Abstract:
Foreign Direct Investment (FDI) has been one of the most
fascinating and intriguing topics amongst researchers in
international business. It is one significant form of rapid
international expansion to increase ownership of assets,
derive location-specific advantages and acquire additional
knowledge.
Emerging markets possess a lot for potential for Foreign
Direct Investment (FDI). These markets enable investors to
increase their profitability at a cost lower as compared to
other markets. During the last two decades and specifically
during the last eight to ten years Pakistan has undergone
certain economic and policy changes which have enabled it
to develop itself as a promising host nation for foreign
investors. Efforts have been made not only to enhance
economic growth but also to develop proper infrastructure,
enhance the human resource availability, reduce factor cost
and amendment of policies in order to render Pakistan as an
investment friendly country.
The prospects of FDI in Pakistan have specifically improved
over the past decade. The factors which are favoring FDI
are higher economic growth, macroeconomic stability,
reforms, consistent policies and the political and law &
order situations.
The study explores the main determinants of FDI in Pakistan
with a particular emphasis on Economic factors and
Investment Policy. Five important economic determinants
along with a political determinant have been highlighted.
These determinants have been stressed upon in coherence to
previously conducted studies. The main determinants
analyzed in the study are GDP, interest rate, inflation,
labor force availability, exchange rate and liberal
investment policy. The economic determinants have been
empirically tested in order to identify the relationship
between these variables and FDI inflow in Pakistan, where
as descriptive analysis has been carried out to signify the
relationship between FDI and a liberal investment policy.
