP in 2011-12 compared to 13.6 percent in 2007-08. Domesticsavings have also declined from 11.5 percent ofGDP in 2007-08 to 8.9 percent of GDP in 2011-12.Net foreign resource inflows are financing thesaving investment gap. Theoretically, there are twoways of improving the savings investment gap.One is through increasing savings and the other isthrough decreasing investment. Pakistan needs togear up both savings and investment to enhance theemployment generating ability of the economy aswell as increase resource availability forinvestment.Public sector investment is crucial for catalyzingeconomic development. It creates spillover effectsfor private sector investment because private sectordevelopment is facilitated through public sectordevelopment spending particularly oninfrastructure. However, curtailment ofdevelopment expenditures limits private sectordevelopment. Public sector investment decreasedfrom 5.4 percent of GDP in 2007-08 to just 3.0percent in 2011-12. Saving and Investment aspercentage of GDP are presented in Table 1.6.Table 1.6: Structure of Savings and Investment (As Percent of GDP)Description 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 PTotal Investment 16.6 19.1 22.1 22.5 22.1 18.2 15.4 13.1 12.5Changes in Stock 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6Gross Fixed15.0 17.5 20.5 20.9 20.5 16.6 13.8 11.5 10.9Investment-Public Investment 4.0 4.3 4.8 5.6 5.4 4.3 3.6 2.9 3.0-Private Investment 10.9 13.1 15.7 15.4 15.0 12.3 10.2 8.6 7.9Foreign Savings -1.3 1.6 3.9 5.1 8.5 5.7 2.2 -0.1 1.8National Savings 17.9 17.5 18.2 17.4 13.6 12.5 13.2 13.2 10.7Domestic Savings 15.7 15.4 16.3 15.6 11.5 9.8 9.3 13.3 8.9Source: EA Wing CalculationsP: ProvisionalForeign Direct InvestmentPakistan has a very fertile market for foreigninvestors given its very large consumer base of 180million people. People need food, energy and otheramenities to live and thrive. There is a greatpotential in the power and infrastructure sector andin natural resources. There seems to be huge scopefor investment in hydel and coal based powerprojects, alternative energy like wind power, andnatural gas transmission from foreign lands. Thecountry also needs infrastructure, world classeducation systems, exploration of its naturalresources and mechanization of industries. Foreigninvestors can exploit all such opportunities.Global foreign direct investment will be close to $800 billion during 2012; less than the $ 1 trillionachieved in 2007. The Euro crisis has dampenedenthusiasm. However, prospects from East Asiaare looking good. The United States is focusing oneconomic revival and its stock markets areresponding positively. China, India, Turkey, Braziland Indonesia also appear to be moving in apositive direction.Foreign Direct Investment (FDI) in Pakistan stoodat $ 666.7 million during July-April 2011-12 asagainst $ 1292.9 million last year. This is a declineof 48.4 percent. Oil & Gas Exploration remainedthe major sector for foreign investors. The share ofOil and Gas Exploration in total FDI during July-April 2012 stood at 69.8 percent.Pakistan will certainly attract foreign directinvestment with the resolution of the energyshortages and improvement in the law and ordersituation. The Board of Investment (BOI) under thePrime Minister’s Secretariat is making efforts toprovide an increasingly investment friendlyenvironment to investors. Efforts are being made tofacilitate foreign investors in Pakistan withimproved infrastructure and a better working13