Economic Analysis of Foreign Direct Investment and Its Impact on Trade and Growth in Pakistan

Foreign direct investment FDI is an investment of a company from one country to another whereby assets are acquired, operations are set up and joint ventures with local firms are made (Financial Times , n.d.). FDI is a risky and more expensive method of venturing globally as compared to licensing and exporting, however it does not stop companies from doing so due to its many advantages. FDI is one of the key drivers in speeding up the development and economic growth in Malaysia. Sound macroeconomic management, presence of a well-functioning financial system and sustained economic growth has made Malaysia an attractive country for FDI. Moreover, FDI plays a crucial role in Malaysia economy as it generates economic growth by increasing capital formation through the expansion of production capacity.

Rapid changes in governments, people’s non-trust towards the government and number of Martial Laws and declaration of Emergencies in Pakistan has made this country to be a high risk country for foreign investment. Examples of political factors are changes in government, changes in govt. policies, corruption, type of government, regulations, trade restrictions, tax policies, tariffs etc.

Cotton, textile, grains, fruits and vegetables are the major exports and source of foreign exchange earnings. The international trade regulation and competition have caused Pakistani producers to introduce technologies in processing and manufacturing better quality, cost-effective and value-added products, in accordance with the international standards. In addition to this, globalization has opened doors for millions of job opportunities for Pakistanis all over the world. Personal remittances account for 7% of GDP for Pakistan (World Bank, 2015) and not only help in increasing the living standards but also, through private domestic investments, help in economic growth. Furthermore, the free and preferential trade agreements with regional and international economies has allowed the inflow of technology and surplus capital into Pakistan, allowing the development of infrastructure, telecommunication and energy

According to Eryigit (2012), “Foreign direct investment (FDI) is defined as establishing a new company or branch of a foreign company by foreign investor or share acquisitions of a company established in host country (any percentage of shares acquired outside the stock exchange or 10 percent or more of the shares or voting power of a company acquired through the stock exchange”. According to Fadli, Norazidah, Rhaudhah, Nurul, Salwani and Kamaruzaman (2011), stated that Malaysia one of the developing country that being openness to foreign country in order to attract foreign investor to maintain an accelerate growth to this country. They also stated that foreign direct investment plays an important role in capital formulation and economy growth

Tarun Kanti Bose (Corresponding author) Assistant Professor, Business Administration Discipline, Khulna University Khulna 9208, Bangladesh Tel: 880-1911-451-044 Received: February 25, 2012 doi:10.5539/ibr.v5n5p164 Abstract This study was directed towards detecting the positive and negative sides for the foreign investors while they go for direct investment in India and China. A descriptive and explorative research study has been carried out for investigating the current proposition of the concerned case of FDI in those two countries. Advantages of investing in India includes-Huge market size and a

Many scholars argue inward FDI have positive economic impacts on the host country (Buckley et al., 2007; Globerman, 1979; Lipsey and Sjöholm, 2004; Nguyen and Nguyen, 2007; Zhu and Tan, 2000). According to them, there is a causal relationship between FDI and economic growth, where FDI stimulates economic growth. Nguyen and Nguyen (2007) state FDI promotes economic growth and is also a tool to attract FDI. The literature by Anwar and Sun (2011) shows FDI and domestic capital have a significant positive impact on economic growth. Thus, FDI has a positive impact on the economic growth of the host country.

In developing countries FDI is seen as a useful source of funds. LDC’s look upon FDI as a source to bridge their demand supply gap of funds. It represents an important source of non-debt inflow that often brings along with it new technology and management

Foreign Direct Investment (FDI) has been considered important for the growth of a country. When the individuals or companies from a country invest in another country, it is regarded as FDI. FDI not only strengthens the manufacturing base of the host country but also contributes to the strengthening of the economic outlook. FDI can be seen as an investment that leads directly to job creation in an economy. The unemployment rate decreases due to FDI, which leads to stability in economic, social and political spheres. This leads to establishing the notion that FDI is necessary for a country because it helps in strengthening the economy of a particular country. Ireland has been benefitted by FDI for years. Since the early years of the twenty-first century, Ireland has attracted billions of dollars of investment from its economic allies. The resultant economic growth has not been hidden from the analysts. This paper will define FDI and its impact on an economy and it will also serve to explain the role of FDI in Ireland’s economic growth.

Foreign Direct Investment as seen as a main source of non-debt inflows and is increasing being required as a vehicle for technology flows and as a means of attaining competitive efficiency by creating a meaningful network of global interconnections. FDI plays a critical role in the economy since it does not only give opportunities to host countries to enhance their economic development but also opens new vistas to home countries to optimize their earnings by employing their ideal resources.

During the last three decades, the world economy has increasingly integrated with foreign direct investment (FDI). FDI itself has become a particularly significant driving force

Many writers have tried to figure out if there is a direct link between Foreign direct investment (FDI) and economic growth of an economy in terms of Gross domestic product (GDP) but a reliable procedure hasn’t been found yet.

A Foreign Direct Investment is basically an ownership in a business in a country by a totally different country. Foreign Direct Investment (FDI) plays a very important role in the development of a nation. All countries need FDI’s but in the case of underdeveloped or developing nations FDI is one of the most important aspect, as this kind of investment is required to help sustain the growth of the economy. This inturn helps improving the balance of payments and also helps in generating employment in the country. FDI also helps to improve productivity and use the available resourecs to the maximum.

The dissertation topic will focus on the importance of foreign direct investment into Pakistan’s Economy and will also focus around the causes of foreign direct investment. The report will look into three different perspectives such as, the effects on FDI pre and post 9/11, investment in different sectors of industry and the importance of investing countries in terms of contributing towards developing Pakistan’s infrastructure or helping financially to fight the ‘War against terror’. Moreover, the report also provides an insight to what can be done to improve the inflow of FDI into Pakistan.

The FDI & FII mantra is considered an all-purpose panacea for the ills of the Indian economy and society. It has become routine for our finance ministers to "showcase" India in various international forums and exhort the global captains of industry and commerce to come to India. We here want to know about the far-reaching implications of FDI in our economy and, particularly, how it can stifle economic growth.

Foreign direct investment was neglected in the developmental process of Indian economy before 1991.the 1991 industrial policy has paved out a way for the foreign player, India is a democratic polity and is a country with the political stability and a growing pool of consumers and educated manpower which is a favorable aspect for FDI in India.