Foreign direct investment (FDI) refers to a company from one country establishing business operations or acquiring assets in another country. FDI provides benefits like access to new markets, resources, and technologies. It plays a major role in global business and economic development. While FDI in Pakistan increased 17.9% in the first 8 months of the current fiscal year, overall foreign investment declined. The oil and gas sector received the most FDI. Key factors that influence FDI include trade policies, investment regulations, and economic stability.

1. A Foreign direct investment (FDI) is a controlling ownership in a
business enterprise in one country by an entity based in
another country.
Foreign direct investment (FDI) is a measure of foreign
ownership of productiveassets, such as factories, mines and
land. Increasing foreign investment can be used as one
measure of growing economic globalization. Foreign direct
investment (FDI) plays an extraordinary and growing role in
global business. It can providea firm with new markets and
marketing channels, cheaper production facilities, access to
new technology, products,skills and financing. For a host
country or the foreign firm which receives the investment,it can
providea source of new technologies, capital, processes,
products, organizational technologies and management skills,
and as such can providea strong impetus to economic
development.
Foreign direct investment,in its classic definition, is
defined as a company from one country making a physical
investment into building a factory in another country.
The direct investmentin buildings, machinery and
equipment is in contrast with making a portfolio investment,
which is considered an indirect investment.In recent years,
given rapid growth and change in global investment patterns,
the definition has been broadened to include the acquisition of
a lasting management interest in a company or enterprise
outside the investing firm’s home country.As such, it may take
many forms, such as a direct acquisition of a foreign firm,
construction of a facility, or investment in a joint ventureor
strategic alliance with a local firm with attendant input of
technology,licensing of intellectual property.
In the past decade, FDI has come to play a major role in
the internationalization of business. Reacting to changes in
technology,growing liberalization of the national regulatory
framework governing investment in enterprises, and changes in
capital markets profound changes haveoccurred in the size,
scope and methods of FDI. New information technology

2. systems, decline in global communication costs havemade
management of foreign investmentsfar easier than in the past.
The sea changein trade and investmentpolicies and the
regulatory environment globally in the past decade, including
trade policy and tariff liberalization, easing of restrictions on
foreign investmentand acquisition in many nations, and the
deregulation and privitazation of many industries, has probably
been been the most significant catalyst for FDI’s expanded role.
Why is FDI important for any considerationof going global?
The simple answer is that making a direct foreign investment
allows companies to accomplish severaltasks:
1. Avoiding foreign governmentpressure for local
production.
2. Circumventing tradebarriers, hidden and otherwise.
3. Making the move from domestic export sales to a locally-
based national sales office.
4. Capability to increase total production capacity.
5. Opportunitiesfor co-production, joint ventureswith local
partners,joint marketing arrangements,licensing, etc;
WHO CAN BE A FOREIGN INVESTOR?
A foreign direct investor may be classified in any sector of the
economy and could be any one of the following:
1. An individual;
2. A group of related individuals;
3. An incorporated or unincorporated entity;
4. A public company or private company;
5. A group of related enterprises;
6. A government body;
7. An estate (law), trust or other societal organisation; or
8. Any combination of the above.

3. Foreign direct investment (FDI) in Pakistanincreased by
17.9 percent to $606.3 millionduring the first eight months of the
current fiscal year, according to figures released by the State
Bank of Pakistan(SBP) on Friday.
FDI inflows stood at $514.2 million during the same period
of last fiscal. FDI has been on the decline since 2008 in the
wake of security concerns, weak law and order situation and
energy and power outagesin the country.And while the
increase in the pace of FDI inflows is reasonable, the volumes
the country received during July-February FY14 are far from
satisfactory, economists say.
Between July 2013 and February 2014,overseas
investment by businesses declined by 11 percent to $1.262
billion against $1.418 billion in the corresponding period last
year. Similarly, outflow was recorded at $656.2 million in the
period under review against $904.4 million for the same period
in the previousfiscal, revealed SBP data.
The oil and gas exploration sector emerged as the biggest
recipient of FDI with $296.2 million, followed by the financial
sector with $102.8 million in the July-Februaryperiod in FY14.
Foreign investment in food, chemical and tobacco and
cigarette sectors was recorded at $75.1 million, $71.6 million
and $55.5 million, respectively.
FDI stood at $79.2 million in February 2014 against outflow of $14
million in the corresponding month of the last year. The numbers on
foreign investment showed that portfolio investment fell drastically from
$169.9 million for the July-January period in FY13 to $54 million over the
same period in the current fiscal – a drop of over 68.2 percent.
Total foreign investment for the first seven months of the current
fiscal was up 6.5 percent to $724.6 million against $680.4 million for the
same period in the previous fiscal.

4. Year
Greenfield
Investment
Privatisation
Proceeds
Total FDI
Private
Portfolio
Investment
2001-02 357 128 485 -10
2002-03 622 176 798 22
2003-04 750 199 949 -28
2004-05 1,161 363 1,524.00 153
2005-06 1,981 1,540 3,521.00 351
2006-07 4,873.20 266 5,139.60 1,820
2007-08 5,019.60 133.2 5,152.80 19.3
2008-09 3,719.90 - 3,179.90 -510.3
Jul-Mar-10 1,553.9 - 1,553.9 378.6
Total 20,037.60 2,805.20 22,303.2
Foreign Investment inflows in Pakistan($Millions)
Country Wise FDI Inflows ($ Million)
Country 2007-08 2008-09 2009-10 2010-11
2011-
12
2012-
13
2013-
14
(July-
Apr)
USA 1,309.3 869.9 468.3 238.1 227.7 223.0 185.5
UK 460.2 263.4 294.6 207.1 205.8 632.3 93.9
U.A.E 589.2 178.1 242.7 284.2 36.6 19.9 2.5
Japan 131.2 74.3 26.8 3.2 29.7 30.7 13.8
Hong Kong 339.8 156.1 9.9 125.6 80.3 242.6 199.0

5. Switzerland 169.3 227.3 170.6 110.5 127.1 149.0 193.4
Saudi Arabia 46.2 (92.3) (133.8) 6.5 (79.9) 3.2 (38.2)
Germany 69.6 76.9 53.0 21.2 27.2 5.0 (2.4)
Korea (South) 1.2 2.3 2.3 7.7 25.4 25.8 23.4
Norway 274.9 101.1 0.4 (48.0) (275.0) (258.4) (32.9)
China 13.7 (101.4) (3.6) 47.4 126.1 90.6 (20.3)
Others 2,005.2 1,964.2 1,019.6 631.3 289.7 283.6 133.2
Total including
Pvt. Proceeds
5,409.8 3,719.9 2,150.8 1,634.8 820.7 1447.3 750.9
Privatisation
Proceeds
133.2 0.0 0.0 0.0 0.0 0.0 0.0
FDI Excluding
Pvt. Proceeds
5,276.6 3,719.9 2,150.8 1,634.8 820.7 1447.3 750.9
12.9% decrease in Net FDI in 2013-2014 (July-Apr) as compared to 2012-
2013 (July-Apr).
Note: Pakistan’s Fiscal Year runs from 1st July till 30th June. The figures in
brackets are in negative.
Sector Wise FDI Inflows ($ Million)

6. Sectors
2007-
08
2008-
09
2009-
10
2010-11
2011-
12
2012-
13
20
14
(Ju
Ap
Oil & Gas 634.8 .0 .6 .2 .4 .6 39
Financial
Business
1,864.9 707.4 163.0 310.1 64.4 314.2 13
Textiles 30.1 36.9 27.8 25.3/td> 29.8 10.0 0.7
Trade 175.9 166.6 117.0 53.0 25.3 5.7 (1
Construction 89.0 93.4 101.6 61.1 72.1 46.0 20
Power 70.3 130.6 (120.6) 155.8 (84.9) 28.4 26
Chemical 79.3 74.3 112.1 30.5 96.3 71.6 81
Transport 74.2 93.2 132.0 104.6 18.7 44.1 (6
Communication
(IT&Telecom)
1,626.8 879.1 291.0 (34.1) (312.6) (385.7) (1
Others 764.5 763.4 586.3 416.3 282.6 872.6 12
Total including
Pvt.
Proceeds
5,409.8 3,719.9 2,150.8 1,634.8 820.7 1447.3 75
Privatisation
Proceeds
133.2 0.0 0.0 0.0 0.0 0.0 0.0
FDI Excluding
Pvt.Proceeds
5,276.6 3,719.9 2,150.8 1,634.8 820.7 1447.3 75
12.9% decrease in Net FDI in 2013-2014 (July-Apr) as
compared to 2012-13(July-Apr).

7. Note: Pakistan’sFiscal Year runs from 1st July till 30th June.
The figures in bracketsare in negative.
Sources:
http://masoodandmasood.com/foreign-direct-investment-fdi-pakistan-law-
lawyer-consultant-help/
http://www.going-
global.com/articles/understanding_foreign_direct_investment.htm
http://boi.gov.pk/ForeignInvestmentinPakistan.aspx