The Impact of Foreign Direct Investment on Growth of Manufacturing Sector of Pakistan

Abstract

Purpose- This study assessed the impact of foreign direct investment on the manufacturing sector growth in Pakistan using panel data of 50 companies covering the period of 2011—2020. Methodology & Design- This study has studied the relationship between FDI and growth of non-fmancial companies listed on Karachi Stock Exchange (KSE) using panel data. Our sample includes 70 non-fmancial companies with data collected and analyzed for the period 2010 to 2020 i.e. ten years. Data is taken from multiple sources including annual reports, financial statements analysis of non-fmancial companies by State Bank of Pakistan, Karachi Stock Exchange (KSE) website and Business Recorder. The study utilized a quantitative research method, which applied secondary data. This study adopted a correlation design to test the relationship between variables. Both descriptive and inferential statistics were utilized to analyze the data. To analyze the influence offoreign direct investment on manufacturing sector growth in Pakistan, adopted a model from (Azolibe, 2021). Findings- According to the Panel data findings, Inward FDI have a favorable impact on the growth of the manufacturing sector. On the other hand, Inflation, trade openness and GDP growth rate was not significant in determining the growth of manufacturing sector in Pakistan. This demonstrates that inward foreign direct investment (FDI) is major driver ofmanufacturing sector growth in Pakistan. we Pakistan should concentrate more on making policies that will for outward foreign direct Limitations encourage the effective utilization of domestic resources investment in other countries of the world as it has the capacity to boost the manufacturing more inflows of sector growth. In addition, policies that will attract FDI in the region should be encouraged. Both inward and outward FDI should be considered as an integral part of Pakistan economic policy in order to spur the manufacturing sector growth.Purpose- This study assessed the impact of foreign direct investment on the manufacturing sector growth in Pakistan using panel data of 50 companies covering the period of 2011—2020. Methodology & Design- This study has studied the relationship between FDI and growth of non-fmancial companies listed on Karachi Stock Exchange (KSE) using panel data. Our sample includes 70 non-fmancial companies with data collected and analyzed for the period 2010 to 2020 i.e. ten years. Data is taken from multiple sources including annual reports, financial statements analysis of non-fmancial companies by State Bank of Pakistan, Karachi Stock Exchange (KSE) website and Business Recorder. The study utilized a quantitative research method, which applied secondary data. This study adopted a correlation design to test the relationship between variables. Both descriptive and inferential statistics were utilized to analyze the data. To analyze the influence offoreign direct investment on manufacturing sector growth in Pakistan, adopted a model from (Azolibe, 2021). Findings- According to the Panel data findings, Inward FDI have a favorable impact on the growth of the manufacturing sector. On the other hand, Inflation, trade openness and GDP growth rate was not significant in determining the growth of manufacturing sector in Pakistan. This demonstrates that inward foreign direct investment (FDI) is major driver ofmanufacturing sector growth in Pakistan. we Pakistan should concentrate more on making policies that will for outward foreign direct Limitations encourage the effective utilization of domestic resources investment in other countries of the world as it has the capacity to boost the manufacturing more inflows of sector growth. In addition, policies that will attract FDI in the region should be encouraged. Both inward and outward FDI should be considered as an integral part of Pakistan economic policy in order to spur the manufacturing sector growth.