 Foreign Direct Investment

has grown in importance in the global

Foreign Direct economy with FDI stocks now constituting
over 20 percent of global GDP.
Investment
Types of Foreign Direct Investment
Project Report
BY DIRECTION
Inward Investment

INTRODUCTION Inward investment means the

investment when foreign capital is
invested in local resources. Inward
Foreign Direct Investment investment is encouraged by tax breaks,
subsidies, grants etc. by the Govt. Inward
Definition & Explanation FDI is restricted by ownership restraints
or limits Differential performance
Foreign Direct Investment is defined as, requirements.
“investment made to acquire lasting interest
Outward Investment
in enterprises, operating outside the economy
of the investor”. Outward investment also known as
direct investment abroad is the
Foreign Direct Investment in relationship
investment when local capital is invested
consists of parent enterprise and a foreign
in foreign resources means investment in
affiliate which together form a multinational
imports and exports from a foreign
corporation (MNC).
commodity country.
In order to qualify as FDI, the investment
Outward Investment is encouraged by
must afford the parent enterprise control over
Government backed insurance to cover
its foreign affiliate.
risk and tax incentives.
In the years after the Second World
Outward Investment is discouraged by
War global FDI was dominated by the
tax disincentive, subsidies for local
United States, as much of the world
businesses and Government policies for
recovered from the destruction brought by
the support of nationalization of the
the conflict. The US accounted for around
industries.
three-quarters of new FDI (including
reinvested profits) between 1945 and 1960.
Since that time FDI has spread to become a
truly global phenomenon, no longer the BY TARGET
exclusive preserve of OECD countries. FDI Greenfield investment

 Page 2
 Foreign Direct Investment
Direct investment in new facilities or the
expansion of existing facilities; Greenfield
investments are the primary target of a host
nation’s promotional efforts because they
create new production capacity and jobs,
transfer technology and know-how, and can
lead to linkages to the global marketplace.
Mergers and Acquisitions
Transfers of existing assets from local firms
to foreign firms takes place; the primary type
of FDI. Cross-border mergers occur when the
assets and operation of firms from different
countries are combined to establish a new
legal entity. Cross-border acquisitions occur
when the control of assets and operations is
transferred from a local to a foreign
company, with the local company becoming
an affiliate of the foreign company.
Horizontal FDI
Horizontal FDI occurs when the
multinational undertakes the same production
to activities in multiple countries.
Vertical FDI
Vertical FDI occurs when the multinational
acquires a stake in a foreign firm that either
uses its output or provides its input. The
primary activity of the foreign firm usually
precedes or succeeds that of the parent
company.
Backward Vertical FDI
Investment in a firm whose industry output
provides the input for the parent company's
operations.
Forward Vertical FDI
Where an industry abroad sells the outputs of
a firm's domestic production, or uses the
firm's output as input.
BY MOTIVE
Resource-Seeking
Investments which seek to acquire factors of
production those are more efficient than
those obtainable in the home economy of the
firm. In some cases, these resources may not
be available in the home economy at all (e.g.
cheap labor and natural resources). This
typifies FDI into developing countries, for
example seeking natural resources in the
Middle East and Africa, or cheap labor in
Southeast Asia and Eastern Europe.
Market-Seeking
Investments which aim at either penetrating
new markets or maintaining existing ones.
FDI of this kind may also be employed as
defensive strategy; it is argued that
businesses are more likely to be pushed
towards this type of investment out of fear of
losing a market rather than discovering a new
one. This type of FDI can be characterized
by the foreign Mergers and Acquisitions in
the 1980’s by Accounting, Advertising and
Law firms.
 Page 3

Efficiency-Seeking
Investments which firms hope will increase
their efficiency by exploiting the benefits of
economies of scale and scope, and also those
of common ownership. It is suggested that
this type of FDI comes after either resource
or market seeking investments have been
realized, with the expectation that it further
increases the profitability of the firm.
Strategic-Asset-Seeking
A tactical investment to prevent the gain of
resource to a competitor. Easily compared to
that of the oil producers, whom may not need
the oil at present, but look to prevent their
competitors from having it.
(Source: http://en.wikipedia.org/wiki/Foreign_direct_investment
Foreign Direct
Investment in Pakistan…
ANALYSIS
Current Situations
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 Foreign Direct Investment
The Pakistan government is working hard to
attract large scale FDI into the country, including
allowing foreign investors to hold unlimited
equity and making concerted efforts to project a
positive country image.
“Federal Minister for Privatization and
Investment Dr. Abdul Hafeez Shaikh, said that
Pakistan has great potential for foreign
investment in various sectors and, for the first
time, it would attract a foreign direct investment
(FDI) of $1 billion this year. He said that foreign
investment in the country was increasing every
year and in the last seven months it had touched
the figure of $600 million which is higher by 50
percent compared to the same period of last
year.”
(Source: Business Recorder)
Most of this investment was in oil and gas,
construction, real estate and telecommunication
sectors and was result of positive policies of the
present government.
Hafeez said that the image of the country is
improving internationally and its growth rate,
stable government and positive policies are
attracting them to invest in this country.
Foreign investors should now come forward to
invest and avail the vast opportunities available
in gas, oil and other sectors in Pakistan and get
benefit of business-friendly policies of the
government.
An Overview
Developing countries by and large face a gap
between domestic savings and the desired level
of investment. In case of Pakistan, for example,
domestic savings constitute only 15-18 per cent
of GDP. This gap is to be filled by the inflow of
foreign capital. Foreign direct investment (FDI)
 Foreign Direct Investment
is arguably the most important source of foreign
capital. In addition to filling the savings-
investment gap, FDI yields a number of
advantages to the host country including transfer
of technology and managerial know-how,
employment generation, revenues to the
government, provision of quality products to
consumers, creation of backward and forward
linkages, broadening of industrial base, and
increase in exports.
In order to increase the level of foreign capital
inflows, developing countries liberalize their
trade and investment regime by relaxing
governmental controls and offering a number of
financial and trade incentives like tax
concessions and tariff reductions. Though
exceedingly important, the right level of foreign
investment is not enough. What also matters is
the direction of investment, that is, in which
sectors it is made.
Having outlined the importance of FDI, let’s
glance at foreign investment regime of Pakistan.
However, before doing this it seems appropriate
to look at the level of FDI in Pakistan during last
one decade.
Total FDI inflows into Pakistan from 1995-96
to 2005-06 stand at $10.93 billion, which come to
$994 million a year. This of course is far below
the desired level. In 1995-96, Pakistan attracted
the (then) record $1.1 billion FDI, which was
mainly due to agreements with Independent
Power Producers (IPPs).
However, the next year FDI registered a sharp
fall as the successive government, repudiated
agreements with IPPs. Thus ensued a row
between the Government of Pakistan and IPPs,
which severely affected foreign investor’s
confidence in Pakistan. Pakistan’s decision to go
nuclear in 1998 prompted several countries to
impose economic restrictions, which also reduced
FDI inflows. The sudden freezing of foreign
currency accounts following the nuclear blasts
increased the risk of doing business in Pakistan
and severely affected FDI. The FDI level
improved during last four financial years mainly
due to consistent economic policies of the
government. In 2005-06, FDI crossed the $3
billion mark for the first time as the total FDI was
registered at $3.52 billion. However, the source
of nearly half of the FDI was proceeds from the
sale of state enterprises.
As regards the direction of FDI, financial
services, telecommunications and the energy
sector have received the bulk of FDI. The
manufacturing sector, especially the all-important
textile sector, has received meager FDI inflows.
This also means that Pakistan has received very
little export-oriented FDI, thus limiting the role
of FDI as a tool of export promotion.
(Source: Board of Investment, State Bank of Pakistan)
Coming to FDI regime of Pakistan, over past
one decade Pakistan has opened its economy
through privatization and deregulation and
presently it has a very liberal FDI regulatory
regime. The regulatory framework for foreign
investment consists of three laws: Foreign Private
Investment (Promotion & Protection) Act 1976;
Furtherance and Protection of Economic Reforms
Act 1992; and Foreign Currency Accounts
(Protection) Ordinance 2001. Taken together,
these laws protect FDI as follows:
One, there is freedom to bring, hold and take
out foreign currency from Pakistan in any form.
Two, fiscal incentives provided by the
government cannot be altered to the disadvantage
of the investor. Three, the privatisation of an
enterprise is fully protected. Four, no foreign
enterprise can be taken over by the government.
Five, original foreign investment as well as
profits earned on it can be repatriated to the
country of origin. Six, equal treatment is
provided to a foreign investor and local investor
in terms of import and export of goods. Seven,
FDI is not subject to taxes in addition to those
levied on domestic investment. Eight, foreign
currency accounts are fully protected and they
cannot be freeze.
 Page 5

(Source of facts & Figures: Foreign Currency Accounts
Ordinance 2001)
Pakistan business strengths are investor-
friendly policies allowing 100 percent foreign
equity, protection to private investment,
remittance of profit, royalty and technology fee,
zero import duties on raw materials for
production of export, large and growing domestic
market, well-established infrastructure, skilled,
qualified and cost effective manpower, regional
hub in view of gateway to Central Asian
Republics and strong links with Gulf region and
South Asia.
There is huge potential of investment of Rs
594.4 billion in engineering industry in Pakistan
against existing Rs 289.8 billion in this sector
including potential in Automotive & Agriculture
Implements of around Rs 110.3 billion, against
existing Rs 65.3 billion, Rs 26 billion in heavy
machinery against existing Rs 17.5 billion, Rs 13
billion in Consumer Durables against Rs 9.5
billion, Rs 21 billion in Surgical & Cutlery
against existing Rs 15 billion, Rs 251.5 billion in
Steel against existing Rs 83.5 billion and Rs
172.6 billion in others against existing Rs 99
billion.
As regards investment policy, all economic
sectors including the service sector are open to
FDI. Foreign equity up to 100 per cent is
allowed. No government sanction is required for
setting up an industry in terms of field of activity,
location and size except in case of four sectors
relating to national security. Under the
deregulation policy, government controls on
business activity are being relaxed. To avoid
double taxation on income earned by foreign
investors, Pakistan has concluded agreements
with 51 countries. The list includes nearly all the
developed economies. However, one area in the
regulatory regime needs a lot of improvement is
the protection of Intellectual property rights
(IPRs), particularly copyrights. Despite bringing
 Page 2
 Foreign Direct Investment
copyright legislation in conformity with
international copyright laws, the government has
not been able to curb piracy. This increases the
cost of doing business in Pakistan.
Factors affecting FDI in Pakistan
Let’s turn to social, economic and political
factors that have bottlenecked the growth of FDI
in Pakistan. Take political uncertainty first.
Political instability has been endemic in Pakistan.
During 1990s four governments and parliaments
were dismissed and three general elections held
towards the close of the decade, the civilian set-
up was replaced with a military regime.
Furthermore, whenever a civilian government
was in office, speculations of its sack were ripe.
Political uncertainty increased the risk of doing
business in Pakistan and decreased its
attractiveness as a market for investment.
Frequent changes in government also made
continuity of policies difficult. In our country
there is a tendency on the part of a government to
undo the policies of its predecessor. The row
between the Nawaz Sharif government and IPPs
has already been mentioned. Policy aphorism
also begets uncertainty and increases the
investment risk.
Another important factor is law and order.
During last one decade, Pakistan has been subject
to twin menaces of religious extremism and
ethnics, which have taken a heavy toll on our
economy. Ironically ethnic violence ran rampant
in Karachi, Pakistan’s business capital. There
were several incidents of murder and kidnapping
for ransom. Of late, Pakistan has faced a series of
suicide attacks in different parts of the country. A
couple of years back, the president had a narrow
escape in two incidents occurred in the same
place in a heavily guarded area.
The fourth factor is lack of human capital.
Workers are widely regarded as the principal
asset of a firm and the capital source of its
competitive advantage. That is why there is so
 Foreign Direct Investment
much emphasis in developed countries on human
resource development.
In Pakistan however development of human
capital has been given a short shrift, which is
responsible for low worker productivity. While
making investment decisions, MNCs take into
account both worker productivity and wages. In
Pakistan wages are low but productivity is also
low.
Infrastructure, including rail, road and
telecommunication network, and price and
availability of utilities is another area that needs a
lot of improvement. Cost of water and power for
business consumers in Pakistan is higher than
those in other neighboring countries like India
and China.
Infrastructure is also not up to the mark. Poor
infrastructure and high cost of utilities increase
the cost of doing business and make a country a
less attractive market for FDI.
Last but not least is the cultural factor. An
overwhelming majority of existing or potential
MNCs in Pakistan are western. The people of the
West have a lifestyle different from us and want
to continue that while staying here. However
certain self-righteous people want to impose their
own values on foreigners and thus meddle into
their personal private lives. Nothing irks these
foreign investors and managers more than
meddling into their personal lives.
In sum, to increase FDI, apart from creating an
investor-friendly regulatory regime, the
government will have to improve law and order
situation and pursue consistent policies. Political
stability, human resource development and
cultural tolerance are also of capital importance.
ANALYSIS OF ARTICLES
(1) Foreign Direct Investment up
by 19 Percent (2004)
Foreign Direct Investment in the country
witnessed a huge surge of 19 percent. After
the company sold two cellular phone licenses
and a strategic stake in Habib Bank, 798
million dollar was the FDI investment in
June 2004, which was raised to 949 million
dollar in July 2004. Two cellular phone
licenses were auctioned in April for 291
million dollar each to Oslo based Telenor and
UAE based Warid Telecom companies. The
companies paid half of the billed amount in
may and rest of the amount was adjusted in
coming years. In December, Pakistan sold
51% shares of Habib Bank Limited Geneva
based Aga Khan Fund for economic
development. US and UAE investment were
238.4 million dollar and 205 million dollar
respectively. Pakistan was expecting 1 billion
dollar foreign direct investment, but on
ground it received 1.25 billion dollar against
950 billion dollar of last financial year.
Ministry of Privatization & Investment, has
announced increase of 300 million dollar in
the foreign investment target for the current
fiscal year.
 Page 7

In last 2 to 3 years, foreign direct
investment was doubled to 748 million dollar
after the country sold United Bank Limited
and the security environment improvement in
the region due to lessening of tension with
India and Afghanistan.
(Ref.: Business Recorder July 26th,2004)
(2) FDI Resisters sharp rise during
Fiscal year 2006 (2006)
The foreign direct investment flows in
fiscal year 2006 amounted to 2 billion dollar,
with a sharp rise of 70.6% over last year.
More than half of the foreign direct
investment was fetched by the
telecommunication sector during fiscal year
2006. (Ref.: annual report FY 2005 -06)
Due to sale of PTCL to a UAE based
company, sale of KESC to Saudi Group and
receipts for Habib Bank and exceptional rise
of 1.5 billion dollar were registered during
FY 2005 – 06.
This also shows that foreign direct
investment in FY07 is likely to be lower than
levels achieved in FY06. Half of the FDI
originated from Middle East. E.g., 95.5%
Foreign Direct investment from the Middle
East is only in the communication sector,
40% of FDI from UK and USA in
telecommunication and oil and gas
exploration sectors during FY06.
(Ref.: Business Recorder Dec. 3rd, 2006)
(3) Pakistan Textile City & Foreign
Direct Investment (2006)
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 Foreign Direct Investment
Pakistan textile city is established over
1250 acres near port Qasim, Karachi,
Pakistan. Ground breaking ceremony was
held on June 24th, 2006 by the President of
Pakistan. While talking to business recorder,
Executive Officer, Pakistan Textile City
(PTC), Zahid Zaheer, said that the project has
a tremendous attraction for the Chinese,
Turkish and world wide investors, who have
indicated their willingness to establish their
own zones in the city. MOU was signed with
Chinese industry Temsad to Joint
Corporation. Their business men have invited
and offered joint business ventures with
Pakistan businessmen. He said, the project
would double the figures of current foreign
direct investment within few coming years in
Pakistan. Zaheer said, Pakistan Textile
exports stood at 67% and it would get a big
boost in coming few years.
While comparing with our
competitors, India, Bangladesh and Sri
Lanka, he added, the cotton produced locally
has made Pakistan better proposition than its
competitors. China, Turkey and European
Union would be the key foreign investors.
Reasons for this companies coming into
Pakistan are: Cheap labor, tax free zone,
basic facilities required for establishing
industry such as water, electricity gas are on
ground there.
Maintaining the WTO standards, like
implementation international norms,
treatment of labor and avoid hazardous
material are also the key points for
investment.
 Foreign Direct Investment
Local industrialists as well as
foreigner investors are very keen to start their
business at textile in an investment friendly
environment very soon.
(Ref.: Business Recorder June 24, 2006)
(4) Local & Foreign investments
grow by 20 percent (2007)
According to Shaukat Aziz domestic
and foreign direct investments has grown up
by 20%, which is highest in the last two
decades.
He said that our government is
committed to good governance through
transparency and accountability. Democratic
institutions have been strengthed while a
deep routed process of decentralization has
been set in motion due to FDI.
This huge increase in FDI has helped
in developing deeper and more liberal
agriculture markets. Apart from this it has
also helped in developing markets in media,
energy and telecom sectors. The foreign
investment has modernized several of the key
agencies including civil service, monopoly
control authority and the police. This has of
course been done by deepening
decentralization, developing greater
transparency, utilizing the latest technology
and relying on a high degree of professional
and technocratic management.
He also said that we have provided
security to minority share holders and made
efforts to bring transparency and better
management and governance structure in the
private sector. Our real challenge was to
bring a good deal of foreign investment and
we have achieved that.
(Ref.: Business Recorder Dec. 20th, 2006)
(5) Pakistan’s Success story:
Foreign Direct Investment
(2007)
Mr. Riaz Haq telling about foreign
direct investment tells us the views of former
US Federal Reserve Chief Alan Greenspan.
India has discouraged FDI. India received 7
billion dollars in FDI in FY 05 and China 72
billion dollar. India’s cumulative stock of
FDI was at 6% at the end of 2005 and
Pakistan’s 9%, China’s 14% and 61% for
Vietnam. The reason FDI is low in India is
because of India’s unwillingness to fully
embrace the market forces. He is than telling
about the strategies adopted by India to not
allow the FDI which are as follows. When
India faced with rising inflation in early
2007, the response was not to allow rising
prices to prompt an increase in supply, but to
ban wheat exports for the nest of year and
suspend future trading ‘curb-speculation’ –
the very market forces that the Indian
economy needs to break strangle hold of
bureaucracy.
Mr. Riaz Haq then pinpoints that Mr.
Greenspan wrote the words, the FDI in
 Page 9

Pakistan has continued to rise and has
remained the success story.
He says that the total investment grew
by 21.4% of the GDP and FDI has posted a
growth of 71% from 3.5 billion dollar to 6
billion dollar in the year 2007. The FDI
represents a deeper and longer term
commitment than portfolio investments
which tend to be less durable and less
reliable. According to him the increase in
FDI to Pakistan has been made possible by
the Pakistani Government’s liberal policies
of allowing foreign investments in many
sectors of the economy. It is also highlighted
the continuous rise in the profits has boomed
with GDP doubling over the past 5 years.
Foreign investors sent $ 519 million
as their profits abroad during first 7 months
of the current fiscal year as compared to
467.9 million dollar of the corresponding
period of 2006-07 which depicts an upsurge
of 11%.
State Bank’s statistics show that
profit by foreign investors registered a
significant increase of $51.4 million during
2006-07, the major share repatriation was
seen in the power sector. He also added that
according to business recorder, foreign
investors have made new investments during
the last few years due to power shortage.
In the end, he concludes by saying
one of the downsides of liberalization has
been an upsurge in inflation in Pakistan
which India has attempted to curb by actions
such as banning export of wheat and
suspending future trading.
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 Foreign Direct Investment
(Ref.: southasianinvestor.com, May 2008)
(6) Major economic targets
achieved (2007)
This article highlights the major
economic targets achieved during the fiscal
year 2007 and has briefed about the major
role that FDI has played in achieving these
goals. The major economic targets were real
GDP growth, agriculture, services sector,
investment, tax revenue during 2007 fiscal
year.
The State Bank of Pakistan, in its
annual report on the state of economy, said
that Pakistan’s economy witnessed a
moderate recovery during 2007 financial year
with real GDP reaching 7%, as compared to
6.6% growth seen in 2006 financial year and
this was contributed by a surge in domestic
private investment and record foreign direct
investment flows.
As a result, the economy looks well
poised to continue on a high growth
trajectory in the coming years. This article
also sheds some light on the darker aspect
that is despite the improvement the
investment to GDP ratio remains low in
Pakistan.
Even though the savings, the GDP
ratio had also increased 18 percent during
2007 financial year compared with 17.2
percent in the preceding year, it was still low
as compared to regional and international
standards.
 Foreign Direct Investment
In the case of foreign direct
Investment, it also highlights the most
important aspect that is this impressive
performance is result of continue strength of
domestic demand, a sharp rise in foreign
direct investment as well as healthy increase
in the public sector development program,
(PSDP).
(Ref.: Business Recorder Oct. 30th 2007)
(7) July – January Foreign
Investment down by 35 Percent
(2008)
Foreign direct investment during July
– January registered a growth of some 8
percent but the declining portfolio investment
decreased the overall investment by around
35%.
The State Bank of Pakistan issued
statistics of foreign direct investment and
portfolio statement, which showed overall 35
percent decline occurred in foreign
investment during July – January of current
fiscal year than to last fiscal year. A drop of
1.2157 billion dollar occurred during this
fiscal year from last fiscal year.
Economic experts said that this major
drop happened due to 100% decline in
portfolio inflows as the foreign investors
were reluctant to invest in the equity market
due to political uncertainty and negative
reports regarding country’s stock markets.
Foreign investors would invest again their
money in Pakistan’s stock market after the
reconstitution of new political government.
Including privatization proceeds total
private investment showed a decline of 19.8
percent to 2.24 billion dollars, while
excluding, it has dipped by 20.8 percent to
2.108 billion dollars during first seven
months of current fiscal year.
(Ref.: Business Recorder Feb 24th, 2008)
(8) A Decline of 44 Percent in
Foreign Investment (2008)
The State Bank showed that in Pakistan,
overall foreign investment (including foreign
direct and portfolio investment) decreased by
$2.1047 billion to $2.612 billion during July-
February of current fiscal year 2008 from
$4.62 billion during the corresponding period
of last fiscal year.
Political uncertainty and poor law and order
situation have reduced foreign investment by
about $2 billion, or 44 percent, from $4.62
billion, during eight months of the current
fiscal year.
The reason behind major share dip in foreign
investment in Pakistan the economists told
that it is contributed by record decline in the
portfolio inflows, as the foreign investors are
reluctant to invest in the equity market due to
political uncertainty.
Statistics show that foreign direct investment
(FDI) registered a dip of 15 percent to $2.52
billion during July-February against $2.97
billion during the same period of last fiscal
year. Portfolio investment declined by 94.9
percent to $84.5 million as compared to
 Page 11

$1.656 billion during the same period of last
fiscal year.
(Ref.: Business Recorder March 20th, 2008)
(9) Foreign investors ready to
invest in Pakistan (2008)
Foreign investors are hungry for
investing in banking, real estate, telecom and
the country’s steel industry: Salman Taseer,
Federal Minister for Industries, Production
said.
Salman Taseer said that the foreign
investors would be ready to invest in
expanding the Pakistan steel Mills to enhance
its production capacity. India has an edge
over Pakistan in the steel industry because of
good governance while its bank in abroad
direct the flow of investment into India by
guiding investors. Presently, China and India
are buying steel on a large scale pushing its
high prices internationally. The situation will
not be improved unless we develop local
resources. Presently, we are buying coal from
Australia and Canada and iron ore from India
and China. However Pakistan steel will sign
an agreement with the Sandac project on Jan.
29 to buy 50,000 to 60,000 tonnes of iron
ore.
Concluding, the Engineering
Development Board CEO Almas Hyder said
that the EDB will appoint foreign consultants
for identification of iron ore and coal sites in
Pakistan, the volume of investment needed
for their exploration and future prospectus.
(Ref.: Business Recorder Jan. 26th, 2008)
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 Foreign Direct Investment
(10) FDI: Linked Policies to be
continued: Dar (2008)
Finance Minister Ishaq Dar has invited
American entrepreneurs to avail investment
opportunities Pakistan offers in various
sectors.
Ishaq Dar was addressing the members of the
US-Pakistan Business Council, said, the
newly elected government in Pakistan will
continue the FDI linked policies, which we
had introduced and which the previous
government continued. Obviously, there will
be continuity in these policies.
He informed the entrepreneurs about
the new coalition government's priorities and
said it had given market economy to the
country (in the 1990s), introduced foreign
direct investment policies as well as various
other economic reforms.
Earlier, the finance minister had a
meeting with chairman US-Pakistan Business
Council, Jay Collins, who said he had been
"extremely impressed with the candor and
vision" of the new top Pakistani finance
official.
"I was both pleased and reassured that the
fundamental premises of the new minister in
terms of kinds of policies that will allow
Pakistan's economy to grow, allow the global
investment community continues to have
faith in Pakistan, will be implemented by this
government so I am very supportive of what
I heard."
 Foreign Direct Investment
CONCLUSION
Foreign direct investment plays a
vital role in economy of developing countries
like Pakistan, not only it constitutes a very
large percentage in GDP, but also gives a
number of other advantages including
technology transfer, managerial know how,
setting up large scale of industries in
competition and increasing country’s export
margin.
Pakistan’s economy which has a
direct impact on foreign direct investment,
was wobbling since its creation back in 1947.
Due to political scenario and poor law and
order situation it get worst day by day, but
regardless of these unwanted factors,
situation is not bad as it looks.
In our research project, we have gone
through the FDI figures collected from 2004
to most recent investment in 2008, and
according to our knowledge, we are at far
better position today, when compared with
2004.
The following paragraph is about
investments made by foreigners from 2004 to
2008.
In 2004, FDI figure was 798 million
dollar which was raised to 949 million dollar
in only one year. In 2006 it was further raised
to 2 billion dollars with a sharp rise of 70.6
percent over last year. In 2007, according to
government figures, it was further raised to
20 percent more. In the current fiscal year
2008, FDI declines 44 percent mainly due to
political uncertainity and poor law and order
situation in Pakistan. It has again come to 2
billion dollar which was 4.62 billion dollar
last year.
Currently formed government is
taking all necessary steps to attract and
facilitate foreign investors, which will
ultimately cause a large increase in FDI.
In the end, we would like to
comment, that Pakistan has got a huge
potential in investment field. New
government should maintain a investor
friendly environment, so that Pakistan could
be prosperous and will be very soon in the
line of developed countries. (INSHALLAH)
FINDINGS
Pakistan’s FDI has got an enormous
increase in last 7 to 8 years, mainly due to the
effort of President Pervez Musharraf, who
has rebuild the peaceful image of Pakistan
around the whole world. Because of this
environment, many investors (Big guns) have
invested in Pakistan.
In our research, we found that all
things were going smoothly till fiscal year
2007. But after 2007 the Foreign direct
investment droped on a large scale which has
been mentioned in the articles and their
reviews.
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It was mainly due to political unrest
and bad security environment. Pakistan is
blessed with a very ideal geo-strategic
location which includes world’s most
booming economy. China as its neighbor.
Central Asian states looks towards Pakistan’s
see route for the mode of trade. By this, we
found that Pakistan has got all the necessary
tools for enhancing our FDI, which mainly
includes availability of cheap labor, fertile
land of Punjab and Sind, world’s most
organized irrigation system and the most
important of all, the Arabian Sea, which is
the back bone of all trade done in Pakistan.
It is matter deep sadness for all of us,
to know that investors all over the world,
who were looking towards Pakistan’s
political and law in order situation, and
changing their plans are moving towards
other investment areas, like India and
Bangladesh, which is not at all in favor of
Pakistani economy.
need, but also create a lot of job
opportunities, bringing back to life the
industries, which have been closed. And
most interaction of Pakistani market with the
whole world.
We should atleast learn from our
neighbors like China and India…
Two of world’s fastest growing
economy countries. What they have got in
which Pakistan is lacking behind? Law and
order situation, smooth functioning of
government, proper power (electricity, water,
gas) facilities, tax free zone and interaction
with WTO, can bring revolutionary change in
Pakistan’s economy.
“This is continuation of trend of expansion
of existing investment in Pakistan and will
hopefully mark the state of real upward
trend in FDI.”

Our Government should keep this in President of Pakistan while addressing

mind that investor will never take risk while congress members in USA
spending its capital.

So far concluding, all over research

work, we came to a major point that if newly
formed government is able to provide
investor friendly environment. Pakistan is
soon going to be a hub for all the trade done
in not only in Asia, but all over the world.
But besides that, if these things are not taken
as a serious matter, Pakistan’s economy will
be in great danger.

Investment by foreigners in country

not only enhances their profit maximaization

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 Foreign Direct Investment

FY

Fiscal Year

PTC

Pakistan Textile Company

WTO

World Trade Organization

PSDE

Pakistan Society for development of

Economists

SECP

Securities and Exchange Commission

of Pakistan

PIDE

Pakistan Institute of development

economists

GLOSSARY GDP

Gross Domestic Product

Abbreviations used in the project report.
CPI

Consumer Price Index

FDI
SPI
Foreign Direct Investment
Sensitive Price Index

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  Foreign Direct Investment

IPRS

Intellectual Property Rights

IPP

Independent Power Produces

SBP

State Bank of Pakistan

GDR

Gross Domestic Revenue Business & Finance Review

http://www.jang.com.pk/thenews/

REFERNCES Foreign Direct Investment website

http://www.fdimagazine.com/

WEBSITES VISITED:

Wikipedia

http://en.wikipedia.org/wiki/Foreign_direct_investmen
t
Business Recorder

http://www.brecorder.com/index.php?

State Bank of Pakistan

http://sbp.com.pk/

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 Foreign Direct Investment

Google search Engine

http://google.com.pk

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