FDI: how it may impact start-ups

Foreign Direct Investment (FDI) is known to be an effective tool for building capital in developing economies like Pakistan. For developing countries, the positive impact of foreign direct investment is becoming increasingly popular as a tool for economic growth and strengthening (Muhammad 2007). Increase in FDI is considered to be beneficial for the growth of local entrepreneurs because it leads to increased economic activity, increased production, employment generation and technological advancement.

According to Ahsan Iqbal (Minister for Planning Development and Reform) in his address titled “Belt & Road”, at the China-Pakistan Economic Corridor (CPEC) Investment and Construction Cooperation Forum in Beijing, China said that, China was now the number one Foreign Direct Investor (FDI) in Pakistan, just within two years of the start of CPEC.

This may prove beneficial for B2C and B2B start-ups in China, Pakistan and other parts of Asia. The start-ups may benefit in the following ways:

1. According to APP, the Minister also reaffirmed Pakistan government’s firm resolve and commitment to the CPEC during his address and said that the Prime Minister is personally supervising implementation of CPEC projects. As a result of this, start-ups from the two countries will benefit through B2B relations that may also push the B2C segment.

FDI-boost-through-CPEC1

2. Problem solvers and the agents of entrepreneurial ecosystem find new ways to implement business strategies. FDI through foreign initiatives helps startups improve and develop their resource pool and business models.

Foreign investment plays a significant role in developing the local businesses and that eventually leads to GDP growth. In Pakistan one of the major factors that hampers growth in FDI is political instability. The government needs to take solid steps to ensure that projects like CPEC will bring in socio economic development. China may be the top FDI investor but the startup boost through CPEC can impact various regions across the globe.

CPEC could be one of the ways to develop infrastructure and ensure resource development through which Pakistan can develop political and economic stability in the region. The government maybe taking active steps to support projects likes these but they may not be enough to support local and regional startups. It needs to also develop a regulatory framework that will help local entrepreneurs, startups and foreign investors to collaborate.


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