FOREIGN DIRECT INVESTMENT

Presented by: Sadia Khalid-(BC09-069) Sana Javaid-(BC09-070) Saira Khan-(BC09-067) Hina Masood-(BC09-066) Bcom hons. (Morning) Section: A

Investment
It is a process of investing money or profit for profit or interest. In a country investment is really important to increase productivity of that nation.

Investment is a necessary element for development of industries

Investment

Local investment

Foreign Investment

Savings

Shares

Foreign direct investment

Foreign portfolio investment

Official flows

Commercial loans

Kinds Of Foreign Assistance In Pakistan

Accompanied by strict conditionality's by the donor country
Foreign aid

Foreign debts

Loans given by foreign countries and self reliance policy is ignored

Two prominent types of foreign investment in Pakistan being prevailed; Foreign investments foreign portfolio investment &foreign direct investment.

Foreign Portfolio investment

Foreign Portfolio investment quite in a bloom until 2007. SBP data reveals that during July to August 20,2008; the USA investors withdrew $217mn, UK$64mn, Switzerland $38mn, Hong Kong $27mn Singapore $11mn.

Foreign Direct Investment

FDI is a kind of foreign investment in which the investors come with long-term interests, and not only invest capital but also introduce new technology in the host country. Private companies incorporated in one country. Private Co. also called MNCs. Invest in the host country via franchises,branches,etc. No government control over these MNCs. Net assets and net income of these MNCs more than total budget of Pakistan.

Graphical Analysis Of FDI

Most of Pakistans investment comes from its War on Terror in 2008. During the year 2008, US had the largest share of 38.46% of FDI Inflow followed by UAE (17.23%), UK (13.52%), Hong Kong (9.98%) and Norway (8.08%).

Some Salient Features Of FDI

FDI enable the host countries to achieve investments level beyond their capacity to save. Potent weapon to achieve countrys socio-economic goals like poverty reduction. Contribute in capital formation and foreign trade.

Country-wise FDI inflow Pie Chart

We can see the major inflows are from the developed world, namely, USA 39%, UK 14%, and Hong Kong 10%. The other countries being Japan, U.A.E, Norway, Germany, Switzerland and Saudi Arabia.

Sector-wise FDI Inflow

The communication (IT & Telecom) sector bring highest foreign investment of 1, 625.3 million with 37% share in year 2007-08.
Financial business 1,607.6 million (36%). Oil & gas 634.8 million (14%). Power 70.3 million (6%). Trade with 175.5 million having 4% share in total FDI.

Benefits Of FDI
Reliable and reputable tool for developing countries. Transfer of technology. Management skills and human capital development. Tax revenues. Mutually beneficial.

 Opportunity for SMEs.

Addition of value added products.

Reduction of saving-investment gap. CSR(corporate social responsibility).

Disadvantages of foreign direct investment

Regional disparity. No government supervision Issue of national security and autonomy. Issue of self reliability. Implementation of undesirable policies. Stiff competition for local investors. Geographical or political instability of host country. Import orientation.

Steps to be taken
Enrollment of local partners in MNCs Transfer of technology should be stressed upon. MNCs to be encouraged to add value to the local goods. Local enterprises to take benefit from profitability of project.

Conclusion
The net advantage or disadvantage of FDI depends upon the regulation & control of MNCs operating the host country by the host country's government. The following errors should be avoided:
Over-dependence on foreign investors. Dumping of products at high prices.

Undesirable outflow of profits

Inappropriate management of labor.

So despite of some shortcomings ,we can get maximum profit out of the foreign investment, on the condition that they are invested at the right place and at the right time.