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Foreign Direct
Investment in Pakistan
ANALYSIS
Current Situations
The Pakistan government is working hardto attract large scale FDI into the
country,including allowing foreign investors to holdunlimited equity and making
concertedefforts to project a positive country image.
´Federal Minister for Privatization andInvestment Dr. Abdul Hafeez Shaikh, saidthat
Pakistan has great potential for foreigninvestment in various sectors and, for thefirst time,
it would attract a foreign directinvestment (FDI) of $1 billion this year. Hesaid that
foreign investment in the countrywas increasing every year and in the lastseven months it
had touched the figure of$600 million which is higher by 50 percentcompared to the
same period of last year.µ
(Source: Business Recorder)
Most of this investment was in oil and gas,
construction,
real
estate
andtelecommunication sectors and was result ofpositive policies of the present
government.
Hafeez said that the image of the country isimproving internationally and its growth
rate,stable government and positive policies areattracting them to invest in this country.
Foreign investors should now come forwardto invest and avail the vast
opportunitiesavailable in gas, oil and other sectors inPakistan and get benefit of business-
friendlypolicies of the government.
An Overview
Developing countries by and large face agap between domestic savings and thedesired
level of investment. In case ofPakistan, for example, domestic savingsconstitute only 15-
18 per cent of GDP. Thisgap is to be filled by the inflow of foreigncapital. Foreign direct
investment (FDI) isarguably the most important source offoreign capital. In addition to
filling thesavings-investment gap, FDI yields a numberof advantages to the host country
includingtransfer of technology and managerial know-how, employment generation,
revenues tothe government, provision of qualityproducts to consumers, creation of
backwardand forward linkages, broadening ofindustrial base, and increase in exports.
In order to increase the level of foreign
capital
inflows,
developing
countriesliberalize their trade and investment regimeby relaxing governmental controls
andoffering a number of financial and tradeincentives like tax concessions and
tariffreductions. Though exceedingly important,the right level of foreign investment is
notenough. What also matters is the direction ofinvestment, that is, in which sectors it
is made.