Economic Determinants of Foreign Direct Investment in Pakistan

Abstract

Pakistan aims to increase the ratio of GDP to investment by attracting foreign direct investment (FDI). Foreign investors, mostly from developed dynamic centers, are enhancing international production by investing in resource-rich economies. By taking an overview of cross-border investment inflows, this paper attempted to empirically investigate the determinants of foreign direct investment in Pakistan. The analysis allowed us to identify some economic determinants of FDI in Pakistan, such as the GDP growth rate, the volume of exports, the human population, import duties, and the price index. The volume of exports has become the most powerful determinant of FDI. The government must make a paradigm shift in its investment policy to attract FDI. It should focus on export-oriented industries instead of promoting FDI for domestic consumption.