Efficiency-seeking FDI in Pakistan

“The paper explores the dynamics of foreign direct investment (FDI) in Pakistan, focusing on the need for a strategic pivot from the current market-seeking FDI to efficiency-seeking, export-oriented FDI. While FDI has long been viewed as a driver of economic growth, infrastructure development, and job creation, the paper criticizes Pakistan’s approach as untargeted and overly reliant on FDI aimed at exploiting local markets rather than enhancing exports.”

“In conclusion, the paper calls for a recalibrated approach to FDI. It advocates for targeted policy reforms that attract efficiency-seeking FDI and foster export-led growth rather than relying solely on investments that cater primarily to local demand. It emphasizes the need for Pakistan to break away from the “all FDI is good” mindset. Barring rare exceptions, future FDI should be directed to investments that can positively impact the external account within a reasonable period of time.”