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SAZH-TAF Report on FDI

Background & Historical Context

Pakistan, a country with precarious foreign exchange reserves and increasing debt situation, needs to prioritize and devise new strategies for foreign capital mobilization. Now more than ever, it must address and evaluate the obstacles present in the way of foreign direct investment[1]. FDI plays an integral role in furthering development and economic activity in host countries. This is well documented in literature (Zakaria, 2008). In the early 1990s, there was a significant increase in the flow of foreign investment in developing countries (Calvo et al., 1996). These countries rely heavily upon FDI to overcome their own capital shortage. They attracted even more FDI following the global financial crisis 2007-08 (Duttagupta et al., 2011). Pakistan has faced a decline in FDI in the last two decades with chronically low investment rates as compared to other emerging countries. (Bano et al., 2018). According to the latest statistics on the Board of Investment (BOI) website, the top four countries providing FDI to Pakistan in 2021-22 are China, the US, Switzerland, and the UAE, respectively. This report focuses specifically on FDI and doing business for foreign investors in Pakistan.

[1] “Foreign direct investment is the net inflow of the investment to get hold of a lasting administration interest that is 10 percent or more of voting power in an enterprise working in an economy other than that of the investor. FDI is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital. This sequence demonstrates the net inflows which mean the new investment inflows less disinvestment in the exposure economy from foreign investors.” (World Bank Glossary)

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