Impacts Of Terrorism On Foreign Direct Investment Inflows To Pakistan

Globalization gave birth to the interdependence of countries and their economies which enable the investors to invest or relocate their investment wherever they wanted to invest.It gave birth to the concept of FDI.At present,it is playing an important role in the economic development of underdeveloped economies and economic integration in the world.It is an investment in a foreign country directly in the form of establishing business by developed countries or their citizens in foreign countries.Since the last century,it gets huge value but particularly from the mid of 1990 s,the world wide increase of inward and outward foreign direct investment inflow has got noteworthy improvement.It is not only supplying capital to the host country but also good administrative skills,transfer technology as well as creating huge employment opportunities.All these things are playing very positive role in the economic development of the countries.Since late 1990 s FDI got improvement towards Pakistan due it its introduction of liberalized economic politics.But after the starting of war on terror in Afghanistan terrorism transferred to Pakistan from Afghanistan which badly affected the FDI inflows to Islamic Republic of Pakistan.During the study period Terrorism had negatively influenced the foreign direct investment inflow to Pakistan.Therefore,this study answered the question “What are the impacts of Terrorism on FDI inflows to Pakistan and how it affecting FDI inflows to Pakistan”? It also put forward some key recommendations that how to make Pakistan a favorable destination of foreign direct investment.The main issue was that Terrorism created law and order and insecurity in Pakistan which had negative effects on FDI inflows.Growing terrorist violence across Pakistan and terrorist attacks on foreigners deteriorated the confidence of the foreign investors.Terrorism also deteriorated business environment in the state as well as endanger the invested capital and lives of investors.Due to these reasons foreign investors started to withdraw their capital from Pakistan.New investors also started hesitation to invest in Pakistan.It badly affected FDI inflows to Pakistan.It is a fact that many things are playing a key role in attracting FDI to Pakistan most importantlypeace and security.It is regarded that peace increase the inflow of FDI.Whereas the lack of security pulls FDI.To conduct this research study Content Analysis Technique is used which is a widely recognized and properly deployed research technique in social sciences qualitative research.Inductive method has been used in analysis and conclusion.The issue addressed in this thesis is a very important problem of Pakistan to be resolved.During the study period,Pakistan had faced a massive deficit of FDI inflows mostly because of terrorism.It worked as important factor in FDI Inflows.Therefore,this study has been conducted in order to explore and critically examine the effects of terrorism on FDI and present some concrete policy recommendations as well.This thesis is divided into five chapters based on the aspects containing the theme.The first chapter titled “Introduction” briefly introducing the issue concerned,showing the research gap as well as the importance of this study.It also discusses the determined objective of the study,the research question it striving to answer in this thesis,main argument,the research methodology and the Literature Review in which briefly discuss the available literature on this problem.The second chapter titled “foreign direct investment Inflows to Pakistan(1998-2018)” is throwing detail light on the phenomena of FDI inflows to Pakistan from1998 till 2018.It has analyzed different dimensions of FDI in details.This chapter detailed that after following traditional financial policies and procedures,the Pakistani government had introduced liberal and market-based reforms and policies in the late1990 s.Started trade liberalization by offering investors economic and trade opportunities and business friendly environment in the form of facilitation of foreign exchange control,taxes concession,facilities of credit and tariff,cost reduction and discount.All Foreign investors were allowed without any discrimination to enjoy100% equity without advanced consent on repatriable grounds investing in Pakistan.Incomes received by investors can also be repatriated to their states easily.All these possible facilitation to Foreign investors and businessmen encouraged foreign stakeholders to invest in a state which leads to an increase in the quantity of FDI inflows to Pakistan.The third chapter titled “Impacts of Terrorism on FDI inflows to Pakistan” have discussed the main problem of the thesis concerned.It has analyzed in very detail the impacts of terrorism on FDI in the study period i.e.1998 to 2018.As FDI inflows toPakistan has been affected by many elements including terrorism.Terrorist attacks including threats,suicide attacks,hijacking,bombings,kidnapping,killings and other violent actions.The higher levels of terrorist risks are connected with minor levels of total FDI inflows.It had affected foreign direct investment inflow to Pakistan very badly.While selecting the locations for investment,peace and security remain top of the list in the eyes of foreign investors,but peace and security were deteriorated by the terrorism in Pakistan.In the study period a lot of foreign citizens were killed,and many were kidnapped as well as the bomb blasts and other kinds of terrorist attacks deteriorated business environment.Foreign direct investment and terrorism activates are interlinked with each other.Due to terrorism Pakistan gets lost one trillion dollars economically and lost more than 70,000 precious lives.As foreign direct investment is significant for a state's economic growth and developmental progress,enhancing manufacturing worth,create suitable trade environment,enhancing modernization,raise the demand of raw material and goods.Foreign direct investment is not just making possible budding economies with urgent capital for investment,but in addition,get better job opportunities,administrative skills as well as the transfer of modern technology.Terrorism is proved as an annoyance and terrible for foreign direct investment.Certainly,the Pakistani economy is bearing the enormous cost of terrorist violence.It is the most important barrier in attracting FDI.Chapter four titled “How Terrorism Affected FDI Inflows to Pakistan” elaborated that Terrorism affected foreign direct investment by a number of ways and means.These include human security,capital security,investment opportunities,brain drainage,decreasing market value and decreasing purchasing power in Pakistan.It is a fact that at present the gravest problem which facing Pakistan is terrorism which is also a problematic matter for foreign direct investment.In a state where law and order situation were deteriorated and having insecurity problems,then foreign investors largely reluctant to invest there.This insecurity and worst law and order situation were created by terrorism in Pakistan.The fifth chapter titled “Conclusion and recommendations” has concluded the whole discussion done in the respective chapter and also presenting some concrete recommendations about how to tackle the issue and how to increase FDI inflows to Pakistan.If the Pakistani government takes strict actions to eliminate terrorism from the country and bring peace,then once again foreign direct investment inflow can beimproved.