Trade Liberalization and FDI in Pakistan

Abstract

This paper quantitatively identifies the impact of trade liberalization on foreign direct investment in Pakistan over the period of 1990 to 2005. The main interest of this study how different variables of trade liberalization affect foreign direct investment in Pakistan. The trade liberalization has been measured through four variables that are custom and other duties, taxes, taxes on income profit and capital gain, and interest payment. The study uses Feasible Generalized Least Squares for estimating the results. The variables custom and other duties and taxes on income and capital gain show the statistically significant impact on foreign direct investment. Taxes and interest payment shows the insignificant impact on foreign direct investment.