Foreign Direct Investment (FDI) plays a vital role in the development of a country. According to the world investment report (2008), FDI boosts the economy by creating employment opportunities, transferring skills and technologies, increasing productivity and continuous long-term development.
In recent years, FDI inflows in the country have increased significantly. According to the World Investment Report 2020, Pakistan’s FDI increased from USD 1.7 billion to USD 2.2 billion in 2019.
In Pakistan, a country with many natural resources and a growing population, FDI plays a significant role in achieving economic growth, human capital, and socioeconomic development. However, due to issues like Pakistan’s selective judicial system, poor law and order situation, and economic issues, investors don’t hold much confidence in the Pakistani economy.
However, due to Pakistan’s persisting political and economic uncertainty, FDI contracted by 29% as investors were hesitant to invest in new projects. FDI in Pakistan decreased to $141.2 million in May 2022 compared to $199.2 million in the same month of last year.
Foreign investors largely injected equity into their ongoing projects in different sectors, including communication, power and financial business. But the continuing economic uncertainty and rupee depreciation have discouraged investors from making further new investments. One of the main reasons for FDI contraction is the country’s low labour productivity and a high taxation environment.
In conclusion, Pakistan needs to increase its FDI as it proves to be a viable solution for achieving economic growth. To attract more FDI, the government must improve law and governance and resolve economic and energy crisis issues to win investors’ trust. Pakistan can do so by first attracting investors in its tech sector as tech is the future. For this purpose, it needs to improve its agriculture sector and use that income to make the tech sector attractive to investors.
Leave a Reply