Foreign Direct Investment on Economy Essay

5691 Words Jun 1st, 2012 23 Pages
diKalim Hyder & Qazi Masood Ahmed

107

Why Private Investment In Pakistan Has Collapsed And How It Can Be Restored Kalim Hyder and Qazi Masood Ahmed*
Abstract The purpose of this paper is to analyse the decline in private investment and formulate a comprehensive strategy to overcome this problem, which is the main cause of deceleration in the growth momentum of Pakistan’s economy. Due to lack of investor confidence, private investment has reached its lowest point in the recent economic history of the private sector led growth phase (1978 to 2002) in Pakistan. This paper argues that economic as well as non-economic factors are responsible for this declining investment. Economic policies are formulated in such a manner that the
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It is the best time to introduce a strategy to increase investment activities in the
Kalim Hyder is an Economist at Social Policy and Development Centre, Karachi, Pakistan. Qazi Masood Ahmed is an Associate Professor at the Institute of Business Administration (IBA), Karachi, Pakistan and is a Member of the Advisory Board at the Social Policy and Development Centre, Karachi, Pakistan.
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108 The Lahore Journal of Economics, Vol.9, No.1

economy because of the high level of foreign exchange reserves, the rescheduling of foreign debt and the drastic reduction in interest rates which have reduced the debt servicing cost. Investor confidence can be restored by accelerating economic activities through following policies that can reduce the cost of imported raw material, bring down the real interest rates in the economy, increase expenditures on infrastructural development activities and that can also increase the availability of conditional subsidised credit for the export oriented small scale industries so that there is an improvement in the quality of the final product. This would make it more competitive in foreign markets. I. Introduction The objective of this paper is to analyse the slowdown in private investment that has resulted in a reduction of the growth momentum of the economy

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