Determinants of Foreign Direct Investment and its Statistical Analysis

Abstract

Foreign direct investment (FDI) is investment that serves the business interests of the capitalist in an enterprise, which is in a different economy distinct from the investor's country of origin. FDI plays an unusual and growing part in world market. It can provide new markets and marketing channels, cheaper production facilities, access to new technology, products, dexterity and financing for businesses. For a host country or theforeign business which receives the investment, it can provide a source of state-of-theart technology, capital, processes, products, organizational technologies and management skills, and as such can provide a strong drive to economic development. In recent years, given rapid development and change in global investment approach, the definition has been broadened to include the acquisition of a lasting management interest in a company outside the investing company's home country. It may take many forms, such as a direct acquisition of a foreign firm, construction of a facility, or investment in a joint venture or strategic alliance with a local business with attendant input of technology, licensing of intellectual property. It produces a positive result on economic growth in host countries. Ironically, the presence of foreign companies in Pakistan predates the beginning of the country itself. Foreign investment and trade from the world, policy makers should consider the factors that attract multinational organizations to bring more investment in the economy and channelizing the investment in production sector to increase the turnover and employment. Inflows of investment in agriculture and textile sectors will increase the efficiency of these sectors and will resolve the food crises and employment issues in the economy.