Muhammad Fahad Saleem Waseem Hassan

Domestic / Foreign Investment in Pakistan

INTRODUCTION

Saving and investment play significant role in the stability of economic growth in any country. Investment is the most volatile component of Gross domestic product.

Despite of the fact that international capital flows are the major influential variable on GNP to our knowledge there are not many studies related to topic is found in Pakistan.

Pakistan’s economy has maintained higher and broad based economic growth in outgoing fiscal year 2014-15 despite a number of internal and external challenges. Government remained focused on the agenda aimed at reviving of the economy, resolving the energy crises, improving security situation, and providing sample opportunities to all.

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Years Foreign Investment

2000 0.42

2001 0.53

2002 1.14

2003 0.64

2004 1.14

2005 2.01

2006 3.11

2007 3.67

2008 3.2

2009 1.39

2010 1.14

2011 0.62

2012 0.38

2013 0.58

2014 0.73

Year Domestic Investment

2000 17.23

2001 17

2002 16.58

2003 16.76

2004 16.58

2005 19.08

2006 19.33

2007 18.79

2008 19.21

2009 17.55

2010 15.8

2011 14.12

2012 15.08

2013 14.96

2014 14.98

Now we become to the GDP, we took some data of GDP of different commodities.

The average GDP growth recorded at 3.53 percent in the outgoing fiscal year 2014-15 as compared to 3.67 percent last year. Continuously achieving higher GDP growth during 2013-14 and 2014-15 is an indicator that government policies are working in better direction and providing incentives and necessary support in the picking up of economic activities in the country.

Sectors/Sub-Sectors

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Agriculture 1.8 3.5 0.2 2.0 3.6 2.7 2.7 2.9

Crops 1.0 5.2 4.2 1.0 3.2 1.5 3.2 1.0

Important Crops

4.1 8.4 3.7 1.5 7.9 0.2 8.0 0.3

Cotton Ginning

7.0 1.3 7.3 8.5 13.8 2.9 1.3 7.4

Livestock 3.6 2.2 3.8 3.4 4.0 3.5 2.8 4.1

Forestry 8.9 2.6 0.1 4.8 1.8 6.6 6.7 3.2

Fishing 8.5 2.6 1.4 15.2 3.8 0.7 1.0 5.8

The government has initiated a number of steps like comprehensive power policy, security policy, privatization, ease of doing business, reforms in taxation system, youth training and employment program etc.

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Growth Performance of Components of Gross National Product

These are the major components of GNP. As we know that Agriculture is the single largest sector of the national economy. It grow 5.4% in 1980’s and it become low in next 3 years and then it become more in the next year.

Commodities 1980’s 1990’s 2002-03 2003-04 2004-05 2005-06 2006-07

Agriculture 5.4 4.4 4.1 2.4 6.5 1.6 5.0

Major Crops 3.4 3.5 6.8 1.7 17.7 -4.1 7.6

Minor Crops 4.1 4.6 1.9 3.9 1.5 0.4 1.1

Livestock 5.3 6.4 2.6 2.9 2.3 7.5 4.3

Fishing 7.3 3.6 3.4 2.0 0.6 20.5 4.2

Economic growth of Pakistan

Years Economic growth

2004 7.37

2005 7.67

2006 6.18

2007 4.83

2008 1.7

2009 2.83

2010 1.61

2011 2.75

FDI inflows in Pakistan ($Millions)

Country Wise FDI Inflows ($ Million)

Country 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

2015-16

USA 1,309.3 869.9 468.3 238.1 227.7 227.1 212.1 209.0 (41.7)

UK 460.2 263.4 294.6 207.1 205.8 633.0 157.0 174.3 49.7

U.A.E 589.2 178.1 242.7 284.2 36.6 22.5 (47.1) 216.4 126.1

Japan 131.2 74.3 26.8 3.2 29.7 30.1 30.1 71.1 16.4

Hong Kong 339.8 156.1 9.9 125.6 80.3 242.6 228.5 83.4 120.4

Switzerland

169.3 227.3 170.6 110.5 127.1 149.0 209.8 2.8 72.4

Saudi Arabia

46.2 (92.3) (133.8) 6.5 (79.9) 3.2 (40.1) (64.8) (70.3)

Germany 69.6 76.9 53.0 21.2 27.2 5.5 (5.7) (20.3) (32.2)

Korea (South)

1.2 2.3 2.3 7.7 25.4 25.8 24.4 14.3 (14.3)

Norway 274.9 101.1 0.4 (48.0) (275.0) (258.4) (21.6) 2.7 33.7

China 13.7 (101.4) (3.6) 47.4 126.1 90.6 695.8 255.3 515.9

Others 2,005.2 1,964.2 1,019.6 631.3 289.7 285.5 224.4 (93.0) 181.3

Sector Wise FDI Inflows ($ Million)

Sectors 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Oil & Gas 634.8 775.0 740.6 512.2 629.4 559.6 502.0 246.1 223.8

Financial Business

1,864.9 707.4 163.0 310.1 64.4 314.2 192.8 256.4 19.6

Textiles 30.1 36.9 27.8 25.3 29.8 10.0 (0.2) 43.9 19.1

Trade 175.9 166.6 117.0 53.0 25.3 5.7 (3.2) 50.0 17.0

Construction

89.0 93.4 101.6 61.1 72.1 46.0 28.8 53.5 34.4

Power 70.3 130.6 (120.6) 155.8 (84.9) 28.4 71.4 201.7 471.6

Chemicals 79.3 74.3 112.1 30.5 96.3 71.6 94.9 55.3 54.7

Transport 74.2 93.2 132.0 104.6 18.7 44.1 2.7 6.2 20.0

Communication(IT&Telecom)

1,626.8 879.1 291.0 (34.1) (312.6) (385.7) 434.2 45.1 54.5

Others 764.5 763.4 586.3 416.3 282.2 765.5 375.2 (107.0) 42.7

CONCLUSION

In the paper long run relationship between saving and investment has been tested by co-integration technique. The study finds the absence of long run relationship between domestic saving and investment of Pakistan so there can be numerous reasons for it one of the reasons is capital mobility. The study by using data from 1980-2009 accept the hypothesis of perfect capital mobility. Capital mobility is tested to be the determinant of domestic investment when incorporated shows negative relationship to investment in economy that is when trade is open capital has more chances to flow out of economy.

Thank You…