final report of brm

8/9/2019 Final Report of BRM

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INTRODUCTION:

First of all we see what investment is? Investment is defined as money that is invested

with an expectation of profit. or Investment: the act of investing; laying out money or

capital in an enterprise with the expectation of profit. or Trade offbetween riskandreward while aiming forincrementalgain and preservation of the

invested amount (principal). In contrast, speculationaimsat high gain or heavy losses,

and gambling at out of proportion gain or loss. Two main classes of investment are(1) Fixed income investment such asbonds, fixed deposits,preference shares, and (2)

Variableincome investment such asbusinessownership (equities),property ownership.

In economics, investment means creation ofcapital orgoods capable of producing othergoods orservices. Expenditure on educationand health is recognized as an investment

inhuman capital, and research and development in intellectual capital. Return on

investment (ROI)is a key measure of a firm'sperformance.

Sajawal Khan and Muhammad Arshad Khan analyze the determinants of privateinvestment in Pakistan over the period 1972-2005. Saving and investment are two key

macro variables with micro foundations which can play significant role in economicgrowth, inflation stability and promotion of employment especially if seen in the context

of a developing country. For self reliance and growth objectives, mobilization ofdomestic resources and their efficient utilization are the two major policy oriented

focuses today (Khan 1993). National savings are critically important to help maintain ahigher level of investment which is a key determinant for economic uplift. Thereby,

necessitating the analysis of saving investment behavior and its determinants for policy

implications; this is a demanding area because of continuing debate on the potential role

of their determinants.

The econometric modeling do not appear to be adequately developed to fully account for

the non-measurable determinants of saving, as they interact with the observable and

quantifiable factors (Kazmi 2001). Moreover, data reliability for a developing country

like Pakistan is still a question and data on many potential determinants is not available.

Where as, earlier studies on saving behavior and its determinants have provided several

model specifications, investment studies have not dealt sufficiently in the estimation of

plausible determinants of investment and their potential impacts. Most of the studies on

investment observed the behavior of foreign investment and the favorable atmosphere for

investment only but could not provide a comprehensive model for the determinants oftotal investment (Khan 1984, Nuannar 1991 and Guisinger 1997).We observed that Investment as percentage of real GDP in Pakistan is low as compared

to other neighboring countries. The gross domestic investment in Pakistan was onaverage 17 percent of GDP during 2003-05. While gross domestic investment in India

was on average 30 percent of GDP, 24 percent in Sri Lanka, 24 percent in Bangladesh,

and 59 percent in Bhutan. The gross domestic investment in Eastern and Northeasterncountries was also highest especially in China (44 percent). It was 30 percent in the least

developing countries and 24 percent in developed countries.

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Main purpose of our research is identifying main factors which are affecting the private

investment in Pakistan. Our objective is that we want to create the awareness amongpeople regarding private investment. Providing guidelines to people who are confused

about their investment decision or business expansion issues and unable to find out what

factor they consider their decision making. And what type of benefit they are gettingfrom it and what type of constraints they are facing in tier private investment decisions.

We want to know general perception of people about the private investment in Pakistan.

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LITERATURE REVIEW:

Hafeez-ur-Rehman, Sajawal Khan and M. Arshad Khan (January 2009), objective is to

describe the determinants of private investment in Pakistan over the period 1972-2005.

They suggested that in developing countries, private investment is determined mainly bylevel of domestic output, the real interest rate, public investment, size of the external

debt, the exchange rate, inflation rate, foreign direct investment, good governance,

quality of institutions and entrepreneurial skills for the private sector to make biginvestment decisions. They used ARDL co-integration technique for estimation.

Their finding shows that real GDP is positively related to private investment, its impact

is significant in long run. The relationship between public and private investment is positive but insignificant. . The relationship between external debt, foreign direct

investment, real interest rate and inflation rate on private investment are negative and also

significant except inflation. Qualities of institutions, governance, entrepreneurial skills

are also show the positive significant relationship with private investment.

Alexander Bilson Darku (2001), objective is to determine how the decision to invest and

the level of investment are influenced by uncertainty and how the relationship betweenuncertainty and investment changes when irreversibility of investment is considered.

Author used a sample selection technique to fit a modified version of an accelerator

model for estimation. The paper yielded results consistent with predictions of theories ofirreversible investment. His results indicate a negative relationship between uncertainty

and investment. Findings also indicate that uncertainty has a greater negative effect on

investment for firms with less reversible investment.

Mauro, Palo (1993), objective is determine the impact of political instability on growth of

investment. He suggests that Govt instability with policy uncertainty e.g. threat toproperty rights and socio political unrest crucially affects the investment decision.

Elizabeth Asiedu and James Freeman, objective to determine the effect of corruption on

investment growth. They used six measures of corruption from four different sources: two

firm-level measures and four country-level measures. This paper analyzes the effect of

corruption varies significantly across regions: corruption has an adverse effect on

investment growth for Transition countries, but has no significant effect for LatinAmerica and the Caribbean and Sub-Saharan. Another important point is that their

analyses pertain only to firms that are already operating within the country. It is likely

that large levels of corruption may prevent many firms from operating in these regions in

the first place. However, this loss of potential investments resulting from corruption isnot captured by their model. Thus, although corruption does not have a significant effect

on investment growth, it is possible, and indeed likely that it might prevent the entry of

firms. As a result, the overall effect of corruption on investment (which includes the lossof potential investments) may be negative.

Khaled Sakr (March 1993), Objective of his research is to identify the determinants ofprivate investment in Pakistan, in particular, the impact of government investment on it.

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Theoretical review and empirical literature indicates that investment functions in

developing countries differ from those in developed countries on the bases of credit

availability and government investment especially in infrastructure.The results suggest that there is positive relationship between private investment and

GDP growth, credit extended to the private sector, and with government investment. To

investigate the issue further, the paper disaggregates government investment into itsinfrastructural and noninfrastructural components. It concludes that noninfrastructural

government investment appears to be negative relation with private investment. The

paper argues that in promoting both infrastructural government investment and creditextended to the private sector, policymakers must be concentrate on maintaining

macroeconomic stability.

Adam Reiff (2006), described a method of structural estimation of firm-level investmentcosts, based on a dynamic investment model that incorporates fix and irreversibility costs

of investment. Approaches: (1) the model makes distinction between cheap (cost- free)

replacement investment and costly new investment, and we also make such a distinction

at the empirical level; (2) we estimate the structural cost parameters of the model with amodified version of the indirect inference method. . Our results indicate that fixed and

irreversibility costs are indeed significant. In particular, we find strong evidence of partialirreversibility, which is of much higher extent than estimated previously. General

investment model, in which firms maximize the present value of their future profits, net

of future investment costs. The goal of this paper is to structurally estimate the most

important costs of investment, based on a dynamic model. To estimate the costcomponents we use an unbalanced panel about US manufacturing plants between 1959-

87.

Kalim hyder and Qazi Masood Ahmed(2003),described the purpose of this article is to

analyze the decline in private investment and formulate a comprehensive strategy to over

come this problem, which is the main cause of deceleration in the growth momentum ofPakistan economy. Due to the lack of confidence private investment is decreases.

Determinants are agriculture and manufacturing.

Richard A. Booth (1999) reviews the state of the law regarding actions against broker-

dealers based on the National Association Of Securities Dealers (NASD) suitability rule

and similar theories, summarizes the theory and practice of investor diversification,

explains the motivations that may lead a broker to recommend excessively riskysecurities and investment strategies, and discusses the various methods that may be used

to quantify or compare risk, focusing in particular on how we can measure the risk. The

suitability rule tells us that risk is a key factor in determining whether an investment orinvestment strategy is suitable for the investor. From the article it is also clear that

brokers may have a strong incentive from his customer if the customers invest in risky

securities and it is difficult to measure the risk of investor. Others things in this articlefinding are that investor can minimize his risk my diversification.

Matthew L. Beville (2009) analyzes systemic risk in the financial system and shows how

current regulations provide insufficient protection for our capital markets and the market

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stability effects the investment decisions. He also describes a new framework with which

to analyze the problem that may provide helpful in stabilizing the financial system.

Benjamin A. Templin (2008) describes that on whether the government or private

individuals should make investment decision and how the government policies effect the

investment decision. Because in USA when economic crisis start the governmentramification of creating a federal government corporation for purpose of investing in

social security trust in high yield securities. If investment is to work , there needs to be

enough time for those investments to mature. While some commentators, withoutunderstanding diversification, criticize the markets as too risky for social security funds,

the real risk is in doing nothing. The failure to act shits an unworkable tax burden onto

future generation and will likely results in benefits cuts and a return to social problem tp

poverty among the elderly.

Joaqun del Campo Revenga (1999) effects of social policy regulation on investments,

using an option-pricing model.. The model developed assumes that the regulator will set

up the desired value of the project as the return earned by that particular project. A meanreverting process arises as a result of modeling this approach. The results will deepen the

understanding of regulated sectors, and will help explain the investment decision processfollowed by companies. The model presented captures the behavior of a both fiscal

disincentives and incentives such as corporate taxes or tax credits in an investment. The

tighter the fiscal policy means the higher the disincentive and the lower the value of the

project and of the option to invest in it.

FRAMEWORK OF STUDY:

We want to research that which particular factors affecting private investment in

Pakistan. For this purpose we spent a lot of time to find out the related articles to our

research topic. After reading such articles we find out ten different variables which arehaving impact on private investment, these are explained in theoretical framework:

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1. Theoretical Framework:Component 1:

Dependent Variables

1. Private Investment

Independent Variables

Foreign Direct Investment

Quality of Institute & Entrepreneurial Skills

Political InstabilityCorporate Governance

Infrastructure Government Investment

Interest RatesExchange Rate

Inflation Rate

Government attitude towards Private InvestmentProblem of getting credit

Component 2:There is relationship between dependent and independent variables.

Component 3:1. Foreign Direct Investment:

There is negative relationship between foreign direct investment and private investment.

2. Quality of Institute & Entrepreneurial Skills:

There is positive relationship between quality of institute & entrepreneurial skills andprivate investment.

3. Political Instability:

There is negative relationship between political instability and private investment.

4. Corporate Governance:

There is positive relationship between corporate governance and private investment.

5. Infrastructure Government Investment

There is positive relationship between infrastructure government investment and privateinvestment.

6. Interest Rates:There is negative relationship between interest rates and private investment.

7. Exchange Rate:

There is negative relationship between exchange rate and private investment.

8. Inflation Rate:

There is negative relationship between inflation rate and private investment.

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9. Government attitude towards Private Investment:

There is positive relationship between government attitude towards private investmentand private investment.

10. Problem of getting credit:There is negative relationship between problem of getting credit and private investment.

Component 4:1. Foreign Direct Investment:

If foreign direct investment comes in Pakistan then private investment will decrease,

indicating the negative relationship.

2. Quality of Institute & Entrepreneurial Skills:

If quality of institute & entrepreneurial skills are more in Pakistan then private

investment will increase, indicating the positive relationship.

3. Political Instability:

If there is political instability in our country then private investment will decrease,indicating negative relationship.

4. Corporate Governance:

If there is good corporate governance in our country then private investment will

increase, indicating positive relationship.

5. Infrastructure Government Investment

If Government invests more in infrastructure in our country, such as roads, power

projects and telecommunications--to improve the environment for private investment,indicating positive relationship.

6. Interest Rates:

If rate of interest will increase in country it will increase the cost of capital for businessesthen the private investment will decrease, indicating negative relationship.

7. Exchange Rate:

If rate of exchange will increase then imports become more expensive for ourbusinessmen they will decrease the private investment, indicating negative relationship.

8. Inflation Rate: If rate of inflation is more in country, it reduces the savings of peoplethen private investment decrease, it indicates the negative relationship.

9. Government attitude towards Private Investment:

If government attitude towards private investment is more, it provides more subsidies toprivate businesses then private investment grows, it indicates the positive relationship.

10. Problem of getting credit:

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If the businessmen face more problem of getting credit from financial institutions to grow

there businesses, then it will become the major obstacle for the growth of private

investment, which indicates the negative relationship with private investment.

Component 4:

Schematic Diagram:

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Independent Variable Dependent Variable

2. Hypothesis:After the identification of variables we can derive the following hypotheses:

Political Instability

Corporate

Governance

Infrastructure

Government

Investment

Interest Rates

Exchange Rate

Inflation Rate

Government

attitude towardsPrivate Investment

Problem of Getting

Credit

Quality of Institute

& Entrepreneurial

Skills

Foreign Direct

Investment

PRIVATE

INVESTMENT

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HA: If foreign direct investment increases then private investment will decreases.

HO: There is no relationship between foreign direct investment and private investment.

HA: If there is more quality of institute & entrepreneurial skills then private investment

will increases.

HO: There is no relationship between institute & entrepreneurial skills and privateinvestment.

HA: If there is political instability in our country then private investment will decreases.

HO: There is no relationship between political instability and private investment.

HA: If there is good corporate governance then private investment will increases.

HO: There is no relationship between corporate governance and private investment.

HA: If government invests more in infrastructure then private investment will increase.

HO: There is no relationship between government investment in infrastructure and privateinvestment.

HA: If rate of interest will increase then the private investment will decrease.

HO: There is no relationship between rate of interest and private investment.

HA: If rate of exchange will increase then the private investment will decrease.

HO: There is no relationship between rate of exchange and private investment.

HA: If rate of inflation is more in our country then private investment will decrease.

HO: There is no relationship between rate of inflation and private investment.

HA: If government attitudes toward private investment are more then private investmentwill grow.

HO: There is no relationship between government attitudes toward private investment andprivate investment.

HA: If there is more problem of getting credit then private investment will decrease.

HO: There is no relationship between problem of getting credit and private investment.

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3. Methodology:This portion includes the model used for the research, the sample size selection, variable

selection and the statistical techniques employed to find out the relationship betweenvariables.

Type of Study:In our research we have done correlational study because we are interested to come

with different variables which are affecting the private investment in Pakistan.

Study Setting:For determining the different variables affecting private investment in Pakistan, we have

conducted study in natural environment. So it is the part of a non-contrived setting. Andwe have done field study by actually visiting the people.

Unit of Analysis:

Our unit of analysis is Individual as we got response from each individual or treatingeach person response as an individual data source.

Time Horizon:As in our research the data is gathered only just once, over the period of 2-3 months, in

order to answer the research question. So, we can say that it is a cross-sectional study or

one-shot study.

Research Instrument:We used Questionnaire as a research instrument for date gathering in our research. This

questionnaire is attached at the end of the report as annexure.

Questionnaire contains twelve questions.

We delivered questionnaire both through mail and by hand.

Sample Size Selection: Sample Size for our research is sixty, and

Geographical premise for research is Islamabad and Rawalpindi.

Variable Selection:We did literature review for selecting the factors that affecting the private investment in

Pakistan.

Statistical Techniques used:We used statistical techniques including descriptive analysis and linear regression fordata analysis.

Hypothesis Testing:

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We have done hypothesis testing to test our variables by using statistical techniques

including descriptive analysis and linear regression. And accept and reject the variables

on the basis of hypothesis testing.

After the research, we will be able to know the major factors affecting the privateinvestment in Pakistan more clearly. After knowing such factors we will be able to give

suggestions that how these factors can be controlled.

DATA ANALYSIS AND DICUSSION:

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The objective of our research to identify the important factors that affecting private

investment in Pakistan. For this purpose we have done correlational study because we areinterested to come with different variables which are affecting the private investment and

we conducted our study in natural environment. Our unit of analysis is individual as we

got response from each individual. We used questionnaire as a research instrument fordate gathering and the sample size for our research is sixty, and geographical premise for

research is Islamabad and Rawalpindi. We have done hypothesis testing to test our

variables by using statistical techniques including descriptive analysis and linearregression. And accept and reject the variables on the basis of hypothesis testing.

DATA CODING:

In data coding we assign the numerical values to variables for analysis. Provided inappendix, from table 4.1.1 to 4.1.11.

CODE BOOK:

PVTI = Private InvestmentFDI = Foreign Direct Investment

QIES = Quality of Institute & Entrepreneurial SkillsPI = Political Instability

CG = Corporate Governance

IGI = Infrastructure Government InvestmentIR = Interest Rates

EI = Exchange Rate

IFR = Inflation Rate

GA = Government attitude towards Private InvestmentPGC = Problem of getting credit

DATA ANALYSIS AND DICUSSION:In order to meet our research, we have done descriptive analysis, regression analysis and

hypothesis testing.

DATA SAMPLE INFROMATION:

Our sample size is 60 and our respondents were businessmen, employees, professors and

students.

DESCRIPTIVE ANALYSIS:

Table 4.2.1 shows the estimated means and standard deviations for the dependent

variable (Private Investment) and independent variables (Foreign Direct Investment,Quality of Institute & Entrepreneurial Skills, Political Instability, Corporate Governance,

Infrastructure Government Investment, Interest Rates, Exchange Rat, Inflation Rate,

Government attitude towards Private Investment, Problem of getting credit).

REGRESSION ANALYSIS:

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The estimated results of regression analysis are shown in table 4.2.3. Foreign direct

investment has negative but insignificant relationship with the private investment, same

results are found by theHafeez-ur-Rehman, Sajawal Khan and M. Arshad Khan (2009).According to them the most traditional factors have little or no impact on private

investment which includes foreign direct investment. Quality of institute and

entrepreneurial skills has positive but insignificant relationship with private investment.Political instability has negatively and significantly affecting the dependent variable

(private investment). Same results are founded by the Mauro, Palo (1993) in his research.

He suggests that Govt instability with policy uncertainty e.g. threat to property rights andsocio political unrest crucially affects the investment decision. Corporate governance has

the negative and insignificant relationship with private investment.

Table 4.2.3 shows that infrastructure government investment has positive but

insignificant relationship with dependent variable (private investment). Same results areprovided by the Hafeez-ur-Rehman (2009). His findings show the relationship between

public and private investment is positive but insignificant.

Table 4.2.3 shows interest rate has positive and insignificant relationship with private

investment. McKinnon (1973) and shaw (1973) provide the same results, that there coulda positive relationship between investment and interest rate, because higher rate of

interest would increase savings and also equilibrium investment will be higher. Hafeez-ur-Rehman (2009) suggests that thenegligible impact in long run as well as in short run

of real interest rate on private investment shows the non-responsiveness of private

investment to interest rate. Exchange rate shows negative and insignificant relationship

with private investment.Table 4.2.3 also shows that inflation rate has positive and insignificant relationship with

dependent variable (private investment). Hafeez-ur-Rehman, Sajawal Khan and M.

Arshad Khan (2009), mention that the inflation has the minor impact on privateinvestment. It has insignificant relationship with private investment, other then this there

are many factors having negative and significant affect on investment like exchange rate.

In developing countries we see in some situations inflation shows positive relationshipwith private investment. In case of existing firms, we see these are growing rapidly

because of increasing inflation rate. They generate high profits due to high prices.

Government attitude towards private investment shows positive but insignificantrelationship with private investment.

Table 4.2.3 also shows the negative but insignificant relationship between problem of

getting credit and private investment. Khaled Sakr (1993) also provides the same results

in his research. This shows credit availability and private investment has positiverelationship.

Table 4.2.2 shows that the R square of the model is 0.154(15.4%) which shows the weak

relationship between dependent variable (private investment) and independent variables(foreign direct investment, quality of institute & entrepreneurial skills, political

instability, corporate governance, infrastructure government investment, interest rates,

exchange rate, inflation rate, government attitude towards private investment, problem ofgetting credit).

HYPOTHESIS TESTING RESULTS:

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We tested ten hypotheses by using statistical techniques.

Model: Multi regression model of variables is as following,

PVTI= f (FDI, QIES, PI, CG, IGI, IR, EI, IFR, GA, PGC)

PVTI=a-b1FDI+b2QIESb3PI+b4CG+b5IGIb6IR-b7EIb8IFR+b9GA-b10PGC+ePVTI=1.278-.096FDI+.146QIES.271PI-.063CG+.171IGI+.003IR-.053EI+.118IFR

+.092GA -.100PGC+.49867

1. Private investment and foreign direct investment:

Linear regression shows the negative relationship between foreign direct investment and

private investment. Negative sign of the coefficient of FDI (b1= -0.096) support over

alternative hypothesis. So we accept our alternative hypothesis and reject null hypothesisand can say that if foreign direct investment increases then private investment will

decreases.

2. Private investment and Quality of institute & entrepreneurial skills:Linear regression shows the positive relationship between quality of institute &

entrepreneurial skills and private investment. Positive sign of the coefficient of QIES(b2= 0.146) support over alternative hypothesis. So we can say that if there is more

quality of institute & entrepreneurial skills then private investment will increases.

3.Private investment and Political instability:Linear regression shows the negative significant relationship between political instability

and private investment. Negative sign of the coefficient of PI (b3= -0.271) support over

alternative hypothesis. So we accept our alternative hypothesis and reject null hypothesisand can say that if there is political instability in our country then private investment will

decreases.

4.Private investment and Corporate Governance:Linear regression shows the negative sign of the coefficient of CG (b4= -0.063). Which

dont support over alternative hypothesis? So we reject our alternative hypothesis andaccept null hypothesis. The rejection purpose of is this variable is, there are many other

factors which are having more importance than corporate governance. In Pakistan, now a

day people seriously consider the government attitude towards private investment and

quality of institute & entrepreneurial skills more than corporate governance. We can saythat good corporate governance can not increase the private investment. There are having

no relationship.

5. Private investment and Infrastructure Government Investment:

Linear regression shows the positive relationship between private investment and

infrastructure government investment. Positive sign of the coefficient of IGI (b5= 0.171)support over alternative hypothesis. So we can say that if there is more infrastructure

government investment then private investment wills increases.

6. Private investment and Interest rates:

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Linear regression shows the positive sign of the coefficient of IR (b6= 0.003). Which

reject over alternative hypothesis? McKinnon (1973) and shaw (1973) provide the same

results, that there could a positive relationship between investment and interest rate,because higher rate of interest would increase savings and also equilibrium investment

will be higher. Hafeez-ur-Rehman (2009) suggests that thenegligible impact in long run

as well as in short run of real interest rate on private investment shows the non-responsiveness of private investment to interest rate. So we can say that increasing rates

of interest will not decrease the private investment. These are having no relationship.

7. Private investment and Exchange rate:

Linear regression shows the negative relationship between exchange rate and private

investment. Negative sign of the coefficient of EI (b7= -0.053) support over alternative

hypothesis. So we accept our alternative hypothesis and reject null hypothesis and cansay that if exchange rate increases then it is difficult for people to start or expend there

businesses.

8. Private investment and Inflation rate:Linear regression shows the positive sign of the coefficient of IFR (b7= 0.118). Which

reject over alternative hypothesis. Hafeez-ur-Rehman, Sajawal Khan and M. ArshadKhan (2009), mention that the inflation has the minor impact on private investment. It has

insignificant relationship with private investment, other then this there are many factors

having negative and significant affect on investment like exchange rate. So we can say

that increasing rates of inflation will not decrease the private investment. These arehaving no relationship.

9. Private investment and Government attitude towards Private investment:

Linear regression shows the positive relationship betweengovernment attitude towards

private investment and private investment. Positive sign of the coefficient of GA (b9=

0.092) support over alternative hypothesis. So we can say that if there is moregovernment attitude towards private investment then private investment will increases.

10. Private investment and Problem of getting credit:Linear regression shows the negative relationship between problems of getting credit and

private investment. Negative sign of the coefficient of PGC (b10= -0.100) support over

alternative hypothesis. So we accept our alternative hypothesis and reject null hypothesis

and can say that if there is more problem of getting credit then it is difficult for people tostart or expend there businesses.

CONCLUSION AND RECOMMANDATION:

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Objective of our research is identifying main factors which are affecting the private

investment in Pakistan. We want to create the awareness among people regarding privateinvestment. Providing guidelines to people who are confused about their investment

decision or business expansion issues and unable to find out what factor they consider

their decision making. And what type of benefit they are getting from it and what type ofconstraints they are facing in tier private investment decisions. We want to know general

perception of people about the private investment in Pakistan. We estimated our results

by using statistical techniques including descriptive analysis and linear regression. Andaccept and reject the variables on the basis of hypothesis testing.

Our findings are the private investment is positively correlated to quality of institute &

entrepreneurial skills, infrastructure government investment and government attitudetowards private investment.And negatively correlated to FDI, political instability,

exchange rate and problem of getting credit. One of the traditional factors that is political

instability has negative and significant relationship with private investment in Pakistan,

other have little or no impact on private investment that includes interest rate andinflation rate.

The findings of our research provide following recommendations for the improvement of

level of private investment in Pakistan.

Government plays a very important role in private investment mostly when

resources are limited. It must focus on it; provide subsidies to private businesses

for flourish of private investment.

Important consideration must be given to maintaining political stability which is

essential to stimulate sustained private investment in productive activities.

Policy needs to focus on quality of institute and entrepreneurial skills in order to

facilitate the private investment in developing countries like Pakistan.

BIBLIOGRAPHY:

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Hafeez-ur-Rehman, Sajawal Khan and M.Arshad Khan What Determines Private

Investment? The Case of Pakistan A Research Journal of South Asian StudiesVol. 24, No. 1, January 2009, pp. 52-68

Elizabeth Asiedu, James Freeman The Effect of Corruption on Investment Growth:Evidence from Firms in Latin America, Sub-Saharan Africa and Transition Countries

Alexander Bilson Darku (2001) Private Investment, Uncertainty, and Irreversibility inUganda The African Finance Journal, Volume 3, Part 1, 2001.

Khaled Sakr (March 1993) Determinants of Private Investment in Pakistan IMF

Working Paper (International Monetary Fund).

Mauro, Palo (1993) political instability, growth and investment Howard university

1993.

Adam Reiff (2006) The Costs of Investment Central European University library.

6 February, 2006.

Kalim hyder and Qazi Masood Ahmed (2003) Why Private Investment in Pakistan has

Collapsed and how it can be restored MPRA paper no. 16251.

Richard A. Booth (1999) The Suitability Rule, Investor Diversification, and Using

Spread to Measure RiskBusiness Lawyer, Vol. 54, Pp. 1599-1627.Matthew L. Beville (2009) Systemic Risk and Market Stability Florida State University

Law Review, Vol. 36, p. 245.

Benjamin A. Templin (2008) The Public Trust in Private Hands: Social Security and the

Politics of Government Investment Kentucky Law Journal, Vol. 96, No. 3, p. 36.

Joaqun Del Campo Revenga (1999) Regulated investments and the valuation of capital

investment strategies through a real options approach

APPENDIX:

18
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QUESTIONNAIRE

We want to research that Which particular factors affecting private investment in

Pakistan. For this purpose we need your help to identify those important factors. It is

assured that all information provided by you will be kept confidential. This research isonly for academic purpose, conducted by Management Sciences Department of

COMSATS Institute of Information Technology, Islamabad.

Name (Optional) __________________________

Occupation _____________________

Factor affecting Private Investment in Pakistan

Q.1. which type of investment would you like to do? If you are having certain amount ofmoney then.Private investment

Government investment

Q.2. which economical condition wills you consider more while investing? Inflation Rate

Exchange Rate

Real Interest Rate

All above are important

Q.4.What is your most significant obstacle to private investment? Uncertainty about the economy (uncertainty about interest rates, exchange rate, demand for

product, etc)

Government attitude towards private investment

Problem of getting credit Interest rates too high

Infrastructure

Q.5.What is the most serious type of uncertainty? Exchange rate uncertainty

Interest rate uncertainty

Political uncertainty

Inflation Rate

Q.6. Do you think Private investment is preferable on Government investment? Keeping

Risk and Return in mind? Yes No

Q.7.Is any form of uncertainty about the economy a constraint to Private investment?Yes No

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Q.8.If you were starting up your business today as a new investor, what sort of obstacles

would arise, and how serious would they be? (Rating as 0 = no problem, 1 = minor

problem, 2 = moderate problem, 3 = major problem)

1. Uncertainty about the economy ______

2. Government attitude towards private investment ______3. Problem of getting credit ______

4. Interest rates too high ______

5. Infrastructure ______

6. Political instability ______

7. Cost of credit ______

8. Exchange Rate ______

9. Inflation Rate ______

10. Other (specify)....................................... ______

Q.9.Please indicates HOW MUCH YOU AGREE OR DISAGREE with each of the

Statements.

Q10.What is your monthly income?

>= Rs.100,000

Rs.75, 000 =< income > Rs.100, 000

Rs.30, 000=< income >Rs.75,000

< Rs.30, 000

Q.11.What is the role of crucial issues in Private investment in Pakistan?

........

THANK YOU FOR YOUR TIME!

Strongly

Disagree

Disagree

Neither

Agree

Nor

Disagree

Agree

Strongly

Agree

1.Corporate Governance play role in investmentdecision in Pakistan:

2. Do you consider the inflow of Foreign Direct

investment while making Private investment decision:

1

1

2

2

3

3

4

4

5

5

3.Infrastructure Government investment having impact

on your Private investment decision:

4.The quality of institutions & entrepreneurial skillsfor the private sector to make big investment decision

are necessary:

1

1

2

2

3

3

4

4

5

5

20


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Table 4.1

Type of Investment

S .No Variable Numerical Value

a. Government investment 1b. Private investment 2

Table 4.2

Impact of FDI on Private Investment

S. No. Priory Numerical Values

a. Strongly Disagree 1

b. Disagree 2

c. Neither Agree non Disagree 3

d. Agree 4

e. Strongly Agree 5

Table 4.3

Impact of Quality of Institutions & Entrepreneurial Skills

on Private Investment



b. Disagree 2


d. Agree 4

e. Strongly Agree 5

Table 4.4

Impact of Political Instability on Private Investment


a. No 0

b. Minor 1

c. Moderate 2

d. Major 3

Table 4.5

Impact of Corporate Governance on Private InvestmentS. No. Priory Numerical Values


b. Disagree 2


d. Agree 4

e. Strongly Agree 5

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Table 4.6

Impact of Infrastructure Government Investment on Private Investment



b. Disagree 2

c. Neither Agree non Disagree 3d. Agree 4

e. Strongly Agree 5

Table 4.7

Impact of Interest Rates on Private Investment


a. No 0

b. Minor 1

c. Moderate 2

d. Major 3

Table 4.8

Impact of Exchange Rateon Private Investment


a. No 0

b. Minor 1

c. Moderate 2

d. Major 3

Table 4.9

Impact of Inflation Rate on Private InvestmentS. No. Priory Numerical Values

a. No 0

b. Minor 1

c. Moderate 2

d. Major 3

Table 4.10

Impact of Government attitude towards Private Investment


a. No 0

b. Minor 1

c. Moderate 2

d. Major 3

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Table 4.11

Problem of getting credit in Private Investment


a. No 0b. Minor 1

c. Moderate 2

d. Major 3

Table 4.2.1

Descriptive Statistics for all Variables (N= 60)

N Minimum Maximum Mean Std. Deviation

Private Investment 60 1.00 2.00 1.6000 .49403

Foreign Direct Investment 60 1.00 5.00 3.4333 1.15519

Quality of Institute and

Entrepreneurial Skills

60 2.00 5.00 4.2667 .86095

Political Instability 60 .00 3.00 2.1667 .90510

Corporate Governance 60 2.00 5.00 3.8333 .76284

Infrastructure Govt.

Investment

60 2.00 5.00 3.2500 .98506

Interest Rate 60 .00 4.00 2.0333 .99092

Exchange Rate 60 1.00 3.00 1.9833 .83345

Inflation rate 60 .00 3.00 2.1833 .87317

Govt, Attitude towards PVTI 60 .00 3.00 2.2833 .92226

Problem of Getting Credit 60 .00 3.00 1.4167 1.19734

Valid N (list wise) 60

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Table 4.2.2

Model Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .392a .154 -.019 .49867

a. Predictors: (Constant), Problem of Getting Credit, Govt. Attitude

towards PVTI, Political Instability, Inflation rate, Interest Rate, Corporate

Governance, Foreign Direct Investment , Exchange Rate, Quality of

Institute and Entrepreneurial Skills, Infrastructure Govt. Investment

Table 4.2.3

Estimated results of overall sample

Coefficients

Model

Un standardized Coefficients

Standardized

Coefficients

t Sig.B Std. Error Beta

1 (Constant) 1.278 .714 1.789*** .080

Foreign Direct Investment -.041 .061 -.096 -.678 .501

Quality of Institute and

Entrepreneurial Skills

.084 .082 .146 1.020 .313

Political Instability -.120 .062 -.271 -1.940** .058

Corporate Governance -.051 .118 -.063 -.433 .667

Infrastructure Gv0t.

Investment

.086 .075 .171 1.134 .262

Interest Rate .002 .077 .003 .020 .984

Exchange Rate -.025 .068 -.053 -.371 .712

Inflation rate .067 .076 .118 .878 .384

Govt, Attitude towards PVTI .049 .076 .092 .647 .521

Problem of Getting Credit -.047 .063 -.100 -.737 .465

a. Dependent Variable: Private Investment

** Significant at 5% level of significant

*** Significant at 10% level of significant

final report of brm

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