Foreign Direct Investment

1576 Words7 Pages
For growing economies, Foreign Direct Investment (FDI) has momentous advantages over equity and debt capital flows. Most of the foreign firms that start their conduct of business in other countries, they not only come with capital but transfer modern technology, promote human capital by training the host country’s employees according to the change of technology to those countries, and this is the key for the development of the host country. According to author Direct Investment replicates aspire of acquiring an enduring awareness by an inhabitant body of one economy that is the direct investor in a venture that is occupier in another economy which is called the direct investment enterprise. The “lasting interest” entails the continuation of a long-term relationship between the direct investor and the direct investment enterprise and an important level of authority on the management of the latter. Direct investment involves both the initial transaction instituting the relationship between the investor and the enterprise and all succeeding capital transactions between them and among affiliated enterprises; both incorporated and unincorporated (Duce & Espana, 2003). Author described that Foreign Direct Investment is considered as a growth enhancing factor for the developing countries. FDI can enhance the growth through different ways in the host country, one of those ways transfer of technology is the most important mean. Through this transfer of technology the interaction between the multinational firms and domestic firms increases that leads to the combined effort towards the economic growth. Technology should be interpreted as product, process, distribution, management, marketing (Khan, 2007). In this manner different peo... ... middle of paper ... ...h and so on, in order to provide better employment opportunities for educated and skilled people so that they can play a vital role in the productivity and modernizing the economy. Due to the modernized economy the living standard of people of the country raised because the level of domestic saving increased and helped in capital formation. According to the author there are three primary components upon which Pakistan’s foreign investment regime relies, these are regulatory, economic and socio political. The regulatory regime of the Pakistan is considered moderate in the case of privatization and deregulation. In order to protect Foreign Investors the regulatory framework for foreign investment consists of three laws such as Foreign Private Investment Act 1992, Furtherance and Protection of Economic Reforms Act 1992, and Foreign Currency Accounts Ordinance 2001.

More about Foreign Direct Investment

Open Document