People from developed countries send money to Pakistan for foreign direct investment purposes. New dimensions for sustainable economic growth have emerged due to changing modes of international transactions and cross-border mobilisation of factor capital in the pursuit of transnational development. The source of acquisition of managerial control over a business operation in a host country by a business enterprise of a foreign country (an influential element of this process) is known as a foreign direct investment (FDI).
The destinations of FDI flows from industrially developed countries to high-growth emerging centres have shifted as a result of shifting attitudes and more favourable policies in the host developing countries. Developing countries’ FDI stock has increased from $ 132.95 billion in 1980 to $ 1438.48 billion in 1999 due to money transfer to Pakistan and other developing countries by investors. In 1999, their share of the inward stock increased to 30.14 percent, up from 26.2 percent in 1980. FDI inflows increased from $ 4.42 billion to $ 208.0 billion during this period, growing at a rate of 22.5 percent per year, while GDP grew at 3.9 percent.
What Are The Factors Affecting Foreign Direct Investment In Emerging Countries?
The economic factors that influence Foreign Direct Investment are divided into two categories: (a) market size, growth potential, and output absorption, and (b) the host country’s incentive mechanism and the cost of international production as opposed to export and licence. The majority of empirical research on FDI has yielded conclusive evidence supporting the positive relationship between FDI and market size (market size hypothesis).
What Are The Advantages Of Foreign Direct Investments To The Economy Of Pakistan?
Foreign direct investment (FDI) provides much-needed money, innovative manufacturing techniques, snobbish management skills, advertising and marketing experience, global connections, and the contentious concept of “transfer pricing.” Pakistan, the world’s seventh most populous country with 140 million inhabitants, has remained unattractive for FDI inflows despite having a relatively high GDP growth rate (averaging about 6%), a large stock of natural resources, and a range of investment provisions. Increasing external debt and declining share of official grants indicate that Pakistan will have to rely more on attracting private investment inflows and online money transfers to Pakistan by expatriates to meet its future requirements of sustained economic growth and retire external debt.
Pakistan’s interest in FDI is primarily on account of technological know-how, its transference and managerial skills that accompany such investment. During the second and third five-year plans, it was supposed that foreign investment and skill related to it are more critical for capital goods and other sophisticated industries. The second most important factor of foreign money is overseas Pakistanis send money to Pakistan online to family and investment in a local business.