AN OVERVIEW OF FOREIGN DIRECT INVESTMENT Presented by; Sadia Khalid-(BC09-069) Sana Javaid-(BC09-070) Saira Khan-(BC09-067) Hina Masood-(BC09-066)

An Introduction
Investment:

It is a process of investing money or profit for profit or interest. In a country investment is really important to increase productivity of that nation. Types of Investment: 1.Local investment 2.Foreign investment

FOREIGN INVESTMENT
Foreign Direct Investment(FDI) Foreign Portfolio Investment(FPI) Official Flows

Commercial Loans

Kinds Of Foreign Assistance

Foreign assistance taken by Pakistan mainly consists of; Foreign aid Accompanied by strict conditionality's by the donor country Foreign debts Burden of indebtness is heavy in itself. Self-reliance policy ignored Foreign investments Two prominent types in Pakistan being prevailed; foreign portfolio investment &foreign direct investment.

Foreign Portfolio investment

Foreign Portfolio investment quite in a bloom until 2007. SBP data reveals that during July to August 20,2008; the USA investors withdrew $217mn, UK$64mn, Switzerland $38mn,

Hong Kong $27mn

Singapore $11mn.

Foreign Direct Investment

FDI is a kind of foreign investment in which the

investors come with long-term interests, and not only invest capital but also introduce new technology in the host country. Private companies incorporated in one country. Private Co. also called MNCs. Invest in the host country via franchises,branches,etc. No government control over these MNCs. Net assets and net income of these MNCs more than total budget of Pakistan.

Graphical Analysis Of FDI

Most of Pakistans investment comes from its War on Terror in 2008. During the year 2008, US had the largest share of 38.46% of FDI Inflow followed by UAE (17.23%), UK (13.52%), Hong Kong (9.98%) and Norway (8.08%).

Some Salient Features Of FDI

FDI enable the host countries to achieve investments

level beyond their capacity to save.

Potent weapon to achieve countrys socio-economic

goals like poverty reduction.

Contribute in capital formation and foreign trade.

Country-wise FDI inflow Pie Chart

We can see the major inflows are from the developed world, namely, USA 39%, UK 14%, and Hong Kong 10%. The other countries being Japan, U.A.E, Norway, Germany, Switzerland and Saudi Arabia.

Sector-wise FDI Inflow

The communication (IT & Telecom) sector bring highest foreign investment of 1, 625.3 million with 37% share in year 2007-08.
Financial business 1,607.6 million (36%). Oil & gas 634.8 million (14%). Power 70.3 million (6%). Trade with 175.5 million having 4% share in total FDI.

Benefits Of FDI
Reliable and reputable tool for developing countries.
Transfer of technology. Management skills and human capital development.

Tax revenues.
Mutually beneficial.

BENEFITS
Opportunity for SMEs.
Addition of value added products. Reduction of saving-investment gap.

CSR(corporate social responsibility).

Disadvantages of FDI
Regional disparity.
No government influence and supervision. Issue of self reliability.

Issue of national security and autonomy.

Implementation of undesirable policies. Stiff competition for local investors. Geographical or political instability of host country. Import orientation.

Steps To Be Taken
Enrollment of local partners in MNCs.
Transfer of technology should be stressed upon. MNCs to be encouraged to add value to the local

goods. Local enterprises to take benefit from profitability of project.

Conclusion
The net advantage or disadvantage of FDI depends

upon the regulation & control of MNCs operating the host country by the host country's government. If the government takes appropriate steps to avoid errors like;

Over-dependence on foreign investors. Dumping of products at high prices. Undesirable outflow of foreign remittances. Inappropriate management of labor.

Final Note
So despite of some shortcomings ,we can get

maximum profit out of the foreign investment, on the condition that they are invested at the right place and at the right time.