The document discusses foreign portfolio investment (FPI) in Pakistan from 2001-2011. It analyzes how FPI increases liquidity and foreign reserves, induces new investment, and encourages existing businesses to expand. FPI lowers the cost of capital by making markets more liquid and efficient. While FPI provides benefits, Pakistan needs stronger efforts to attract domestic and foreign investment by improving stability, reducing bureaucracy, and developing infrastructure to strengthen investor perceptions. The analysis concludes that overall, FPI brings net benefits by integrating Pakistan's economy globally and transferring technology and skills.

1. Presented by:
Ali Raza_______
Seat. No: Ep-100963
M.A (Final) Evening
Presented to:
Dr. Abdul Waheed
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2. INTRODUCTION
• Foreign Portfolio Investment (FPI) as a growth-enhancing component
has received great attention of developed countries in general and less
developed countries in particular in recent decades.
• FPIs increase the liquidity position of local economy and then FPIs help
to improve the Foreign Reserves that results in a stabilize exchange
rate.
• Secondly FPIs induce new invests in the economy hence the rate of
investment increases and lastly, FPIs are also helpful and encourages
existing business firm to expand their businesses through raising their
equities by issuance of new securities in the market.
• This enhancement of efficiency due to internationalization makes the
market more liquid, which leads to a lower cost of capital. The cost of
foreign capital also tends to be lower, because the foreign portfolio can
be more diversified across the national boundaries and therefore be
more efficient in reducing country-specific risks, resulting in a lower risk
premium.
• A well-developed stock market has its impact on the demand side also.
It provides investors with an array of assets with varying degree of risk,
return and liquidity.
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3. Foreign funds encourage domestic secondary and Primary Market
Share price
Foreign up
portfolio
investmen
t
Liquidity up
Cost of issue down
More supply
Liquidity
Demand Cheaper
capital.
Local and More stock
Foreign issue.
Demand More New listing.
increased Equity
Issued
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4. 4

5. ANALYSIS
Foreign Portfolio Investment 2001-2011
Foreign Portfolio
Period Year
Investment
1 2001-02 -10
2 2002-03 22
3 2003-04 -28
4 2004-05 153
5 2005-06 351
6 2006-07 1,820.00
7 2007-08 19.3
8 2008-09 -510.3
9 2009-10 587.9
10 2010-11 344.5
11 2011-12 -143.2
Total 2,606.20
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6. Foreign Portfolio Investment 2001-2011
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7. CONCLUSION RECOMMENDATION
• There is a strong perception among • Pakistan has to make stronger efforts
to attract as much domestic and
investors that the pro-business policies foreign investment in the foreign
and inducement used to attract exchange sectors at least in the short
prospective new investors are term to improve its balance of
somehow weak given realities when payments position.
they actually begin to set up and
operate their business in Pakistan. • Government of Pakistan should take
the following steps on priority basis to
enhance both domestic and foreign
• Pakistan has a number of positive investment in the country.
attributes that can successfully attract
the attention of foreign investors from • Law and order
both developed and developing • Political stability.
countries. • Macroeconomic stability.
• Removal of bureaucratic hurdles.
• The general conclusion of this analysis • Fiscal incentives.
is that FPI brings net benefit to • Credit facilities.
Pakistan. These benefits appear to be
• Transfer of technology.
important for integrating the domestic
• Labour laws.
economy with the global economy and
• Infrastructure.
in the area of technology and skill
transfer. • Improvement in tax structure.
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8. • REFERENCE
• http://www.dawn.com
• http://www.dailytimes.com.pk
• http://www.thenews.com.pk
• http://www.google.com.pk/
• http://www.pakboi.gov.pk/
• http://www.secp.gov.pk/
• http://www.sbp.org.pk/departments/.../Pak Economy Handbook/index.htm
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