Economic Conditions of

Pakistan and Their

Impact on FDI
Ammara Jamshaid

2014

Introduction
The economy of Pakistan is the 27th largest in the world in terms of purchasing power parity
(PPP), and 47th largest in terms of nominal GDP. iPakistan has three main sectors in his
economy which encompasses agriculture sectors, services sector and industrial.Pakistans
economy is in a downward spiral and is passing through a period of slow growth, mainly on
account of security challenges, political instability, natural disasters, weak global economy and
energy crisis. Pakistans economy is mostly dependent on agriculture sectors throughout of his
independent. The importance of the agriculture sector increases manifold because of its strong
influence over demand for industrial goods and services. Because of the devastating floods for
two three consecutive years has ruined agriculture sector badly. Textile sector is also dependent
on agriculture sector. Textile industry has been growing through one of the toughest periods in
recent years because of sever energy crisis, low international demand. There are many other
industries are also dependent of agriculture sectors. Sustained growth in services sector is an
important drive of overall economic growth of an economy. The development experiences
manifest that the services sector not only engenders growth in agricultural and manufacturing
sectors but also results into greater economic integration with the development world. The
services sector in Pakistan has also posited considerable growth episodes over the last decade
and now claims the largest share in GDP. In last few years terrorist attacks has damaged the
services sector badly in Pakistan. These economic conditions of Pakistan have great impact on
foreign direct investment in the country, which is decreasing very sharply.
Statement of the Problem
Foreign Direct Investment (FDI) fell by 48.2% during July-March 2011-12 and stood at $599
million as against $ 1157 million during the comparable period of last years. The portfolio
investment decreases by 148.5% as it turned to outflow of $83 million against inflow of $ 305
million in the corresponding period of last year because of the recent economic conditions of
Pakistanii.
Purpose of the study
The purpose of the study is to analyze the current economic conditions of Pakistan and their
impact on Pakistan. In this study we will deeply analyze the three major economic sectors of
Pakistans economy and their positive and negative impact on FDI. In this study we will also
follow the most recent political conditions of Pakistan and their impact on economy. Beside
energy crises and security conditions in Pakistan are also the part of this study.
Hypothesis
Ho = the current economic conditions are not decreasing the FDI in Pakistan
Ha = the current economic conditions are decreasing the FDI in Pakistan

Literature Review
In its latest report on Pakistans economy, The World Bank has painted a dismal report in which
it has reported a noticeable decline in per captia income (PCI), and increase in unemployment by
volumes. Expressing its deep apprehensions over Pakistans economic progress, it has said that
progress had slowed considerably, and Pakistan was lagging well behind even such SAARC
counterparts as Bangladesh, Nepal, Sri-Lanka and India. The report cites political tensions,
confrontations and natural calamities, chiefly floods, as the main reasons for this sad state of
affairsiii. Pakistans economy is estimated to grow by 3.7% against the target of 4.2% set for
the year 2011-12 and actual growth of 3% in 2010-11. Agriculture sector is estimated to grow by
3.1% as against the target of 3.4%. The rain damaged agriculture sector badly in lower Sindhiv
Industrial sector is also shown downfall due to the shortage of gas and electricity in the
Pakistan.The services sector grew by 4% which is below the targeted growth of 5% and actual
growth of 4.5% last year.
National Saving is estimated to fall from 13.2% of GDP to 10.8% in 2011-12 as against the
target of 13.2%. Real private and public investment both fell by 13% and 8.4% respectively.v
Methodology
I shall use both qualitative and quantitative research to solve the problem. In this research I shall
collect both the qualitative data and quantitative data with primary and secondary resources. In
qualitative research I shall see the economic instability of the country, security problem of the
country and their overall impact on country and FDI. In quantitative research I shall collect the
data of agriculture, services and industrial sector data of last ten years and the FDI data of last
ten years and then compare their impacts and the results.
Conclusion
Pakistan is facing many crises these days. In this study we shall see the economic crises of the
Pakistan and their impact on FDI. The overall aim of the study is to deeply analyze the recent
economic crises of Pakistan thoroughly and their effects particularly on FDI, so that after
analyzing these problems I shall be able to give a healthy solution to sole this exciting problem
of Pakistan.