Syed Aamir Abbas_Approved Thesis_Impact on the Performance of Foreign Direct Investment (FDI) in Telecom Sector of Pakistan

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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



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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



15

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



16

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



17

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



18

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



19

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



20

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



21

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



22

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



23

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



24

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



25

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



26

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.



27

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).



28

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.



29

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.



30

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



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).



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



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


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


the national treasury during the last six years. Telecom sector data also s



Telecommunication Authority also put in treasury on Pakistan aroun



License Fee, USF, Annual Spectrum and Research and Develop





34

11 that the telecom sector has a

substantial contribution to the national treasury put over Rs. 100 billion, on average, for


the national treasury during the last six years. Telecom sector data also shows that there is



Telecommunication Authority also put in treasury on Pakistan around 109.1 billion that



License Fee, USF, Annual Spectrum and Research and Development (R&D) fund




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


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


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


GST/FED collection from the services sector of Pakistan. Telecom sector dat



billion contributed. Telecom Sector data shows that cellular services con



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


GST/FED collection from the services sector of Pakistan. Telecom sector data shows that



billion contributed. Telecom Sector data shows that cellular services contributed Rs. 44.9


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


Telecom Revenues


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




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


with promotion of 5.4% as compared to the last year. Telecom sector data shows



mpare with Rs. 236,047 million from past year. Telecom sector shows that there is


described that decrease in their total telecom revenues is explain by




36


(Pakistan Telecommunication Authority, 2011).

11 that Telecom Sector revenue


with promotion of 5.4% as compared to the last year. Telecom sector data shows



mpare with Rs. 236,047 million from past year. Telecom sector shows that there is


is explain by (Pakistan



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.


Figure 5: Telecom Revenues


Telecom Investment

According to the Pakistan Telecommunication Authority (PTA)

11 that investment in telecom sector is very essential tool for the advancement in


s have invested above US$ 12 billion in constructing the infrastructure and



nd USF invested Rs. 3.5 billion in different unmerited areas.



37


11 that investment in telecom sector is very essential tool for the advancement in


s have invested above US$ 12 billion in constructing the infrastructure and





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


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




Telecom Imports


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


Figure 6: Foreign Direct Investment


According to the PTA-Annual Report 2010-11 that imports in telecom sector



ferent imports of cellular mobile handsets. It shows that different cellular mobile



cludes machinery and fixed wireless terminals decreased to US$ 548 million in fiscal



39

11 that imports in telecom sector



ferent imports of cellular mobile handsets. It shows that different cellular mobile



cludes machinery and fixed wireless terminals decreased to US$ 548 million in fiscal



40

year 2011 as compared to US$ 556 million in the last year is explain by (Pakistan


Figure 7: Telecom Imports

Source: PTA – Annual Report, 2010-11



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



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).



43

Table 3: Foreign Direct Investment in Telecom Sector


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



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)



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



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



47

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.



48

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.



49

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.



50

� 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.



51

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APPENDICES

Appendix A






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Appendix B:

Source: PTA – Annual Report,





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Appendix C






58


Appendix D






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Appendix E






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Appendix F



Report, 2010-11



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Documents

Syed Aamir Abbas_Approved Thesis_Impact on the Performance of Foreign Direct Investment (FDI) in Telecom Sector of Pakistan