SOCIAL AND POLITICAL FACTORS EFFECTS ON FOREIGN DIRECT INVESTMENT IN PAKISTAN (1971-2005)

Abstract

The present paper empirically evaluates the effects of social and political factors on the inflow of Foreign Direct Investment (FDI) in Pakistan. Secondary data over the period from 1971 to 2005 have been used. A simple semi log linear regression model and the method of least square for estimation have been applied. Firms investing abroad want the opportunity to choose educated, skilled and trained workers to produce more efficiently. Further, multinational corporations always prefer to choose a location that is economically and politically stable for their investment. This study found a positive and statistically significant relationship between human capital and FDI inflow. The result of political instability indicates though an inverse relationship with FDI but insignificant. Thus it has been concluded that trained and skilled labour force and stable political environment are indispensable for enhancement of FDI inflow.