syed aamir abbas_approved thesis_impact on the performance of foreign direct investment (fdi) in...
TRANSCRIPT
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ACKNOWLEDGEMENTS
I like to express my special thanks and prayers to my supervisor,
Mr. Muhammad Zubair Mumtaz. This dissertation would not
have been complete without his expert recommendations and
unflagging patience.
I would like to express lot of prayers and special word of thanks to
my all University fellows, University management, University
faculty, classmates, and my family who indefatigably listened to
my ideas and assisted me in every moment when it was needed.
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DEDICATION
This thesis is dedicated to my mother who has supported me all the
way since the beginning of my life and in my educational career.
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ABSTRACT
The purpose of this research study is to examine the factors that
contribute positive impact on Foreign Direct Investment (FDI), the
performance of FDI, determinative effects on FDI, constraints that
reduces the FDI, and how can be again enhance the FDI in Telecom
Sector of Pakistan. In this research study FDI in telecom sector of
Pakistan taken as dependent variable and Market size, Competition,
Literacy Rate, Foreign Trade, and Per Capita Income are taken as
Independent Variable. In this study secondary data is used. For the aim
of investigation time series data has been selected (2001Q1-2011Q4) on
quarterly basis. To check and analyze the dependent and independent
variables relationship and changing trend between dependent and
independent variables, the Regression Analysis is applied, and also other
statistical tool like Augmented Dickey Fuller (ADF) Test is used in this
research study. This study shows that all independent variables have real
strong affect and are acting crucial role in an enhancing the FDI in
telecom sector of Pakistan. In order to attract Foreign Direct Investment
(FDI) in Telecom Sector of Pakistan, Government of Pakistan should
provide a conducive environment for foreign investors so as they
improve the economic and security conditions of the country, restructure
the political environment, control the terrorism, tax benefits, allow more
3G Licenses etc. to make this sector more competitive and attractive.
Key Words: FDI, Telecom Sector, Pakistan Market Size,
Competition, Literacy Rate, Foreign Trade, Per Capita Income
TABLE OF CONTENTS LIST OF FIGURES .................................................................................................................................................................. I
LIST OF TABLES .................................................................................................................................................................. II
CHAPTER I: INTRODUCTION .......................................................................................................................... 1
Background ......................................................................................................................................................................... 1
Rational Of Study ............................................................................................................................................................... 2
Problem Statement ............................................................................................................................................................. 3
Objectives of Study ............................................................................................................................................................. 3
Research Questions ............................................................................................................................................................ 3
Hypothesis ............................................................................................................................................................................ 3
CHAPTER II: LITERATURE REVIEW ..................... ......................................................................................... 5
CHAPTER III: THEORETICAL FRAMEWORK ................ ............................................................................ 27
Dependent Variable .......................................................................................................................................................... 27
Independent Variables ..................................................................................................................................................... 28
CHAPTER IV: TELECOM SECTOR OF PAKISTAN ............ ......................................................................... 29
Mobilink ............................................................................................................................................................................. 31
Ufone ................................................................................................................................................................................... 31
Zong .................................................................................................................................................................................... 32
Telenor................................................................................................................................................................................ 32
Warid .................................................................................................................................................................................. 32
Teledenity ........................................................................................................................................................................... 33
Telecom Contribution to Exchequer ............................................................................................................................. 34
Taxes ................................................................................................................................................................................... 35
Telecom Revenues ............................................................................................................................................................ 36
Telecom Investment ......................................................................................................................................................... 37
Telecom Imports ............................................................................................................................................................... 39
CHAPTER V: METHODOLOGY ....................................................................................................................... 41
Specification of Variables ................................................................................................................................................ 42
Dependent Variable ..................................................................................................................................................... 42
Explanatory Variables ................................................................................................................................................ 43
CHAPTER VI: RESULTS AND DISCUSSION .................................................................................................. 45
CHAPTER VII: CONCLUSION............................................................................................................................. 48
CHAPTER VIII: RECOMMENDATIONS ..................... .................................................................................... 49
REFERENCES....................................................................................................................................................................... 51
APPENDICES ........................................................................................................................................................................ 56
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LIST OF FIGURES
Figure 1: Theoretical Framework .............................................................................................................. 27 Figure 2: Teledensity ................................................................................................................................... 34 Figure 3: Telecom Contribution to Exchequer ......................................................................................... 35 Figure 4: GST/FED Collected .................................................................................................................... 36 Figure 5: Telecom Revenues ....................................................................................................................... 37 Figure 6: Foreign Direct Investment ......................................................................................................... 39 Figure 7: Telecom Imports ......................................................................................................................... 40
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LIST OF TABLES
Table 1: Annual Cellular Subscribers ....................................................................................................... 30 Table 2: Telecom Investment ..................................................................................................................... 38 Table 3: Foreign Direct Investment in Telecom Sector............................................................................ 43 Table 4: Independent Variables Data ........................................................................................................ 44 Table 5: Descriptive Statistics (2001-2011) ............................................................................................... 45 Table 6: Correlation between LFDI TEL and Other Variables .............................................................. 45 Table 7: Result of ADF Test ....................................................................................................................... 46 Table 8: Regression Results (2001-2011) ................................................................................................... 46
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
Syed Aamir Abbas 01-221111-100 MBA-V (C)
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CHAPTER I: INTRODUCTION
Background
Foreign Direct Investment (FDI) plays very crucial role in global business activities. It
can help an enterprise with new and alternative marketing channels, relatively low price
production facilities, cheap labor, approached unique technology, competitive
environment, unique products and different investment opportunities. FDI means when
one company from any country making its physical investment into any other country for
getting different benefits like high profit, low production cost, cheap labor and new
technology advantage. It provides investment benefits to both home country and host
country by the passage of time. It enhances the growth, skills, jobs and development of
the host countries. It is collection of assets, new technology, expert management, and
easy access to market. It provides a major source of assets which brings an up-to-date
technology for different market users. Government of Pakistan has opened foreign
investment in telecom sector, because it a very strong sector among other sectors in terms
of economic growth and development of the country. If we review past few years of
Pakistan Telecom Sector performance and economic growth and development of
Pakistan, the FDI shows positive and significant impact on telecom sector of Pakistan,
but gradually FDI reduces due to some factors like Political instability, Terrorist Attacks,
Less Secure Environment, Inflation, Weak Leadership, Low Literacy Level and
Fluctuation in Economic Growth.
There are lots of studies exercised on FDI in telecom sector of Pakistan. Some
developing countries think that FDI is good for economic growth of the country, but on
the other side some countries are opposite that they think FDI is bad for development of a
country. But mostly countries believe and agree that without FDI there is no economic
growth and development of the country. Awan, Khan, and Zaman (2011) explains in his
research paper that the major economic determinants of FDI inflows in commodity
producing sector of Pakistan, and the result disclosed that Gross Domestic Product
(GDP), Real Growth Rate of GDP in Commodity Producing Sector (CPS), Gross Fixed
Capital Formation (GFCF), Foreign Exchange Reserves (FOREX), Degree of Trade
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Openness (RTO) and Per Capita Income (PC) are the key determinants of FDI inflows in
commodity producing sector of Pakistan, also inquire into that all these variables are
found statistically substantial with positive signs. Hashim et al. (2011) narrates the
positive and substantial affect of competition on telecom sector performance, this study
also shows that competition is requiring attention for the complete development of
telecom sector. Tabassum, Nazeer and Siddiqui (2012) explains that for long run policies
the inflow of FDI has largely been directed toward import substitution production for the
domestic market on the other side little has gone dynamics as analyzed industries by
using Co-integration Analysis, and for short term policies dynamics as analyzed by the
Error Correlation Mechanism (ECM) showed that the short term disagreement were
significant enough to not converge toward equilibrium. Rehman, Jaffri and Ahmed
(2010) gives an idea that massive foreign direct investment inflows and workers payment
of money sent to a person in another place or remittances have important appreciated
equilibrium real exchange rate of Pakistan. Sirari and Bohra (2011) examine the
importance of the FDI inflows in Indian service sector and relating the growth of service
sector foreign direct investment in generation of employment like skilled and unskilled
workers of the country. Hashim, Munir and Khan (2007) narrate the foreign direct
investment in telecom sector of Pakistan by using empirical analysis. This study shows
that foreign direct investment as dependent variables and market size, competition,
literacy rate, foreign trade and per capita income as independent variables having a
positive and significant impact on foreign direct investment in telecom sector of Pakistan.
Rational Of Study
Foreign Direct Investment have a huge scope of foreign investment opportunity in
telecom sector of Pakistan and is growing gradually due to its potential market, but if we
look back and compare the current situation of FDI in telecom sector, the situation is
opposite from last 5 years progress. This study analyze and give some valuable solutions
by considering the present and past situation and changing trend of foreign direct
investment in telecom sector of Pakistan. This study will be beneficiary for academics
like teachers, students and person related with education field. Practitioner experts will
take benefit from this research study. With the help of this study foreign investor can take
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an overview on FDI in telecom sector of Pakistan. This study will also motivate to
foreign investor to invest in telecom sector of Pakistan and that will be good sign for
Pakistan’s economic growth and development.
Problem Statement
This whole research study examine the factors that give positive impact on
Foreign Direct Investment (FDI), the FDI performance, its determinative effects, its
constraints that are reduces the FDI, and enhancement of FDI in Telecom Sector.
Objectives of Study
• To identify the factors and performance that give positive impact on FDI in Telecom
Sector of Pakistan.
• To identify the determinative effects on FDI in Telecom Sector of Pakistan
• To identify the constraints that are reduces the FDI in Telecom Sector of Pakistan.
• To suggest some ways that can help to enhance the FDI in Telecom Sector of
Pakistan.
Research Questions
Q#1: What are the factors and performance indicators that give positive impact on FDI in
Telecom Sector of Pakistan?
Q#2: What are the main determinative consequences on FDI in Telecom Sector of
Pakistan?
Q#3: How can be the major constraints cut down the FDI in Telecom Sector of Pakistan?
Q#4: What factors contribute to enhance FDI in Telecom Sector of Pakistan?
Hypothesis
a. Alternative Hypothesis
All the variables show the positive relationship with FDI in telecom sector of
Pakistan
b. Null Hypothesis
All the variables don’t show the positive relationship with FDI in telecom
sector of Pakistan
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
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In this research study FDI in telecom sector of Pakistan taken as dependent variable and
Market size, Competition, Literacy Rate, Foreign Trade, and Per Capita Income are
taken as Independent Variable. In this study Secondary data is used. For the aim of
investigation time series data has been selected (2001Q-2011Q4) on quarterly basis. To
check and analyze the dependent and independent variables relationship and changing
trend between dependent and independent variables, the Regression Analysis is applied,
and also other statistical tool like Augmented Dickey Fuller (ADF) Test is used in this
research study.
The second chapter of this research is the literature review of different twenty
nine research articles related with my research topic. The third chapter of this research is
telecom sector of Pakistan. The fourth chapter of this research is methodology. The fifth
chapter of this research is results and discussion. The sixth chapter of this research is
conclusion and the final chapter of this research is recommendations. So, the main focus
of this research is the impact on the performance of Foreign Direct Investment in
Telecom Sector of Pakistan.
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CHAPTER II: LITERATURE REVIEW
FDI is very important for any country’s growth and development. There are so many
studies have been carried on by different researchers to point out the significance of FDI.
Hence, the literature reviews of few important research articles are explained as
following. Khan & Khan (2011) point out this research by using the framework of
Granger causality and panel co integration, and the time period ranges from 1981-2008,
and this research paper is conducted in Pakistan. The result showed that it support with
proof of panel co-integration among FDI and its output. It showed that FDI gave a
positive effect on its output in the long term. It also showed that causality running from
GDP to FDI in the long term. On the other hand it showed that two-way causality among
GDP and FDI is recognizing in short term period. It showed that growth due to FDI is
varying from sector to sector. The most important result is taken from this research is that
the in different primary, manufacturing and services sectors with the help of FDI.
According to my thought that it is overall good article in highlighting the importance of
FDI, but if the write focused on some aspects of FDI with deep description that will be
more benefited for every readers.
Awan, Khan and Zaman (2011) narrate this study on the major economic
determinants of inflows of Foreign Direct Investment, especially in commodity
producing sector of Pakistan. The approached is used for this research is time series data
in quarterly, and the time period ranges from 1996Q1-2008Q4. In this research there are
two methods uses namely Co-Integration and Error Correction Model (ECM). The result
through these models showed that Gross Domestic Product, Commodity Producing
Sector, Gross Fixed Capital Formation, Foreign Exchange Reserves, Degree of Trade
Openness, and Per Capita Income are main determinants of Foreign Direct Investment,
especially in commodity producing sector of Pakistan. This study is also revealed that all
these variables has important role and showed positivity on Inflow of Foreign Direct
Investment and commodity producing sector of Pakistan. According to my understanding
that writer well managed all the aspects related with inflows of FDI, but if he explained
other factors like enhancement of service sector that will be more attractive.
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Hashim et al. (2011) explains the main impact of competition on the telecom
sector of Pakistan. The data for this research is used quarterly, time period ranges from
1999Q1 to 2006Q4. In this study performance of telecommunication sector taken as a
dependent variable, and the competition is taken as an independent variable. In this
research the method is used multiple regression models in log linear form. This study
showed that positive and important impact of competition on telecom sector of Pakistan.
It also showed that due to competition the telecom sector is able to increase the access of
different telecommunication services in different widespread areas of Pakistan.
According to my perception that the writer describes well about the impact of
competition on FDI with quarterly based data, but if he relates other variables with
competition that will be more attractive for every readers in long run as well as in short
run.
Hashim and Zaman (2010) suggest a study on the effect of telecom sector’s
investment and how to increase the trade. The approached is used for this research is time
series data, and time period ranges from 1950-1951 to 2006-2007. In this study foreign
trade and domestic trade were taken as a dependent variables and telecommunication
sector investment was taken as independent variable. The methods used for this study is
regressions models in log linear form. This study showed that the positive and important
impact of telecommunication sector investment on foreign and domestic trade. This study
also reveals that due to increase in telecom services and facilities the trading activities
also increase. According to my observation that writer have a good focus on overall study
in terms of to identify the effect of telecom sector investment and how to increase the
trade, but if the writer some relate the whole study with some more independent variables
then it will give more clear idea about the effect.
Tabassum, Nazeer and Siddiqui (2012) point out that Foreign Direct Investment
can increase the imports of host country, the reason behind Multi-National Corporation
(MNCs) having a high trend to bought commodities from a foreign country intermediate
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inputs, capital goods and other services that are not available in the host countries. This
study also showed that it also affect the export side of the countries. The main focus of
this study is to find the relationship between FDI and Imports demand, also FDI and
Export supply of Pakistan, time ranges from 1973 to 2009. The analysis of this research
is to focus on the long run equilibrium and the relationship between FDI and export
supply, and also FDI and import demand of Pakistan. The techniques are used for this
research is econometric techniques in terms of Co-integration Analysis and Error
mechanism. The results revealed that import demand is stable long run with the real
import, on the other hand FDI in the long run showed a positive relation with real
exports, but the coefficient is opposite for both conditions. It showed that the inflow is
having a large portion towards import industries and if we look on other side the inflow is
having a less portion towards export industries. It showed that all long run policies are
good for implementation. It describes that for short term the Error Correction Mechanism
(ECM) showed the differences that are not suitable toward equilibrium and for to readjust
in both models it take large time that is time consuming process. It also revealed that
single side causality was found between FDI and real imports which is proved by
theoretical and also by empirical evidence, but there is no causality detected between
Foreign Direct Investment and real export. According to my understanding the whole
research give a very broad idea about the FDI that can increase import due to the MNCs
massive scale buying and selling activities, but if writer put some evidence with practical
examples then it will be clearer for readers.
Alam and Zubayer (2010) come up with empirical research that investigates the
partner countries bears less cost if they make regional integration arrangements. This
study showed that reduce in cost increase the trade and also increase the pattern of FDI.
As mentioned the this research that South Asian Association for Regional Cooperation
(SAARC) come into existence on 8th December 1985 with the combination of seven
countries namely Sri Lanka, Pakistan, Nepal, Maldives, India, Bhutan, and Bangladesh.
This study expressed that there is very low level of intra regional trade between the
countries in the period of 25 years, in percentage it is less than 5%. This research study
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indicate that intra regional flow is less than important sources that goes out from the
country in terms of FDI. This study presented that there is a lot of differences between
the member countries, but each countries have a scope and potential to increase the intra
regional inflow in terms of FDI. In this study there are number of research papers
delivered by focusing on the regional trade and integration, and give a vision of future
research on FDI’s Inflow and economic integration between the countries. According to
my observation this research papers is very useful and very important for all seven
countries of SAARC, but if writer add some practical models that will be more accurate
and attractive for other researchers.
Malik, Basit and Qazi (2011) explain that all unions want to encourage their
member’s choices. In this study write says that the main object of any union is to care of
individuals, organization and the government, because to enhance the economic growth
and social attitude of their man components. This study shows that unions can play a very
important role in different issues like unemployment, job security, wages problem, health
issue, tariffs issues, technology problems, and social safety. This study describes that
unions are beneficial for individual member of organization as well as for state rules and
regulation to labor issues and improvement in the requirements of company’s employees.
This study also describe that unions always think about on the benefits of their employees
and enhance the confidence of workers that you are very important for us. This study is
conducted in Pakistan, and the writers firstly focus history and development of unions in
Pakistan. In addition, the writers focus on pros and cons of unions, then what is the
current situation in private and public companies, and then what are the challenges that
are companies facing. The second focus of this study that what is a major role of unions
in Pakistan like Pakistan Telecommunication Corporation Limited (PTCL) in most
organization is working very well. This study further describe that unions are losing their
strength by the passage of time, as we can see globally and we can take an example in
Pakistan is PTCL. This study indicates that before privatization of PTCL since 2006, it
works very well, but the situation is opposite now, because people those working in
PTCL loosing hopes and confidence; they know nothing can be left for their future. This
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study gives a solution that unions must review polices and come up with hard effort to
retake a place, and also unions mostly focus on future social vision for workers.
According to my understanding the overall study is covering mostly aspects of unions,
but if the writer gives some solutions regarding how unions can reappears for social work
and betterment of employment in current situation, that will be very attractive and
reasonable results for different unions.
Ch et al. (2012) explains that globalization has a very significant impact on
Pakistan’s economy. In this study the writers shows that all the growth sectors has been
affect by Globalization in different ways like directly or indirectly. The center point of
this study is to analyze the Telecommunication Sector in terms of Pakistan’s Economy.
Furthermore, writer give evidence that how Globalization effects on telecom sector of
Pakistan. In this study the methods are used like past data with the help of statistical tools
to find the Globalization and its impact on telecom sector of Pakistan. This study also
gives an idea that with the help of Globalization how increase the performance of
Pakistan telecom sector. According to my perception the writer put very hard effort to
analyze the Globalization and its impact on telecom sector of Pakistan, and shows very
positive ideas about the topic, but if writer used some independent and dependent
variables, then this whole study will be more attractive.
Khan and Khattak (2009) come up with to investigate the different economic
factors and their effect on Foreign Direct Investment (FDI) in Pakistan’s economy. The
method used in this study is econometric analysis, the data is used for this research is
secondary data, and time ranges from 1971-2005. In this study writers used different
models to analyze and for empirical estimation like Log Linear Regression Model and
Least Square. In this study writers also used Augmented Dickey Fuller Test and Error
Correction Model for the analysis of time series data. The findings of this study is
different economic factors have a significant effect on FDI, the economic factors used in
this study are market size comparing with GDP, Openness of Trade, Investment in
Domestic sectors, and Return on Investment (ROI). This study also give some important
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solution to enhance the FDI in Pakistan’s economy, like firstly this study propose that
least square estimation must be used, the second thing that highlighted in this study is that
government should make a equal and provide secure economic environment to every
firm, then provide good and reputed infrastructure, then enhance the confidence of
domestic investment, then debt burden should be minimized, the provide a financial
benefits to the investor, and there should be proper and lawful government policies.
According to my perception article is well written by writers, very informative and very
informative for readers, but if writer put few more economic factors like competition and
literacy rate, then this article is more attractive for researchers.
Rehman, Jaffri and Ahmed (2010) examine the inflows of FDI on Equilibrium
Real Exchange Rate of Pakistan. In this study the time period ranges from 1993 M7 to
2009 M3. In this study writer used Behavioral Equilibrium Real Exchange Rate (BEER)
technique, and the writer also link BEER technique with econometric technique as co-
integration, because he want to make a behavioral link between macroeconomic key
factors and real exchange rate. In this study writers found that there is huge relationship
between foreign direct investment inflow and a payment of money sent to a person in
another other country comparing with equilibrium real exchange of Pakistan. In this
study the main focus of writer is to find out that the effects of equilibrium real exchange
rate of Pakistan on foreign direct investment and workers salary in terms of remittances.
According to my understanding that overall this study is very informative, useful and
unique topic for every researchers, but if writer put some dependent and independent
variables and then he find the relationships and their effects with each other, then this
study can b more attractive for every readers.
Preetha (2011) narrates that Foreign Direct Investment is very essential for every
country’s growth and development. In this study the writer shows that countries where
FDI is insufficient consider as poor countries. This study describes that if FDI increases
in terms of direct currency loan and technology that can help to enhance the poor country
growth and economic development. In this study there are numbers of evidence to prove
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that FDI can play a very vital role in the economic development of the country. This
study conducted in India. The writer shows that with the help of FDI in telecom sector of
India that creates a growth and development path for the country progress. The main
focus of this study is to identify the current situation of foreign direct investment in the
Indian telecom sector, and the second part that is focused by writer is to identify the main
problems confronting foreign companies that why they are not investing in Indian
telecom sector. In this study shows that approximately above 45% increase in growth of
telecom sector of India in recent years. This study shows that how possible speedy
growth in telecom sector in India, the answer is firstly proactive and positive decision of
government of India, and second is the participation of both private and public sector of
Indian government. This study close with short and small econometric test with the help
of economic factors that influencing the FDI, then this study explain that how FDI put in
by Go-Green, and then elaborate the most powerful sectors of Indian economy like
Information Technology (IT) and telecom sector. According to my understanding overall
this articles is very useful in terms of importance of FDI, but if writer use some models
like linear equation model in this research then it can be more attractive for different
researcher.
Faridi, Malik and Bashir (2011) suggest that the transportation and
telecommunication can play a very significant role in economic growth of Pakistan. In
this study writer focus on basic two sectors namely transportation and telecommunication
sector. This study describes that these two sectors are very important sectors for any
country’s economic growth. It can help by increasing economies of scale by using
production procedures and by joining people. In this study Solow Growth Model is used
for checking the relationship of transportation and communication on economic growth
of Pakistan. In this study writers used time series data, and the time periods range from
1972 to 2010. Furthermore, writers also used Autoregressive model for checking and
estimating the authentic results. In this study writers used two basic variables like
Telecom and GDP, and Capital and GDP to check the causal association between them.
In this study writers showed that economic development of Pakistan is largely depends
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on Capital and Transportation. On the other hand writer shows that by deriving the
communication in terms of telephone line inadequacy economic development of the
country. In this study that writers give some basic suggestion like Government should
launch some training programs that will help to enhance the technical skills with some
basic education. According to my perception overall this study is very informative and
very useful for every researcher, but if writer put some econometric models for this study
to prove relationship between transportation and telecommunication impact on economic
growth of Pakistan, then this study will be more attractive for different researchers.
Sirari and Bohra (2011) point out the performance of Foreign Direct Investment
(FDI) in service sector of India. In this study the writers describe that FDI is a major
source and tool that help to enhance, growth and development of employment, capital
and productivity. This study also work out that FDI can play a very important role to
boost up the technology, improvement of skills, and increase in the managerial capacity
of the country. This study shows result that FDI inflows from 1991 in service sector of
Indian economy give very important trend in the development of economic growth of the
country. This study also revealed that with the help of FDI in service sector the
employment in terms of skilled employ and unskilled employ also increase. According to
my thought that overall this study is well managed by writer, but if writer used some
statistical tools with the help of some models then this study can be more attractive for
very researcher.
Kransdorff (2010) suggest that how tax incentives and foreign direct investment
play role in South Africa. In this study writer says that there is a lot of inequality between
rich and poor people of South Africa, this difference leads South Africa on top rank
between other countries of the world. This study shows that to handle this huge
difference between rich and poor people that is hurdling in the progress of the country,
then the government took macroeconomic policy namely Growth Employment and
Redistribution (GEAR) strategy that is exist in locally and globally. The main object of
this strategy is to raise the welfare of all the people who living in South Africa, then
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increase the economic growth of the country, and then create pool of opportunity that
leads to economic growth of South Africa. In this study writer shows that the growth rate
of 6% coupled that is estimated by GEAR and this study also indicate that with the help
of GEAR 400,000 annual job creations is possible, that is required for South Africa. But
this study also indicates that it is very difficult to say that all the required goals of the
South Africa are achieved. In this study writer describe the importance of Foreign Direct
Investment (FDI), and also writer indicate that FDI is a key element and can play a very
important role in economic growth of any country. This study describes that if domestic
savings rate is less, then FDI can play a main role as a fund provider for a country. In this
study writers shows that South Africa is not able to attract the large amount of foreign
direct investment in the country. This study also shows that current situation of South
Africa is better from last few years, because foreign investor are investing a lot of money
in South Africa due to liberalization. In this study writer used some econometric
techniques to justify that taxation can also play important role and impact on any country
in terms of FDI inflows increase or decrease, it means if taxation is low, then FDI
increases, and if taxation is high in any country then FDI is low. The main focus of this
study is to find out that in South Africa’s tax is the main factor that causes the hurdle to
attract the foreign direct investment in country. According to my perception this how
whole research article is very practical and essential for any country’s economist, because
this gives an idea that how any country can attract the foreign direct investment, but if
writer give some proof with the help of some model and by using dependent and
independent variable, then this study can be more attractive for any researcher.
Hashmi (2012) narrates the main factors in participation of Foreign Direct
Investment (FDI) of United States large corporations in different countries. In this study
the writers shows that what are the main factors that help to succeed United States
corporations in international businesses. In this study writer shows that firstly all
successful economic growth is due to the foreign direct investment. Secondly the writers
shows that rise in social activities help the citizens of world feel very satisfied with the
help of large U.S Corporation involvement in international environment. In this study the
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writer used data that is collected from different and specific United States Corporation.
This study shows that there are the three important factors that help to large United States
Corporation in international operations like low production and operation cost,
Geographical differences and prominent market size. According to my perception that
writer took a very broad topic for this research, and he wrote this study in very
comprehensive style, but if he used some statistical tools and some models that are
related this study that can be more attractive regarding this research for every information
seeker or researcher.
Azam (2010) elaborate this research on different economic causal factors of
Foreign Direct Investment (FDI) in different republic namely Turkmenistan, Kyrgyz and
Armenia by using theory and different evidence. The main focus of this study is to check
the various economic causal factors on Foreign Direct Investment (FDI). In this study
three specific countries selected from Central Asia like Turkmenistan, Kyrgyz Republic
and Armenia. In this study secondary data is used, and the time period ranges from 1991
to 2009. In this study secondary data is taken from World Development Indicator on
different issues for testing the whole research. In this study two methods are applied
namely Simple Economic Model in log form and the Least Squares technique. This study
shows that there is a positive relationship between Market Size and FDI, and Official
development assistance and FDI, but there is negative relationship between inflation and
FDI. In this study when different techniques are apply on Armenia the result shows that
there is less impact of Official Development Assistance on Foreign Direct Investment. In
this study when different techniques are apply on Kyrgyz Republic also give same result
as Armenia like there is less impact of Inflation on foreign direct investment with
anticipated negative sign. In this study writer give some beneficial recommendation like
he says that there is need to enhance the Market Size and Official Development
Assistance, and there is need of handled inflation if countries want to progress and excel
the level of foreign direct investment for economic development of country. According to
my understanding about this research study that writer put had effort to prove his idea
very well, but if writer used some more statistical tools with the help of dependent and
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independent variables for this study then this study will be more attractive for different
researchers.
Akhtar (2009) explains the affect of Macroeconomic Determinants on
Telecommunication Sector and its operation in Pakistan. This study also shows the
different Policy Issues in Telecommunication Sector and its performance in Pakistan. In
this study writer used time series data. In this study writer used some policy and
macroeconomic variables to measure the performance of telecommunication sector of
Pakistan. This study shows that receptivity of foreign companies in telecom sector and by
using the current population contributed to enhance the output level of cellular and fixed
networks of the country. This study shows that there is a mixed relationship between Real
Per Capita GDP and a Separate Regulator of the country. This study also reveals that with
the increase in the progress of cellular networks gives benefits by increasing the growing
ratio of fixed line networks. In this study writer give some useful suggestions that to all
foreign companies to invest in telecom sector of Pakistan, there is need of maintained
long term relationship and some amendment in Government Policies. In this study writer
also suggest that when foreign companies invest in telecom sector of Pakistan then
country can take benefit by using new technology and this technology leads to the
development of country’s economic and financial growth. According to my
understanding about this study whole article is well written, and writer link all the aspects
of this study very well, but if writer use some more econometric techniques by using
statistical tools, then this study will be more valuable for different researchers.
Shahid, Lian and Liu (2007) explain the contest and relaxation terms and
conditions for telecom sector in China and Pakistan two friendly countries. In this study
writer shows that there is a direct relationship between telecommunication sector and
economic growth of the country, because when there is increase in development of
telecommunication then economic growth of the country also increases. In this study
writer shows that there are number of developed countries that openness investment
opportunity in telecom sector between 1980s and 1990s, and also some developing
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
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countries are still trying to increase the foreign investment in telecom sector of the
country. In this study writers shows that every country is achieving the foreign direct
investment opportunity by different approaches, because every country has its own social
living style and different economic conditions of the country. In this study writer shows
that different countries can learn to each other experiences in terms of each other policies,
competition advantages, worldwide service, consumer concern protections, and
enhancement of boosted services. In this study writer compares the policies of China and
Pakistan for checking the development of telecom sector, and give some recommendation
to that upcoming mergers in the world with the help of taking and benefiting from
experience of other developed nations. In this study the main focus of the writer is
liberalized policies and competition advantages. In this study writer compare the China
and Pakistan policies, then writer analyze that Pakistan is very proactive to liberalize the
competitive market as compare to China is step by step liberalizing and regulating the
competitive market and China is using assured approach. In this study writers also tell
that Pakistan is helping new foreign firms by liberalization of regulation and policies of
the countries, because this leads to enhancement of private sector investment. This study
shows that on the other side China is using opposite strategy to Pakistan, China want to
promote Government based companies that are operating within the country, so China is
not liberalizing its regulation and policies to allow foreign firms enter in telecom sector
of China, because China knows that foreign firms are good and they have a ability to
operate in host country’s telecom sector and can generate high profit, so China wants to
retain this profit for the betterment of the country. In this study writer also shows that
China want to make a reasonable competition but on the other hand Pakistan believe on
open competition approached. In this study shows that economic growth of Pakistan is
boosted with the enhancement, open competition, liberalization and deregulation of
foreign firms in telecom sector, this is also proved by the some good economist by using
different telecom indicators. In this study writers give some useful recommendations to
both countries that there is need of some more expertise and skillful labor force that will
help to adopt new and innovative technology and both countries can take benefits from
this valuable sector that is telecom sector. According to my understanding about this
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study the writers put very hard effort to managed and organize this research by systematic
way, but if writer put some dependent and independent variables and check the
relationship with FDI by using some statistical tools, then this study can be more
informative for different researchers.
Ansari and Ranga (2010) narrates that the progress of FDI in India, the current
situation of FDI in India, current issues in economy of India, and some policies with
recommendations for India. In this study the writer focus on importance of FDI to
enhance the growth of the country. This study shows that foreign direct investment
without debt financial instrument for every country, which leads to the economic growth
of the country. In this study writer describes that it is a tool to gain technical skills with
new technology knowledge, and it also help to generate the employment opportunities in
the country. In this study writer also show some draw backs of foreign direct investment
like it can harm the sovereignty of the host country, and it can also decrease the
performance of domestic business of the host country. In this study, writer shows that by
using of the natural resources of host country that leads to high profit by passage of time.
This study also explains the different pros and cons of foreign direct investment. In this
study writer also highlight the changing pattern of foreign direct investment gradually.
This study analyze that there is a very immense competition on foreign direct investment
between different developed countries. This study shows that India is also one of the
countries that is attracting very huge amount in shape of foreign direct investment. In this
study writer shows that India is very good in attracting the foreign direct investment in
service sector, but very behind to attracting the foreign direct investment for
manufacturing sector, because manufacturing sector is also one of the best economic
growth sector. In this study writer shows that foreign direct investment can improve the
situation of economic growth, but it is not necessary that it also handle and improve other
issues like poverty obliteration, joblessness, and other economic problems. This study
gives some useful recommendation like if India want to attain the 20-20 objective, then
India must do massive investment in this field. In this study writer also suggest that
government should focus on clarity and harmonious uniformity in regulation and policy
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with broad in scope for long term economic growth strategy. According to my
understanding about this research study that it is a good article with very useful
information for information seekers, but if writer put some more econometric approaches
with using statistical tools for testing the give information, then it will be more and
authentic article for different researchers.
Gupta and Gupta (2011) come up with an estimation of FDI with particular
indicators on India and China’s Economy. In this study writer focus on the importance of
FDI, and describes that with the help of FDI the economic situation of any country also
boosted. In this study writer shows that with the help of FDI a lot of capital flow in the
country and also innovative technology, job creation and enhancement in the economic
growth of the country. In this study writer shows that there is vital role of China and India
to increase the usage of foreign direct investment in the global economy. This study
shows that India and China is in list of top 10 from overall world to promote the foreign
direct investment. This study also shows that China and India’s economy is growing with
very high pace as compare to other countries in the globe, and some economist predict
that both country can be a super power in future. In this study writer used statistical tools
like Correlation and T-test on both countries China and India’s Economies. In this study
writer divide whole research paper into four sections namely first section consist of
foreign direct investment policies on China and India’s economies, second section is also
consist of foreign direct investment policies on India and China’s economies, third
section of this research is methodology of research and analysis of data, and the fourth
section of this research consist of some useful suggestions and finding. According to my
understanding about this whole research paper that it is well organized by writer, and
some very useful information is available in this study for every information seeker, but
if writer used some authentic model in this study that will be more attractive for different
researchers.
Lamine and Yang (2010) narrates the significant effect of Foreign Direct
Investment (FDI) on Economic Growth by using different evidence from Guinea
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Republic in West Africa. In this study the writer focus on the important role of foreign
direct investment on economic growth of Guinea Republic. In this model writer used the
Granger Causality Technique to check the relationship between economic growth of the
Guinea Republic and foreign direct investment. This study shows by the help of Granger
Causality Test that GDP of the country can enhance the attractiveness of foreign direct
investment, it means when gross domestic product increases in Guinea Republic then
foreign direct investment increases and when gross domestic product decreases then
foreign direct investment also decreases in Guinea Republic. In this study writer also
explain that foreign direct investment can promoted by the help employment factor, so
the Guinea Republic Government has play a very important role to attracting the foreign
direct investment for other countries by the help of employment promotion factor. This
study also shows that with the help of school enrollment GDP of the country can
increases, and increase in GDP also increase the foreign direct investment from other
country. In this study writer reveal a very important point that current situation of Guinea
Republic is improving day by day, because of good government regulations and authentic
policies, that leads to attractiveness of foreign investor and hold up of healthy investor for
economic growth of the country. According to my understanding about this study, it is
very informative and well written study, but if writer put some dependent and
independent variables and then check the relationship between each other, then the results
of this study will be more accurate and the study will be more attractive for different
researchers.
Kumar and Dhingra (2011) state the affect of less restriction on FDI in India’s
Economy. In this study writer describe that foreign direct investment is a unique way for
every international economies, which helps to create a long term relationship between
different countries of the world. This study shows that the foreign direct investment is
took for economic growth of every country, it can be achieved through entrepreneurial
Skills, Managerial Skills, and Technical Skills that are very essential for economic
growth. In this study writer also shows that foreign direct investment is one of the very
powerful and critical instrument for economic growth of every country. In this study
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writer shows that every country wants to enhance the economic development by using
foreign direct investment. This study shows that India like other developing countries
want to enhance the economic growth of his country by taking the benefit from foreign
direct investment. In this study writer shows that India is very keen to inflow of foreign
direct investment from 1990s and 2000s with the help of giving foreign firms friendly
environment, openness in trade, deregulation of trade, national ownership privatization,
and enhance the territorial consolidation. In this study writer shows that in 1980s Indian
Government liberalize a policies to increase the foreign direct investment, this FDI
mostly inflows in new technology sector and second is in exports sectors by giving and
creating a friendly environment. In this study writer also explain that during 1990s Indian
Government take some proactive steps like accept benefits of host country, freedom from
duty, and liberalizations regarding foreign ownership in the country, these strategy gives
a lot of enhancement in foreign direct investment that leads to improvement in the
economic growth of India. This study also shows that there is a best boost of foreign
direct investment in India’s economic growth during 1980s and 1990s, so this is the best
period for Indian economy in terms of economic growth of the country. In this study
writer shows that after 1991 this trend of foreign direct investment has been changed as
post liberalization period, during this period there is two best things has been increased,
first thing is that foreign direct investment boosted with very high pace and the second
thing is that very big change in different sector composing with foreign direct investment
enormously. According to my perception about this study that it is written well with
historical evidence provided by the writer, but if writer used some well known statistical
tools in this study then this study will be more attractive in terms of information
regarding the importance of foreign direct investment in economic growth of the any
country for every researcher.
Moses (2011) narrates the FDI in term of Oil and Nonoil FDI, and how foreign
direct investment help to boost the economic growth in Nigeria. In this study writer
describe that foreign direct investment is a major and attractive instrument that play a
very significant role with domestic economy of the different country, which leads to
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economic growth and development of the country. This study indicates that economic
growth with the help of foreign direct investment depends on the strength in the area of
country and the usage of that area. This study explains that there is huge inflow trend of
foreign direct investment in extractive industry, mostly during the current political system
and compared to non-extractive sector not well in terms of foreign direct investment, and
the question rise that how can increase the FDI in this sector and how can achieve more
economic growth in Nigeria. The main focus of this study is to analyze the affect of Oil
and Non-Oil FDI in the economic growth of Nigeria. In this study OLS technique is used,
time period ranges from 1970 to 2008. In this study writer used empirical testing to
identify the affect of extractive and some other sectors on the economic growth of
Nigeria. In this study writer take Extractive FDI as OILFDI sector and on the other hand
Non-Extractive FDI as NONOILFDI sector and check the effect of both on the economy
of Nigeria. This study shows that the variables are used to check the probabilities and
significant on Nigerian economy are t and the f statistic, and the result proved with the
help of determination coefficient (R2) 78%. This study reveals that there is positive
autocorrelation relationship between these variables. This study also reveals that in
NONOILFDI sector having a more important and positive effect on Nigerian economy
and in OILFDI sector has averaged impact on the Nigerian economy. This study also
shows that FDI is higher in case of extractive sector and moderate positive effects on
Nigerian economy. In this study writer put up some recommendations to Government and
all Stakeholders that they need to enhance the foreign direct investment in Non-Oil
Sectors, because it has more advantages in terms of high economic returns in the shape of
different valuable factors like advantage of human capital, high employment
opportunities and local capacities that will be more prevailed by exiles. In this study
writer further stress on that Nigerian Government should toned up the local capacity
policy in extractive sector to extension the benefits of that industry to Nigerian economic
growth. According to my understanding about this study that it is very unique top to
research, and it is good quality work from the writer side, but if writer come up with
some more econometric and statistical tools by comparing and checking the relationship
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of dependent and independent variables, then this study can be more accurate, authentic
and informative for different researchers.
Goel and Shivani (2012) suggest that to check the development practice of FDI in
Indian economy by analyzing region wise, sector wise and country wise. In this study
writer describes that two important tools that play very important role in the development
of the economic growth of the country, first tool is Globalization and the other tool is
foreign direct investment. This study shows that globalization and foreign direct
investment is can play a very vital role with the help of creating unique products, with
essential skills, comfortable access to markets, and injection of innovative technology for
the host country. In this study writer shows that all countries of the world are trying to
promote the foreign investors with huge investment. This study shows that every foreign
investor want to invest either in China or in India, because if we look the statistics of
different countries in terms of foreign direct investment, India is on second number best
place for foreign investors, and the first number is with China, mostly foreign investors
want to invest in China before India, so with the help of foreign investor’s investment
both China and Indian economy is on boost in economic growth of the country. In this
study writer analyze the movements and growth practice of foreign direct investment by
checking on different sectors of India, and the data is used in this study taken from
different countries that investing in India during the time periods of 2000 to 2010.
According to my perception about this study is very well written in terms of information,
beneficial, and experienced based, but if writer put some econometric techniques with the
help of statistical tools to test the available information, then this article will be more
attractive for different researchers.
Rajalakshmi and Ramachandran (2011) explain that how FDI can affect on
India’s Automobile Sector by using the passenger car segment. In this study writer shows
that there is huge increase of FDI in Automobile Industry because India liberalize his
economic investment policies as compare to other industries of the country. In this study
there is 18% increase of FDI growth in automobile industry. This study shows that there
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are so many advantages that are provided by automobile sector namely updated
technology, cost effectiveness, and effective work force. Furthermore, in this study
writer shows that with the combination of Automobile industry, Auto Ancillary Industry
and R&D centers Indian economic growth increasing with very high pace. This study
shows that automobile sector is number 3rd in manufacturing of three wheelers vehicle
and it is number 2nd in manufacturing of two wheelers vehicle. In this study writer shows
that there are number of developed countries investing namely United States of America,
South Korea, Netherlands, Germany, United Kingdom, and Japan. In this study writer
describe that Ministry of Commerce of India shows that there is only $18.35 billion
received in foreign direct investment in very first eleven months during 2010-2011. This
study also indicate that there is $63 billion came in eleven month of last financial year as
compare to current previous year it is very high increase in FDI. This study shows that
Automotive Sector is having a very bright future. In this study write explains that original
automobile companies are changing with foreign multinational companies because of
getting consumer satisfaction in long run. This study predicts that automotive sector will
boost more in 2012. In this study writer narrates that there are some major foreign
investors that playing a very vital role in the progress of Automobile Industry of India.
This study also describes the passenger growth car segment; production enhancement;
increases the sales and investment opportunities were discussed. In this study writer used
the three statistical instruments to examining this study, namely ARIMA, Linear and
Compound Model. In this study writer also further used time series investigation for
predicting the future outcome. According to my understanding on this study, it is well
written and well tested by different statistical model, but if writer use some dependent
and independent variables, and then to check their relationship with FDI in different
sector, then this study will be more attractive for different researchers.
Gunawardana and Siscombat (2008) state the importance of FDI rules and
regulations of Lao Peoples Democratic Republic (Lao PDR). In this study writer explain
that this study can help to potential investors by providing authentic information for right
decision making process, those who want to make a huge investment in Lao Peoples
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Democratic Republic. In this study writer describes that the first regulation of Laos was
to join local economic relationship with foreign investment laws of foreign countries.
This study shows that current rules and regulations are very useful in terms of creating
more foreign direct investment opportunity environment in Laos. In this study writer
describes that Government of Laos has taken so many steps to promote foreign
investment like there is huge tax benefits and non-tax benefits for different foreign
investment projects within the range that name is Special Economic Zones (SEZs),
further more there is decrease in import taxes, and decrease in tax on foreign companies
profit, which his very low as compare to domestic companies operating within the Laos.
In this study writer further explains that there is very wide liberalization in foreign direct
investment rules and regulation, permitting more than 100 percent foreign ownership in
different sectors of Laos. According to my perception writer puts very hard effort to
analyze the foreign direct investment rules and regulation of Loa PDR, overall study is
very informative and well written, but if writer put some econometric techniques and
apply some statistical tools to check the authenticity of give data, then this study will be
more attractive for different researchers.
Majeed and Ahmad (2009) narrate the some important features of host country
and the factors of FDI in different developing countries. In this study writer used the
board data of 72 developing countries, and the time period take from 1970-2008. In this
study writer choose the model which name is General Method of Moments (GMM)
method to for selecting the best host country’s characteristics. This study shows that there
is positive affect of GDP, Per Capita Income, and Economic Growth of the country on
foreign direct investment. In this study writer coherent this result with the attempting
conducts of Multi-national Corporations (MNCs). In addition, this study shows that
remittances are having very important and convinced affect on foreign direct investment.
This study shows that some other determinants like Balance of Payments (BOP) and
inflation having a negative effect on foreign direct investment. This study further
describes that Multi-national Corporations want to investment in those countries where
they look physical reality and good promoting policies regarding trade. This study also
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shows that Military Expenditures give negative impact on foreign direct investment, and
this study also determine that there is also negative impact of Real Exchange Rate on
foreign direct investment. According to my understanding about this study, it is well
written in terms of information and practical usage, but if writer come up with some
dependent and independent variables and check the relationships and their effects on each
other, then this study will be more valuable for every researcher.
Liu and Daly (2011) come up with idea that FDI in Manufacturing Industry of
China with checking the trend of transformation from low Technology to High
Technology Manufacturing sectors. In this study writer describe that China liberalize its
economy for foreign direct investment in 1979, due to this China is on second position
for promoting the enhancement of FDI in the world, and on number first is United States
of America to promote the enhancement of foreign direct investment in the world. In this
study writer explains that during 1997 to 2008, the manufacturing sector prevailed
foreign direct investment inflow in China. This study indicates that when manufacturing
activities divided in to two different activities namely low technology and high
technology. In this study writer also describes that due to converting its manufacturing
sector in to two parts, China is in changeover phase acting foreign direct investment in
conventional low technology manufacturing activity to high technology manufacturing
surroundings. The main focus of this study is to examine the important factors of foreign
direct investment inflow throughout low technology manufacturing industry and high
technology manufacturing industry throughout the main three China’s Geographical
Regions. Furthermore, in this study writer describe that empirical inquiry is apply for
factors of foreign direct investment in terms of high to low technology inflow by using
infrastructure, quality of labor, cost of labor, and market size. In this study writer also
elaborate that theoretical base for China’s conversion from low technology to high
technology manufacturing surroundings. According to my perception this study is well
managed by writer, with the help of some authentic evidence, and it is very unique topic
to research, but if writer put some econometric techniques to clarify the concept of high
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low and low high manufacturing technology with the help of some statistical tools, then
this study can be more attractive for different researchers.
Hashim, Munir and Khan (2007) examine that flow of FDI in telecom sector of
Pakistan by using an empirical analysis. The main focus of this research is to check the
FDI attractiveness in telecom sector of Pakistan and how also check the effects of its
determinants on foreign direct investment. In this study writer use the regression analysis
taken data in quarter (2000Q1-2006Q4) for identifying the attractiveness of FDI in
telecom sector of Pakistan. In this study writer used foreign direct investment taken as
dependent variable, and independent variables are market size, competition, literacy rate,
foreign trade, and per capita income. This study reveals that all variables having positive
and significant impact on FDI in telecom sector of Pakistan. According to my
understanding about this article, it is very informative and understandable empirical
evidence given by writer, but if writer put some statistics by using updated telecom sector
investment information, revenue information, total FDI in Pakistan, and then sector wise
FDI in Pakistan by using graphs and table, then it will be more attractive and informative
research study for all researchers.
The brief summary of entire literature review on different articles related with
impact on the performance of FDI in telecom sector of Pakistan. All studies show that
Foreign Direct Investment is very important tool for enhancement of economic growth
and economic development of the country. Different studies show that there is a positive
impact of foreign direct investment in telecom sector and that leads to economic
development and economic growth of the country. Different studies also shows that there
are some constraints to reduce the foreign direct investment in telecom sector, these
constraints are vary from country to country, and the constraints may be in the form of
inflation factor, political instability, differences in cultures, competitions, barriers to
entry, literacy level, market size and security problems. Some studies also give few
recommendations to enhance the FDI in telecom sector like government should review
their policies and regulation regarding for foreign investment.
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CHAPTER III: THEORETICAL FRAMEWORK
The theoretical framework of dependent and independent variables are as follow:
Figure 1: Theoretical Framework
In this study the dependent and independent variables are taken from the work of
(Hashim, Munir, & Khan, 2007).
Dependent Variable
In this research study Foreign Direct Investment in Telecom Sector (FDI
TEL) is taken as dependent variable. FDI data in telecom sector has been taken from
different Pakistan Telecommunication Authority (PTA) Annual Reports like from
(Pakistan Telecommunication Authority, 2008), (Pakistan Telecommunication Authority,
2009), (Pakistan Telecommunication Authority, 2010), and (Pakistan Telecommunication
Authority, 2011).
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Independent Variables
In this research study Market size (MS), Competition (COMP),
Literacy Rate (L.R), Foreign Trade (F.T), and Per Capita Income (PCI) are taken as
Independent Variables. Independent variables data has been taken from different years
Pakistan Economic Survey. These surveys are taken by visiting the Government of
Pakistan, Ministry of Finance website from (Ministry of Finance, 2007), (Ministry of
Finance, 2008), (Ministry of Finance, 2009), (Ministry of Finance, 2010), (Ministry of
Finance, 2011).
• Market Size is measured as Gross Domestic Product (GDP) of the host country.
• Competition is measured as total number of telephone, mobile and wireless local
loop companies per million of the people.
• Literacy rate data has been taken in percentage.
• Foreign trade is the sum of total imports and total exports of the host country in
each year.
• Per capita income data is taken in dollars.
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CHAPTER IV: TELECOM SECTOR OF PAKISTAN
Telecom sector of Pakistan has a very strong background in terms of success and gain
Win-Win situation for different participants like Customers, Investors and Government of
Pakistan. FDI in telecom sector of Pakistan was started in 1990, and FDI in this major
sector has extraordinary boom after 2000 explain by (Hashim, Munir, & Khan, 2007).
Actually this sector was on its flourish in the Government of Ex-President Pervaiz
Musharaf give details by (Ch, Faheem, Dost, & Abdullah, 2012). Telecom sector has the
potential and capability to attract large amount of FDI in the future. This sector can create
job opportunities, reduce poverty, improve skills, and can help in the progress of
economic and growth of the country. The telecom sector is flourishing speedily in
different parts of the country by the passage of time. This sector is still in developing
stage to spread its services in lots of different un-served areas like in many small cities
and in different villages. In current situation companies are planning to enhance their
services operation in uttermost locations to capture potential customer market for getting
maximum profit. In current situation due to raise in competition consumers are getting
benefits in terms of good quality and lost cost cellular packages.
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In telecom sector annual cellular subscribers in Pakistan are as shown in below table:
Table 1: Annual Cellular Subscribers
Source: Source: PTA – Annual Reports (2004-05, 2005-06, 2007-08, 2008-09, 2009-10, and 2010-11)
Annual Cellular Subscribers Mobilink Ufone Zong Instaphone Telenor Warid Total
2003-04
3,215,989 801,160 470,021 535,738 - - 5,022,908
2004-05
7,469,085 2,579,103 924,486 454,147 835,727 508,655 12,771,203
2005-06
17,205,555 7,487,005 1,040,503 336,696 3,573,660 4,863,138 34,506,557
2006-07
26,466,451 14,014,044 1,024,563 333,081 10,701,332 10,620,386 63,159,857
2007-08
32,032,363 18,100,440 3,950,758 351,135 18,125,189 15,489,858 88,019,812
2008-09
29,136,839 20,004,707 6,386,571 34,048 20,893,129 17,886,736 94,342,030
2009-10
32,202,548 19,549,100 6,704,288 - 23,798,221 16,931,687 99,185,844
2010-11
33,378,161 20,533,787 10,927,693 - 26,667,079 17,387,798 108,894,518
Jul, 2011
33,545,462 20,569,290 11,594,583 - 26,946,265 17,036,690 109,692,290
Aug, 2011
33,468,080 20,624,408 12,045,445 - 27,061,319 16,685,299 109,884,551
Sep, 2011
33,412,130 20,681,699 12,591,120 - 27,309,218 16,334,277 110,328,444
Oct, 2011
33,537,922 20,828,145 13,168,025 - 27,607,043 15,985,299 111,126,434
Nov, 2011
33,932,235 21,069,561 13,572,798 - 28,008,770 15,636,754 112,220,118
Dec, 2011
34,213,552 21,368,744 13,874,709 - 28,130,720 15,287,861 112,875,586
Jan, 2012
34,703,110 22,019,458 14,423,646 - 28,470,254 14,990,190 114,606,658
Feb, 2012
35,296,206 22,423,269 14,951,789 - 28,844,869 14,693,616 116,209,749
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
Syed Aamir Abbas 01-221111-100 MBA-V (C)
31
According to the Pakistan Telecommunication Authority (PTA)- Annual Reports (2004-
05, 2005-06, 2007-08, 2008-09, 2009-10, 2010-11) the current mobile network operators
are:
• Mobilink
• Ufone
• Zong
• Telenor
• Warid
Mobilink
Mobilink is one the leading cellular and Blackberry service provider in Pakistan.
This company is a subsidiary of Orascom Telecom Holding. It has more than 31.6 million
subscribers. It has hold market leadership amongst other competitors by integrated
technology, the largest portfolio of different value added services in the telecom sector
and the strongest brands. It also has a broadband carrier division for next generation and
community internet technology with the combination of largest voice and data network
with more than 8,000 cell sites in the country elaborate by (Mobilink, 2012).
Ufone
By using Ufone brand name, Pakistan Telecommunication Company Limited
(PTCL) started its operations in January 2001. Later PTCL go for privatization, and then
Ufone turned to Emirates Telecommunication Corporation Group (Etisalat) in 2006.
Ufone has main focus on customer and best offering packages. It has more than 20
million subscribers. Its network coverage is in more than 10,000 locations. Its currently
provide the international roaming to more than 288 live operators in more than 160
countries. It also offers largest Pakistan’s GPRS and BlackBerry Roaming Coverage to
more than 200 live operators throughout 122 countries in the world explain by (Ufone,
2012).
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
Syed Aamir Abbas 01-221111-100 MBA-V (C)
32
Zong
Zong is the first international brand of China Mobile. It is launched in Pakistan in
2008. It is referred as China Mobile Pakistan (CMPak). It has more than 14 million
subscribers. CMPak has invested more than US$ 700 million in the telecom sector of
Pakistan. Zong is devoted on pulling and holding better human resource from throughout
Pakistan. It has also provides a working environment that satisfies the professional
persons and personal needs of its valuable employees explain by (Zong, 2012).
Telenor
Telenor Pakistan Company is 100% owned by Telenor Group. Telenor Group is
an international service provider of high quality voice, data, and different communication
services in 11 different markets throughout Europe and Asia. It is a largest mobile
operator in the world with the combination of 140 million mobile subscriptions (Q4
2011) and its workforce approximately around 30,000. Telenor Pakistan is the only
company that is largely invested by European foreign investor. It acquired a GSM license
in 2004. It starts their commercial operations on March 15, 2005. It has more than 28
million subscribers. It has 24% of Market Share making it the Pakistan’s second largest
mobile operator is work out by (Telenor, 2012).
Warid
Warid Telecom is a joint venture between SingTel Group and Abu Dhabi Group.
The Abu Dhabi Group came in into a strategic alliance with the help of Singapore
Telecom Company. In July 2007 SingTel acquired 30% equity stake in Warid Telecom
Pakistan for US$ 758 million. Warid has more than 14 Million subscribers. Abu Dhabi
Group is one of the largest business groups in the Middle East and the only one of the
largest foreign investor in Pakistan is work out by (Warid, 2012).
According to the Pakistan Telecommunication Authority (PTA)-Annual Report
2010-11 that Pakistan economy faced adverse shocks during the fiscal year 2011, adverse
shocks in the form of massive floods, and price fluctuation in oil and commodity
products. According to an estimate made by the Government that last year’s floods rub
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
Syed Aamir Abbas 01-221111-100 MBA-V (C)
33
out 2% of growth and more than 20 million people endured shift. The economic growth
was showed at 2% against the objective of 4% in the fiscal year 2010. In telecom sector
revenue increased by 5.4% and tax collection increase by 7.2% in the fiscal year 2011
compare to the previous year.
Teledenity
According to the Pakistan Telecommunication Authority (PTA)-Annual Report
2010-11 that in year 2011 teledensity of the Pakistan was showed at 68.39%. It shows
that 6.7% expansion as compared to previous year. As data shows that 95% of mobile
sector contribution in total teledensity of the country, and also an increase in mobile
insight from 60.4% in fiscal year 2010 to 64.9% in fiscal year 2011. It means that there is
improvement of 4.3% in total teledensity. Previous data shows that there is declining
trend in Fixed Local Loop teledensity, because of mobile substitution and currently it
stands at 1.93% in fiscal year 2011 as compared to 2.1% from last year, data shows that
there is a reduction of 0.17%. On the other hand Wireless Local Loop subscribers have an
increasing trend but harmonious increase in population is continuing the teledensity of
WLL services at 1.6% for the past year, this teledensity related all information is
elaborate by (Pakistan Telecommunication Authority, 2011)
Impact on the performance of Foreign Direct Investment (FDI)
Source: PTA – Annual Report
Telecom Contribution to Exchequer
According to the PTA
substantial contribution to the national treasury put over Rs. 100 billion
every year. Telecom sector data shows that the amount of Rs. 627 billion has been put in
the national treasury during the last six years. Telecom sector data also s
highest contribution to the national treasury in the fiscal year 2011 approximately Rs. 117
billion by different telecom companies operating within the Pakistan. Pakistan
Telecommunication Authority also put in treasury on Pakistan aroun
shows 7% growth during the fiscal year 2011. The PTA has total contribution in national
treasury is Rs. 72 billion during the past six years which consist of Initial and Annual
License Fee, USF, Annual Spectrum and Research and Develop
contributions. Telecom sector data also shows that there is a small decrease of Rs. 2
billion was found as last year in Pakistan Telecommunication Authority deposits
Impact on the performance of Foreign Direct Investment (FDI)In Telecom Sector of Pakistan
Figure 2: Teledensity
Report, 2010-11
Telecom Contribution to Exchequer
According to the PTA-Annual Report 2010-11 that the
substantial contribution to the national treasury put over Rs. 100 billion
every year. Telecom sector data shows that the amount of Rs. 627 billion has been put in
the national treasury during the last six years. Telecom sector data also s
highest contribution to the national treasury in the fiscal year 2011 approximately Rs. 117
billion by different telecom companies operating within the Pakistan. Pakistan
Telecommunication Authority also put in treasury on Pakistan aroun
shows 7% growth during the fiscal year 2011. The PTA has total contribution in national
treasury is Rs. 72 billion during the past six years which consist of Initial and Annual
License Fee, USF, Annual Spectrum and Research and Develop
contributions. Telecom sector data also shows that there is a small decrease of Rs. 2
billion was found as last year in Pakistan Telecommunication Authority deposits
Impact on the performance of Foreign Direct Investment (FDI)
Syed Aamir Abbas 01-221111-100 MBA-V (C)
34
11 that the telecom sector has a
substantial contribution to the national treasury put over Rs. 100 billion, on average, for
every year. Telecom sector data shows that the amount of Rs. 627 billion has been put in
the national treasury during the last six years. Telecom sector data also shows that there is
highest contribution to the national treasury in the fiscal year 2011 approximately Rs. 117
billion by different telecom companies operating within the Pakistan. Pakistan
Telecommunication Authority also put in treasury on Pakistan around 109.1 billion that
shows 7% growth during the fiscal year 2011. The PTA has total contribution in national
treasury is Rs. 72 billion during the past six years which consist of Initial and Annual
License Fee, USF, Annual Spectrum and Research and Development (R&D) fund
contributions. Telecom sector data also shows that there is a small decrease of Rs. 2
billion was found as last year in Pakistan Telecommunication Authority deposits
Impact on the performance of Foreign Direct Investment (FDI)
outstanding to non-payment of APC for USF by a very elite telecom companie
outstanding to litigations in the Court of Law of Pakistan is elaborate by
Telecommunication Authority, 2011)
Figure
Source: PTA – Annual Report, 2010
Taxes
According to the PTA
contributor of Tax to Government of Pakistan. This sector has share of 93% in total
GST/FED collection from the services sector of Pakistan. Telecom sector dat
during the fiscal year 2011 different telecom companies added Rs. 52.6 billion in the
shape of GST/FED, it is 20% greater than from last fiscal year 2010 which is Rs. 44
billion contributed. Telecom Sector data shows that cellular services con
Impact on the performance of Foreign Direct Investment (FDI)In Telecom Sector of Pakistan
payment of APC for USF by a very elite telecom companie
outstanding to litigations in the Court of Law of Pakistan is elaborate by
Telecommunication Authority, 2011).
Figure 3: Telecom Contribution to Exchequer
Report, 2010-11
According to the PTA – Annual Report 2010-11 that Telecom Sector is a main
contributor of Tax to Government of Pakistan. This sector has share of 93% in total
GST/FED collection from the services sector of Pakistan. Telecom sector dat
during the fiscal year 2011 different telecom companies added Rs. 52.6 billion in the
shape of GST/FED, it is 20% greater than from last fiscal year 2010 which is Rs. 44
billion contributed. Telecom Sector data shows that cellular services con
Impact on the performance of Foreign Direct Investment (FDI)
Syed Aamir Abbas 01-221111-100 MBA-V (C)
35
payment of APC for USF by a very elite telecom companies
outstanding to litigations in the Court of Law of Pakistan is elaborate by (Pakistan
: Telecom Contribution to Exchequer
11 that Telecom Sector is a main
contributor of Tax to Government of Pakistan. This sector has share of 93% in total
GST/FED collection from the services sector of Pakistan. Telecom sector data shows that
during the fiscal year 2011 different telecom companies added Rs. 52.6 billion in the
shape of GST/FED, it is 20% greater than from last fiscal year 2010 which is Rs. 44
billion contributed. Telecom Sector data shows that cellular services contributed Rs. 44.9
Impact on the performance of Foreign Direct Investment (FDI)
billion in fiscal year compared to Rs. 36.2 billion fiscal year 2010 that shows an increase
of 25% during one year is explain by
Source: PTA – Annual Report, 2010
Telecom Revenues
According to the PTA
achieved wholly high during the fiscal year 2011. This revenue is now around Rs. 363
billion with promotion of 5.4% as compared to the last year. Telecom sector data shows
that there is a highest share of cellular sector in telecom revenues. Throughout fiscal year
2011, the cellular revenues increased by 11% that leads to Ra. 252,761 million as
compare with Rs. 236,047 million from past year. Telecom sector shows that there is
increase in revenue due to mobile services, as some other services exclude WLL have
described that decrease in their total telecom revenues
Telecommunication Authority, 2011)
Impact on the performance of Foreign Direct Investment (FDI)In Telecom Sector of Pakistan
billion in fiscal year compared to Rs. 36.2 billion fiscal year 2010 that shows an increase
of 25% during one year is explain by (Pakistan Telecommunication Authority, 2011)
Figure 4: GST/FED Collected
Annual Report, 2010-11
According to the PTA - Annual Report 2010-11 that Telecom Sector revenue
achieved wholly high during the fiscal year 2011. This revenue is now around Rs. 363
with promotion of 5.4% as compared to the last year. Telecom sector data shows
that there is a highest share of cellular sector in telecom revenues. Throughout fiscal year
2011, the cellular revenues increased by 11% that leads to Ra. 252,761 million as
mpare with Rs. 236,047 million from past year. Telecom sector shows that there is
increase in revenue due to mobile services, as some other services exclude WLL have
described that decrease in their total telecom revenues is explain by
Telecommunication Authority, 2011).
Impact on the performance of Foreign Direct Investment (FDI)
Syed Aamir Abbas 01-221111-100 MBA-V (C)
36
billion in fiscal year compared to Rs. 36.2 billion fiscal year 2010 that shows an increase
(Pakistan Telecommunication Authority, 2011).
11 that Telecom Sector revenue
achieved wholly high during the fiscal year 2011. This revenue is now around Rs. 363
with promotion of 5.4% as compared to the last year. Telecom sector data shows
that there is a highest share of cellular sector in telecom revenues. Throughout fiscal year
2011, the cellular revenues increased by 11% that leads to Ra. 252,761 million as
mpare with Rs. 236,047 million from past year. Telecom sector shows that there is
increase in revenue due to mobile services, as some other services exclude WLL have
is explain by (Pakistan
Impact on the performance of Foreign Direct Investment (FDI)
Source: PTA – Annual Report, 2010
Telecom Investment
According to the Pakistan Telecommunication Authority (PTA)
2010-11 that investment in telecom sector is very essential tool for the advancement in
technology and for the innovative product. Telecom data shows that different cellular
companies have invested above US$ 12 billion in constructing the infrastructure and
some other projects during the last six years. Telecom sector data shows that the main
contributor is cellular mobile sector that invested US$ 495.8 million in the telecom sector
and USF invested Rs. 3.5 billion in different unmerited areas.
Impact on the performance of Foreign Direct Investment (FDI)In Telecom Sector of Pakistan
Figure 5: Telecom Revenues
Annual Report, 2010-11
Telecom Investment
According to the Pakistan Telecommunication Authority (PTA)
11 that investment in telecom sector is very essential tool for the advancement in
technology and for the innovative product. Telecom data shows that different cellular
s have invested above US$ 12 billion in constructing the infrastructure and
some other projects during the last six years. Telecom sector data shows that the main
contributor is cellular mobile sector that invested US$ 495.8 million in the telecom sector
nd USF invested Rs. 3.5 billion in different unmerited areas.
Impact on the performance of Foreign Direct Investment (FDI)
Syed Aamir Abbas 01-221111-100 MBA-V (C)
37
According to the Pakistan Telecommunication Authority (PTA)-Annual Report
11 that investment in telecom sector is very essential tool for the advancement in
technology and for the innovative product. Telecom data shows that different cellular
s have invested above US$ 12 billion in constructing the infrastructure and
some other projects during the last six years. Telecom sector data shows that the main
contributor is cellular mobile sector that invested US$ 495.8 million in the telecom sector
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
Syed Aamir Abbas 01-221111-100 MBA-V (C)
38
Table 2: Telecom Investment
Telecom Investment
(US $ million)
Cellular LDI LL WLL Total
2005-06 1,420.90 50.5 0.3 259.4 1,731.10
2006-07 2,584.50 602.8 40.6 747 3,974.80
2007-08 2,337.70 403.9 342.1 52.8 3,136.40
2008-09 1,229.75 276.75 57.37 82.11 1,646.98
2009-10 908.8 183.1 22.5 23 1,137.51
2010-11 358.6 108.8 18.2 10.2 495.81
Source: Source: PTA – Annual Reports (2004-05, 2005-06, 2007-08, 2008-09, 2009-10, and 2010-11)
Previous telecom data also shows that FDI has a boosting trend, and FDI in the
telecom companies was greater than 30% of the total FDI of the country during the past
six years. If we look on the fiscal year 2011, telecom sector pulled over US$ 79 million
FDI in the Pakistan that is about 5% of the total foreign direct investment that added up
in Pakistan. Different investigation shows that there is a need of more foreign investment
to boost these amounts in the coming future. Some analysts predict that by auction of 3G
licenses that bring more FDI in Pakistan. Some very useful recommendations are like
better economic situation and security conditions in the Pakistan will more encourage the
foreign investors to bring large capital into the country is explain by (Pakistan
Telecommunication Authority, 2011).
Impact on the performance of Foreign Direct Investment (FDI)
Source: PTA – Annual Report, 2010
Telecom Imports
According to the PTA
showed an increasing trend as these move forward to US$ 766.3 million from US$ 725.7
million last year. Telecom sector data shows that since bringing relief in regulatory duty
on different imports of cellular mobile handsets. It shows that different cellular mobile
imports increased to US$218 million in the fiscal year 2011 as compared to US$ 169
million in the last year. It also shows that telecommunication apparatus’s import that
includes machinery and fixed wireless terminals decreased to US$ 548 million in fiscal
Impact on the performance of Foreign Direct Investment (FDI)In Telecom Sector of Pakistan
Figure 6: Foreign Direct Investment
Annual Report, 2010-11
According to the PTA-Annual Report 2010-11 that imports in telecom sector
showed an increasing trend as these move forward to US$ 766.3 million from US$ 725.7
million last year. Telecom sector data shows that since bringing relief in regulatory duty
ferent imports of cellular mobile handsets. It shows that different cellular mobile
imports increased to US$218 million in the fiscal year 2011 as compared to US$ 169
million in the last year. It also shows that telecommunication apparatus’s import that
cludes machinery and fixed wireless terminals decreased to US$ 548 million in fiscal
Impact on the performance of Foreign Direct Investment (FDI)
Syed Aamir Abbas 01-221111-100 MBA-V (C)
39
11 that imports in telecom sector
showed an increasing trend as these move forward to US$ 766.3 million from US$ 725.7
million last year. Telecom sector data shows that since bringing relief in regulatory duty
ferent imports of cellular mobile handsets. It shows that different cellular mobile
imports increased to US$218 million in the fiscal year 2011 as compared to US$ 169
million in the last year. It also shows that telecommunication apparatus’s import that
cludes machinery and fixed wireless terminals decreased to US$ 548 million in fiscal
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
Syed Aamir Abbas 01-221111-100 MBA-V (C)
40
year 2011 as compared to US$ 556 million in the last year is explain by (Pakistan
Telecommunication Authority, 2011)
Figure 7: Telecom Imports
Source: PTA – Annual Report, 2010-11
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
Syed Aamir Abbas 01-221111-100 MBA-V (C)
41
CHAPTER V: METHODOLOGY
FDI in telecom sector of Pakistan is very essential for the economic stabilization and
economic growth and development of Pakistan. According to current situation there is
need to enhance the foreign direct investment by taking different steps like liberalization
of foreign investor to invest in Pakistan, cheap labor availability, huge tax incentives,
beneficial return on investment and investment policies should be liberalize. Hashim,
Munir, and Khan (2007) explain that foreign direct investment in telecom sector was
initiated in 1990. Also there is a great increase of FDI in telecom sector after 2000. The
model is used in this study is pick from the work of (Hashim, Munir, & Khan, 2007). In
this study time series data have been taken from 2001-2011, keeping in view the
availability of data.
In this study functional equation is used that is based on theoretical
formulation that is taken from the work of (Hashim, Munir, & Khan, 2007). This
equation is given in Log-Linear Form as:
LFDI TEL = δδδδ0 + δδδδ1 LMS + δδδδ2 LCOMP + δδδδ3 LLR + δδδδ4 LFT + δδδδ5 LPCI + ε
Where
FDI TEL = Foreign Direct Investment in Telecommunication Sector
MS = Market Size
COMP = Competition
L.R = Literacy Rate
FT = Foreign Trade
PCI = Per Capita Income
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
Syed Aamir Abbas 01-221111-100 MBA-V (C)
42
It is supposed that
∂∂∂∂L FDI TEL / ∂∂∂∂L δδδδ1MS > 0 ∂∂∂∂L FDI TEL / ∂∂∂∂L δδδδ4FT > 0
∂∂∂∂L FDI TEL / ∂∂∂∂L δδδδ2COMP > 0 ∂∂∂∂L FDI TEL / ∂∂∂∂L δδδδ5PCI > 0
∂∂∂∂L FDI TEL / ∂∂∂∂L δδδδ3L.R > 0
Specification of Variables
In this study the dependent and independent variables are also taken from the work of
(Hashim, Munir, & Khan, 2007).
Dependent Variable
In this research study Foreign Direct Investment in Telecom Sector (FDI
TEL) is taken as dependent variable. FDI data in telecom sector has been taken from
different Pakistan Telecommunication Authority (PTA) Annual Reports like from
(Pakistan Telecommunication Authority, 2008), (Pakistan Telecommunication Authority,
2009), (Pakistan Telecommunication Authority, 2010), and (Pakistan Telecommunication
Authority, 2011).
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
Syed Aamir Abbas 01-221111-100 MBA-V (C)
43
Table 3: Foreign Direct Investment in Telecom Sector
Source: Source: PTA – Annual Reports (2004-05, 2005-06, 2007-08, 2008-09, 2009-10, and 2010-11)
Explanatory Variables
In this research study Market size (MS), Competition (COMP),
Literacy Rate (L.R), Foreign Trade (F.T), and Per Capita Income (PCI) are taken as
Independent Variables. Independent variables data has been taken from different years
Pakistan Economic Survey. These surveys are taken by visiting the Government of
Pakistan, Ministry of Finance website from (Ministry of Finance, 2007), (Ministry of
Finance, 2008), (Ministry of Finance, 2009), (Ministry of Finance, 2010), (Ministry of
Finance, 2011).
• Market Size is measured as Gross Domestic Product (GDP) of the host country.
• Competition is measured as total number of telephone, mobile and wireless local loop
companies per million of the people.
• Literacy rate data has been taken in percentage.
• Foreign trade is the sum of total imports and total exports of the host country in each
year.
• Per capita income data is taken in dollars.
Foreign Direct Investment in Telecom Sector (US $ Million)
Years FDI in Telecom Total FDI Telecom (%) Share 2001-02 6.1 484.7 1.3
2002-03 13.5 798.0 1.7
2003-04 207.1 949.4 21.8
2004-05 494.4 1,524.00 32.4
2005-06 1,905.10 3,521.00 54.1
2006-07 1,824.20 5,140.00 35.5
2007-08 1,438.60 5,410.00 26.6
2008-09 815 3,720.00 21.9
2009-10 373.62 2,199.44 17.0
2010-11 79.2 1,574.00 5.0
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
Syed Aamir Abbas 01-221111-100 MBA-V (C)
44
Table 4: Independent Variables Data
Years
Market Size
(GDP in %)
Competition (No. of telephone, Mobile, &
Wireless Local Loop) (%)
Literacy Rate (%)
Foreign Trade {Sum of total imports and
exports} ($ Million)
Per Capita
Income ($)
2001-02 3.1 3.7 50.50 18,574 503
2002-03 4.7 4.3 51.60 22,222 586
2003-04 7.5 6.25 54.00 26,000 669
2004-05 9.0 11.89 53.00 33,154 733
2005-06 5.8 26.26 54.00 41,012 836
2006-07 6.8 44.06 55.00 44,267 921
2007-08 3.7 58.90 56.00 55,824 1,042
2008-09 1.7 62.00 57.40 50,868 1,046
2009-10 3.8 64.10 57.70 41,626 1,073
2010-11 2.4 68.4 59.70 49,337 1,254
Source: Source: PTA – Annual Reports (2004-05, 2005-06, 2007-08, 2008-09, 2009-10, and 2010-11),
Pakistan Economic Survey (2006-07, 2007-08, 2008-09, 2009-10, 2010-10)
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
Syed Aamir Abbas 01-221111-100 MBA-V (C)
45
CHAPTER VI: RESULTS AND DISCUSSION
The empirical investigation on the dependent variable and independent variables of this
research study that is impact on the performance of FDI in telecom sector of Pakistan
uses time series data quarterly and time period is taken from 2001-2011. Different
descriptive statistics, correlation between LFDI TEL and other variables, Augmented
Dickey Fuller (ADF) Test results, and regression results are given below:
Table 5: Descriptive Statistics (2001-2011)
LFDI LMS LCOMP LLR LFT LPCI
Mean 5.527854 1.461530 3.071762 4.004107 10.49426 6.726486
Median 6.063292 1.441282 3.526800 3.998159 10.62905 6.777044
Maximum 7.552290 2.197225 4.225373 4.089332 10.92996 7.134094
Minimum 1.808289 0.530628 1.308333 3.921973 9.829518 6.220590
Std. Dev. 2.022722 0.527949 1.192050 0.052142 0.376438 0.295533
Skewness -0.773796 -0.287202 -0.443318 0.030851 -0.608999 -0.359430
Kurtosis 2.286253 2.096170 1.505302 2.081908 1.993170 1.950055
Table 6: Correlation between LFDI TEL and Other Variables
LFDI LMS LCOMP LLR LFT LPCI
LFDI 1.000000 0.222007 0.691961 0.475496 0.790632 0.623206
LMS 0.222007 1.000000 -0.396846 -0.471406 -0.292425 -0.391934
LCOMP 0.691961 -0.396846 1.000000 0.902063 0.965104 0.974522
LLR 0.475496 -0.471406 0.902063 1.000000 0.846119 0.963885
LFT 0.790632 -0.292425 0.965104 0.846119 1.000000 0.947983
LPCI 0.623206 -0.391934 0.974522 0.963885 0.947983 1.000000
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
Syed Aamir Abbas 01-221111-100 MBA-V (C)
46
Table 7: Result of ADF Test
Variables Level/ Difference Without trend Conclusion
FDI Tel
MS
COMP
LR
FT
PCI
Level
First difference
Level
First difference
Level
First difference
Level
First difference
Level
First difference
Level
First difference
-2.441809
-3.462728
-1.455077
- 3.036983
-3.883005
-5.383422
-0.316471
-4.052053
-2.019747
-3.383422
-1.607907
-4.248516
I(I)
I(I)
I(I)
I(I)
I(I)
I(I)
95% critical value for ADF Statistics for all variables: -3.0039(without trend)
Table 8: Regression Results (2001-2011)
Variable Coefficient t-statistics
Constant term -202.1984 -3.486824
L Market Size 2.187963 5.985267
L Competition 2.389424 3.004119
L Literacy 67.94256 2.069774
L Foreign Trade 11.40031 5.479523
L Per Capita Income 28.91530 4.278338
R2 0.978550
Adjusted R2 0.951738
DW test 2.382377
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
Syed Aamir Abbas 01-221111-100 MBA-V (C)
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The empirical investigation on the dependent variable and independent variables
of this research study that is impact on the performance of FDI in telecom sector of
Pakistan uses time series data on quarterly basis and time period is taken from 2001-
2011Q. Different descriptive statistics and correlation between LFDI TEL and other
variables are shown in table 5 and table 6 respectively. In order to check the
consolidation of dependent and independent variables, ADF Test (Table 7) are apply for
unit roots to determine that the dependent and independent variables are completed to be
incorporated of the same order. All ADF test shows that all dependent and independent
variables have static in the levels of 95% without change. All dependent and independent
variables are in first difference. Therefore from the result of Unit Root Test we reach on
conclusion that all of the dependent and independent variables are incorporated of same
result.
All Regression results (Table 8) shows that all dependent and independent
variables are detected statistically substantial with positive sign at 1% significance level.
Further they reflect that FDI Tel is influenced because of market size, competition,
literacy rate, foreign trade and per capital income. Due to increase in market size, FDI
will flow in telecom sector showing the positivity on the part of the economy. Similarly,
competition will further generate FDI to promote in the telecom sector. Literacy rate
indicates that the population in the economy is more understandable about the usage of
telecommunication sector and it help to attract FDI in this sector. Likewise, foreign trade
and per capita income are also positively correlated to bring FDI in telecom. R² and
adjusted R² are 0.98 and 0.95 respectively showing the regression results clearly explain
its variable.
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CHAPTER VII: CONCLUSION
The key focus area of this research study was impact on the performance of FDI in
Telecom Sector of Pakistan. There is no doubt that nobody can neglect the essence of
FDI in telecom sector. There are number of researches are going on in whole world on
the various aspects of telecom sector and FDI in telecom sector. Different researchers’
shows that the number of reasons to FDI reduction in telecom sector of Pakistan like they
explain some reasons namely competition, regulatory reforms, strict government policies,
political instability, terrorism, unsecure environment, market performance, economic
conditions, exchange rate fluctuation, tax burden etc. In this research study FDI in
telecom sector of Pakistan taken as dependent variable and Market size, Competition,
Literacy Rate, Foreign Trade, and Per Capita Income are taken as Independent Variables.
In this study Secondary data is used. For the aim of investigation time series data has
been selected (2001Q-2011Q4) on quarterly basis. To check and analyze the dependent
and independent variables relationship and changing trend between dependent and
independent variables, the regression analysis is applied, and also other statistical tool
like Augmented Dickey Fuller (ADF) Test is used in this research study. All Regression
results show that all dependent and independent variables are detected statistically
substantial with positive sign at 1% significance level. This shows that increase of FDI in
telecom sector of Pakistan with the enhancement in literacy rate and per capita income of
the country and vice versa. The results also show that by the boost in foreign and
domestic trade demand for telecom innovative services have as well heightened to reduce
transaction cost and as fast and relatively low price communication. The results as well
show that by the increase in competition has promote urge foreign investors to build huge
investment to cope with growing demand of rising population, it also indicate that they
have increased their investment funds in both urban and rural area of the Pakistan. Hence
it is ended that market size, competition, literacy rate, foreign trade and per capita
income, all these independent variables have real strong affect and are acting crucial role
in an enhancing the FDI in telecom sector of Pakistan. In final word, this study terminates
with focusing of impact on the performance of FDI in telecom Sector of Pakistan.
Impact on the performance of Foreign Direct Investment (FDI) In Telecom Sector of Pakistan
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CHAPTER VIII: RECOMMENDATIONS
After an in-depth analysis of data related with impact on the performance of Foreign
Direct Investment (FDI) in telecom sector of Pakistan, the some useful recommendations
are as following:
� In order to attract Foreign Direct Investment (FDI) in Telecom Sector of Pakistan,
Government of Pakistan should provide a lot of satisfaction relating rewards to
make foreign investors agree for transfer their technology to Pakistan.
� Given that the economic and security conditions of the country is not well,
Government should take some steps to improve the economic and security
environment of the country that leads to attract foreign investment in the country.
� In the light of FDI reduces due to the political instability, Government should
restructure the political environment and then ensure to foreign investor that they
can transfer their technology in stable political environment of the country.
� In order to enhance the FDI, Government should focus on market development
and healthy competition within secure and stable environment of the country.
� For promoting the FDI, Government should control the terrorism that will bring
peace and satisfaction in the country as well as more foreign investment.
� To enhance the FDI, Government should amend the existing law and order, and
best imposed to assist the rights and intellectual properties of foreign investors.
� In order to pull FDI, Government should provide some financial grants like tax
benefits, cash benefits and specific grants.
� In the light of attracting the FDI, Government should concentrate on amending
the infrastructure, skill improvement, and making strategy to cope with
requirements and anticipation of foreign investors.
� To attract the FDI, Government should attempt to meliorate the general business
environment of the country by modifying the administrative barriers.
� For enhancement of FDI, Government should allow more 3G Licenses for the
foreign telecommunication companies in the future.
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� For boosting up the FDI, Government should allow different Cellular Mobile
Companies to participate in given competitive environment of the country.
� To increase the FDI, Government should build up strong R&D team for attracting,
recommending and researching, the future trends of FDI in telecom sector of
Pakistan.
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Impact on the performance of Foreign Direct Investment (FDI)
APPENDICES
Appendix A
Source: PTA – Annual Report, 2010
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Annual Report, 2010-11
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Impact on the performance of Foreign Direct Investment (FDI)
Appendix B:
Source: PTA – Annual Report,
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Annual Report, 2010-11
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Impact on the performance of Foreign Direct Investment (FDI)
Appendix C
Source: PTA – Annual Report, 2010
Impact on the performance of Foreign Direct Investment (FDI)In Telecom Sector of Pakistan
Annual Report, 2010-11
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Impact on the performance of Foreign Direct Investment (FDI)
Appendix D
Source: PTA – Annual Report, 2010
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Annual Report, 2010-11
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Impact on the performance of Foreign Direct Investment (FDI)
Appendix E
Source: PTA – Annual Report, 2010
Impact on the performance of Foreign Direct Investment (FDI)In Telecom Sector of Pakistan
Annual Report, 2010-11
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Impact on the performance of Foreign Direct Investment (FDI)
Appendix F
Source: PTA – Annual Report, 2010
Impact on the performance of Foreign Direct Investment (FDI)In Telecom Sector of Pakistan
Report, 2010-11
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