Does Inward Foreign Direct Investment Affect Agriculture Growth? Some Empirical Evidence from Pakistan

Abstract

This study empirically investigates the effects of inward foreign direct investment (FDI) on Pakistan's agricultural growth, spanning the period 1977-2015, using the vector error correction model (VECM). Overall, the analysis shows that there is a positive relationship between agricultural growth and FDI. Further, the results indicate that the liberal 1997 policy of opening up the agricultural sector to FDI does not yield favourable results. Together, these results suggest that the long-term benefits of FDI inflows for Pakistan can only be fully realised when, other development issues related to domestic factors and institutions are addressed in tandem with FDI reforms. Therefore, there should be policy congruence among FDI policies and reforms with domestic developmental policies for a developing agrarian country like Pakistan to advance growth in the agriculture sector.