New Insights for Revealing the Effect of FDI on Pakistan's Economic Growth: Evidence from the Auto Sector

Abstract

FDI is one of the important pillar for the development of economic sectors and industries for promoting the high growth of valuable products and improve the quality of useful industrial products. However, as a result of globalization, a country's economic development is no longer completely reliant on its own resources. The foreign direct investment (FDI) made by multinational corporations improves the quality of life for locals by creating employment for them and raising their level of living. FDI may have both positive and negative effects on the expansion of the economy, depending on the factors. South Asia's leading liberal economy is Pakistan. Pakistan permits 100% foreign ownership in its secondary industry due to its open economy and fast-paced private sector. Pakistan's tertiary sector has seen a sharp growth in FDI inflows when compared to other economic sectors. Pakistan's primary sector of the economy is characterised, like other emerging countries, by poor productivity, inefficient labour, energy deficits, and less incentives. However, it seems that the incentives and other variables have only had a modest impact on Pakistan's FDI levels in recent years. The economic development of Pakistan is negatively impacted by foreign direct investment. FDI has a significant influence on Pakistan's short- and long-term economic development.