Foreign direct investment (FDI)

By eraj shamimBy: Eraj Shamim

Foreign direct investment (fdi)

In its classic definition,  FDI is  defined as

“A company from one country making a physical investment into building a

factory in another country.” 

In other words:

FDI is a major source of external finance which means that countries with

limited amounts of capital can receive finance beyond national borders from

richer countries.

Definition

FDI has been recognized the most powerful and strategic weapon for

transforming a traditional economy of a nation into a modern economy by

accelerating the pace of growth and development. There have been many

examples wherein the FDI inflows have boom the economies of many countries.

For example, China, Malaysia and South Korean economies.

FDI has emerged as not only a major source of much needed capital but is also

considered to be a major channel for the access to advance technologies,

organizational and managerial skills.

Importance of FDI

Year Total FDI

2005-06 3,521.00

2006-07 5,139.60

2007-08 5,409.80

2008-09 3,719.90

2009-10 2,150.80

2010-11  1,739.40

2011-12  741.5

2012-13 70.8

Total 26,248.8

Foreign Investment inflows in Pakistan ($Million)

Investors : The United States was the top investor with $490m. It was followed

by The Netherlands, $269.2m; Britain, $214m; UAE, $182m; Switzerland, $126m; Singapore, $93.5m; Cayman Islands, $69.2m; and others, $328m.

REASONS OF DECLINE FDI

Terrorism

Counter-terror operations

Energy crisis

Terrible law and order situation

Decline in economic growth

Bad planning and government

policies

Why FDI is needed in Pakistan

In developing economy like Pakistan,

FDI is beneficial in many ways, like

Heighten the economic growth

Increase the productivity

Additional capital investment

Provide employment

High wages

Boost up the industry

Fulfill technical and managerial

skills

Link to he global market