FDI Of PakistanBy

Nauroz Khan (358)Class: BBA 8th

Teacher: Sir ArifSubject: MISDate: 5/7/2011

Introduction

• FDI:-• An investment abroad, usually where

the company being invested in is controlled by the foreign corporation.

• Foreign direct investment (FDI) or foreign investment refers to long term participation by country A into country B.

Introduction Cont…

• It is well documented in the literature that foreign direct investment (FDI) plays a positive role in the process of economic growth. Thamos, et al. (2008) argued that foreign affiliates of transnational corporation (TNCs) succeed in developing new products and technologies faster than local firms, thereby exerting competitive pressure and forcing local firms to imitate and innovate.

Summary• FDI is more than an external resource

inflow

• FDI can modernize industry and better integrate the economy into international production.

• Market-seeking FDI is viable in current global recession.

• Export-oriented FDI is a desirable medium-term objective.

Types of FDI

1. Inward Foreign Direct Investment:

• Inward FDI for an economy can be defined as the capital provided from a foreign direct investor (i.e. the coca cola company) residing in a country, to that economy, which is residing in another country.

• “ Foreign direct investment by a foreign firm establishing a facility within the domestic country. Contrasts with outward FDI. ”

• EXAMPLE: General Motors decides to open a factory in Malaysia. They are going to need some capital. That capital is inward FDI for Malaysia.

Types of FDI Cont…

2. Outward Foreign Direct Investment

• Foreign direct investment by a domestic firm establishing a facility abroad. Contrasts with inward FDI.

• EXAMPLE: General Motors decides to open a factory in Malaysia. They are going to need some capital. That capital is outward FDI for USA.

5 Key Reasons To Invest In Pakistan

Geo-strategic Location

Trained Workforce

Economic Outlook

Investment Policies

Financial Markets

Foreign Investment Inflows In Pakistan ($ Million)

Geo-strategic Location

Trained Workforce

Economic Outlook

Investment Policies

Financial Markets

Year Green FieldInvestment

PrivatizationProceeds

Total FDI 

2005-06 1,981.00 1,540.00 3,521.00

2006-07 4,873.20 266.40 5,139.60

2007-08 5,276.60 133.20 5,409.80

2008-09 3,719.90 0.00 3,719.90

2009-10 2,150.80 0.00 2,150.80

2010-11 (Jul-Jan) 947.00 0.00 1,181.80

Green Field Investment

• A form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up. In addition to building new facilities, most parent companies also create new long-term jobs in the foreign country by hiring new employees. 

Privatization Proceeds

• Selling off public assets to private operators can create a win-win situation for developing countries looking to unload expensive and unsustainable assets

Main Greenfield Projects, Inward Investing In Pakistan

Investing company Home Economy Industry Investment value (US $)

China Mobile China Communications 500

Total France Petroleum 406

Yamaha Japan Transport Equipment 150

Metro Germany Trade 55

Coca-Cola U.S. Beverages 100

Procter & Gamble U.S. Chemicals 100

Toyota Motor Japan Transport Equipment 180

Credit Suisse Group Switzerland Finance 33

Country Wise FDI Inflows ($ Million)

2010-2011 Jul-Jan

USA 142.9UK 127.6U.A.E 158.3Japan 1.1Hong Kong 91.8Switzerland 23.3Saudi Arabia 5.9Germany 9.1Korea (South) 1.5Norway 0.4China 4.9Others 380.2

Sector Wise FDI Inflows ($ Million)

Sector 2010-2011(Jul-Jan)

Oil & Gas 296.4Financial Business 114.1Textiles 14.0Trade 27.6Construction 37.5Power 86.4Chemical 19.5Transport 54.7IT & Telecom 77.3Others 219.5

Foreign Direct Investment, Net Inflows

Foreign Direct Investment, Net Inflows (South Asia)

Foreign Direct Investment, Net Inflows (Developed Countries)

Foreign Direct Investment, Net Outflows

Pakistani companies are operating in ;UKSingaporeMalaysiaUAESaudi Arabia USAQatar

Foreign Direct Investment, Net Outflows

• 6,000 Pakistani companies operating in the UAE e.g. Netsol’s (a Pakistani software company).

• Pakistanis have invested 6.7B Dirham's in Dubai real estate.

• Fosh Tech dealing in electronic field in Singapore.

• Most banks invest in many countries such as HBL.

How Can A Foreign Investor Invest His Funds?

The foreign direct investor may invest in by any of the following methods in Pakistan:

• By incorporating a wholly owned subsidiary or company, by acquiring shares in an associated enterprise

• Through a merger or an acquisition of an unrelated enterprise

• Participating in an equity joint venture with another investor or enterprise