INTRODUCTION:

First of all we see what investment is? Investment is defined as “money that is invested
with an expectation of profit.” or “Investment: the act of investing; laying out money or
capital in an enterprise with the expectation of profit.” or “Trade off
between risk and reward while aiming for incremental gain and preservation of the
invested amount (principal). In contrast, speculation aims at ‘high gain or heavy losses,
and gambling at out of proportion gain or loss.” Two main classes of investment are
(1) Fixed income investment such as bonds, fixed deposits, preference shares, and (2)
Variable income investment such as business ownership (equities),property ownership.
In economics, investment means creation of capital or goods capable of producing other
goods or services. Expenditure on education and health is recognized as an investment
in human capital, and research and development in intellectual capital. Return on
investment (ROI) is a key measure of a firm's performance.

Sajawal Khan and Muhammad Arshad Khan analyze the determinants of private
investment in Pakistan over the period 1972-2005. Saving and investment are two key
macro variables with micro foundations which can play significant role in economic
growth, inflation stability and promotion of employment especially if seen in the context
of a developing country. For self reliance and growth objectives, mobilization of
domestic resources and their efficient utilization are the two major policy oriented
focuses today (Khan 1993). National savings are critically important to help maintain a
higher level of investment which is a key determinant for economic uplift. Thereby,
necessitating the analysis of saving investment behavior and its determinants for policy
implications; this is a demanding area because of continuing debate on the potential role
of their determinants.

The econometric modeling do not appear to be adequately developed to fully account for
the non-measurable determinants of saving, as they interact with the observable and
quantifiable factors (Kazmi 2001). Moreover, data reliability for a developing country
like Pakistan is still a question and data on many potential determinants is not available.
Where as, earlier studies on saving behavior and its determinants have provided several
model specifications, investment studies have not dealt sufficiently in the estimation of
plausible determinants of investment and their potential impacts. Most of the studies on
investment observed the behavior of foreign investment and the favorable atmosphere for
investment only but could not provide a comprehensive model for the determinants of
total investment (Khan 1984, Nuannar 1991 and Guisinger 1997).

We observed that Investment as percentage of real GDP in Pakistan is low as compared

to other neighboring countries. The gross domestic investment in Pakistan was on
average 17 percent of GDP during 2003-05. While gross domestic investment in India
was on average 30 percent of GDP, 24 percent in Sri Lanka, 24 percent in Bangladesh,
and 59 percent in Bhutan. The gross domestic investment in Eastern and Northeastern
countries was also highest especially in China (44 percent). It was 30 percent in the least
developing countries and 24 percent in developed countries.

1
Main purpose of our research is identifying main factors which are affecting the private
investment in Pakistan. Our objective is that we want to create the awareness among
people regarding private investment. Providing guidelines to people who are confused
about their investment decision or business expansion issues and unable to find out what
factor they consider their decision making. And what type of benefit they are getting
from it and what type of constraints they are facing in tier private investment decisions.
We want to know general perception of people about the private investment in Pakistan.

2
LITERATURE REVIEW:
Hafeez-ur-Rehman, Sajawal Khan and M. Arshad Khan (January 2009), objective is to
describe the determinants of private investment in Pakistan over the period 1972-2005.
They suggested that in developing countries, private investment is determined mainly by
level of domestic output, the real interest rate, public investment, size of the external
debt, the exchange rate, inflation rate, foreign direct investment, good governance,
quality of institutions and entrepreneurial skills for the private sector to make big
investment decisions. They used ARDL co-integration technique for estimation.
Their finding shows that real GDP is positively related to private investment, its impact
is significant in long run. The relationship between public and private investment is
positive but insignificant. . The relationship between external debt, foreign direct
investment, real interest rate and inflation rate on private investment are negative and also
significant except inflation. Qualities of institutions, governance, entrepreneurial skills
are also show the positive significant relationship with private investment.

Alexander Bilson Darku (2001), objective is to determine how the decision to invest and
the level of investment are influenced by uncertainty and how the relationship between
uncertainty and investment changes when irreversibility of investment is considered.
Author used a sample selection technique to fit a modified version of an accelerator
model for estimation. The paper yielded results consistent with predictions of theories of
irreversible investment. His results indicate a negative relationship between uncertainty
and investment. Findings also indicate that uncertainty has a greater negative effect on
investment for firms with less reversible investment.

Mauro, Palo (1993), objective is determine the impact of political instability on growth of
investment. He suggests that Govt instability with policy uncertainty e.g. threat to
property rights and socio political unrest crucially affects the investment decision.

Elizabeth Asiedu and James Freeman, objective to determine the effect of corruption on
investment growth. They used six measures of corruption from four different sources: two
firm-level measures and four country-level measures. This paper analyzes the effect of
corruption varies significantly across regions: corruption has an adverse effect on
investment growth for Transition countries, but has no significant effect for Latin
America and the Caribbean and Sub-Saharan. Another important point is that their
analyses pertain only to firms that are already operating within the country. It is likely
that large levels of corruption may prevent many firms from operating in these regions in
the first place. However, this loss of potential investments resulting from corruption is
not captured by their model. Thus, although corruption does not have a significant effect
on investment growth, it is possible, and indeed likely that it might prevent the entry of
firms. As a result, the overall effect of corruption on investment (which includes the loss
of potential investments) may be negative.

Khaled Sakr (March 1993), Objective of his research is to identify the determinants of
private investment in Pakistan, in particular, the impact of government investment on it.

3
Theoretical review and empirical literature indicates that investment functions in
developing countries differ from those in developed countries on the bases of credit
availability and government investment especially in infrastructure.
The results suggest that there is positive relationship between private investment and
GDP growth, credit extended to the private sector, and with government investment. To
investigate the issue further, the paper disaggregates government investment into its
infrastructural and noninfrastructural components. It concludes that noninfrastructural
government investment appears to be negative relation with private investment. The
paper argues that in promoting both infrastructural government investment and credit
extended to the private sector, policymakers must be concentrate on maintaining
macroeconomic stability.

Adam Reiff (2006), described a method of structural estimation of firm-level investment

costs, based on a dynamic investment model that incorporates fix and irreversibility costs
of investment. Approaches: (1) the model makes distinction between cheap (cost- free)
replacement investment and costly new investment, and we also make such a distinction
at the empirical level; (2) we estimate the structural cost parameters of the model with a
modified version of the indirect inference method. . Our results indicate that fixed and
irreversibility costs are indeed significant. In particular, we find strong evidence of partial
irreversibility, which is of much higher extent than estimated previously. General
investment model, in which firms maximize the present value of their future profits, net
of future investment costs. The goal of this paper is to structurally estimate the most
important costs of investment, based on a dynamic model. To estimate the cost
components we use an unbalanced panel about US manufacturing plants between 1959-
87.

Kalim hyder and Qazi Masood Ahmed(2003),described the purpose of this article is to
analyze the decline in private investment and formulate a comprehensive strategy to over
come this problem, which is the main cause of deceleration in the growth momentum of
Pakistan economy. Due to the lack of confidence private investment is decreases.
Determinants are agriculture and manufacturing.

Richard A. Booth (1999) reviews the state of the law regarding actions against broker-
dealers based on the National Association Of Securities Dealers (NASD) suitability rule
and similar theories, summarizes the theory and practice of investor diversification,
explains the motivations that may lead a broker to recommend excessively risky
securities and investment strategies, and discusses the various methods that may be used
to quantify or compare risk, focusing in particular on how we can measure the risk. The
suitability rule tells us that risk is a key factor in determining whether an investment or
investment strategy is suitable for the investor. From the article it is also clear that
brokers may have a strong incentive from his customer if the customers invest in risky
securities and it is difficult to measure the risk of investor. Others things in this article
finding are that investor can minimize his risk my diversification.

Matthew L. Beville (2009) analyzes systemic risk in the financial system and shows how
current regulations provide insufficient protection for our capital markets and the market

4
stability effects the investment decisions. He also describes a new framework with which
to analyze the problem that may provide helpful in stabilizing the financial system.

Benjamin A. Templin (2008) describes that on whether the government or private

individuals should make investment decision and how the government policies effect the
investment decision. Because in USA when economic crisis start the government
ramification of creating a federal government corporation for purpose of investing in
social security trust in high yield securities. If investment is to work , there needs to be
enough time for those investments to mature. While some commentators, without
understanding diversification, criticize the markets as too risky for social security funds,
the real risk is in doing nothing. The failure to act shits an unworkable tax burden onto
future generation and will likely results in benefits cuts and a return to social problem tp
poverty among the elderly.

Joaqu´ın del Campo Revenga (1999) effects of social policy regulation on investments,
using an option-pricing model.. The model developed assumes that the regulator will set
up the desired value of the project as the return earned by that particular project. A mean
reverting process arises as a result of modeling this approach. The results will deepen the
understanding of regulated sectors, and will help explain the investment decision process
followed by companies. The model presented captures the behavior of a both fiscal
disincentives and incentives such as corporate taxes or tax credits in an investment. The
tighter the fiscal policy means the higher the disincentive and the lower the value of the
project and of the option to invest in it.

FRAMEWORK OF STUDY:
We want to research that “which particular factors affecting private investment in
Pakistan”. For this purpose we spent a lot of time to find out the related articles to our
research topic. After reading such articles we find out ten different variables which are
having impact on private investment, these are explained in theoretical framework:

5
 1. Theoretical Framework:
Component 1:
• Dependent Variables
1. Private Investment
• Independent Variables
1. Foreign Direct Investment
2. Quality of Institute & Entrepreneurial Skills
3. Political Instability
4. Corporate Governance
5. Infrastructure Government Investment
6. Interest Rates
7. Exchange Rate
8. Inflation Rate
9. Government attitude towards Private Investment
10. Problem of getting credit
Component 2:
There is relationship between dependent and independent variables.

Component 3:
1. Foreign Direct Investment:
There is negative relationship between foreign direct investment and private investment.

2. Quality of Institute & Entrepreneurial Skills:

There is positive relationship between quality of institute & entrepreneurial skills and
private investment.

3. Political Instability:
There is negative relationship between political instability and private investment.

4. Corporate Governance:
There is positive relationship between corporate governance and private investment.

5. Infrastructure Government Investment

There is positive relationship between infrastructure government investment and private
investment.

6. Interest Rates:
There is negative relationship between interest rates and private investment.

7. Exchange Rate:
There is negative relationship between exchange rate and private investment.

8. Inflation Rate:
There is negative relationship between inflation rate and private investment.

6
9. Government attitude towards Private Investment:
There is positive relationship between government attitude towards private investment
and private investment.

10. Problem of getting credit:

There is negative relationship between problem of getting credit and private investment.

Component 4:
1. Foreign Direct Investment:
If foreign direct investment comes in Pakistan then private investment will decrease,
indicating the negative relationship.

2. Quality of Institute & Entrepreneurial Skills:

If quality of institute & entrepreneurial skills are more in Pakistan then private
investment will increase, indicating the positive relationship.

3. Political Instability:
If there is political instability in our country then private investment will decrease,
indicating negative relationship.

4. Corporate Governance:
If there is good corporate governance in our country then private investment will
increase, indicating positive relationship.

5. Infrastructure Government Investment

If Government invests more in infrastructure in our country, such as roads, power
projects and telecommunications--to improve the environment for private investment,
indicating positive relationship.

6. Interest Rates:
If rate of interest will increase in country it will increase the cost of capital for businesses
then the private investment will decrease, indicating negative relationship.

7. Exchange Rate:
If rate of exchange will increase then imports become more expensive for our
businessmen they will decrease the private investment, indicating negative relationship.

8. Inflation Rate: If rate of inflation is more in country, it reduces the savings of people
then private investment decrease, it indicates the negative relationship.
9. Government attitude towards Private Investment:
If government attitude towards private investment is more, it provides more subsidies to
private businesses then private investment grows, it indicates the positive relationship.

10. Problem of getting credit:

7
If the businessmen face more problem of getting credit from financial institutions to grow
there businesses, then it will become the major obstacle for the growth of private
investment, which indicates the negative relationship with private investment.

Component 4:
Schematic Diagram:

8
 Foreign Direct
Investment

Quality of Institute
& Entrepreneurial
Skills
Political Instability

Corporate
Governance

Infrastructure
PRIVATE
Government
Investment INVESTMENT

Interest Rates

Exchange Rate
Inflation Rate

Government
attitude towards
Private Investment

Problem of Getting
Credit

Independent Variable Dependent Variable

2. Hypothesis:
After the identification of variables we can derive the following hypotheses:

9
HA: If foreign direct investment increases then private investment will decreases.
HO: There is no relationship between foreign direct investment and private investment.

HA: If there is more quality of institute & entrepreneurial skills then private investment
will increases.
HO: There is no relationship between institute & entrepreneurial skills and private
investment.

HA: If there is political instability in our country then private investment will decreases.
HO: There is no relationship between political instability and private investment.

HA: If there is good corporate governance then private investment will increases.
HO: There is no relationship between corporate governance and private investment.

HA: If government invests more in infrastructure then private investment will increase.
HO: There is no relationship between government investment in infrastructure and private
investment.

HA: If rate of interest will increase then the private investment will decrease.
HO: There is no relationship between rate of interest and private investment.

HA: If rate of exchange will increase then the private investment will decrease.
HO: There is no relationship between rate of exchange and private investment.

HA: If rate of inflation is more in our country then private investment will decrease.
HO: There is no relationship between rate of inflation and private investment.

HA: If government attitudes toward private investment are more then private investment
will grow.
HO: There is no relationship between government attitudes toward private investment and
private investment.

HA: If there is more problem of getting credit then private investment will decrease.
HO: There is no relationship between problem of getting credit and private investment.

10
 3. Methodology:
This portion includes the model used for the research, the sample size selection, variable
selection and the statistical techniques employed to find out the relationship between
variables.

Type of Study:
In our research we have done correlational study because we are interested to come
with different variables which are affecting the private investment in Pakistan.

Study Setting:
For determining the different variables affecting private investment in Pakistan, we have
conducted study in natural environment. So it is the part of a non-contrived setting. And
we have done field study by actually visiting the people.

Unit of Analysis:
Our unit of analysis is Individual as we got response from each individual or treating
each person response as an individual data source.

Time Horizon:
As in our research the data is gathered only just once, over the period of 2-3 months, in
order to answer the research question. So, we can say that it is a cross-sectional study or
one-shot study.

Research Instrument:
We used Questionnaire as a research instrument for date gathering in our research. This
questionnaire is attached at the end of the report as annexure.
• Questionnaire contains twelve questions.
• We delivered questionnaire both through mail and by hand.

Sample Size Selection:

• Sample Size for our research is sixty, and
• Geographical premise for research is Islamabad and Rawalpindi.

Variable Selection:
We did literature review for selecting the factors that affecting the private investment in
Pakistan.

Statistical Techniques used:

We used statistical techniques including descriptive analysis and linear regression for
data analysis.

Hypothesis Testing:

11
We have done hypothesis testing to test our variables by using statistical techniques
including descriptive analysis and linear regression. And accept and reject the variables
on the basis of hypothesis testing.

After the research, we will be able to know the major factors affecting the private
investment in Pakistan more clearly. After knowing such factors we will be able to give
suggestions that how these factors can be controlled.

DATA ANALYSIS AND DICUSSION:

12
The objective of our research to identify the important factors that affecting private
investment in Pakistan. For this purpose we have done correlational study because we are
interested to come with different variables which are affecting the private investment and
we conducted our study in natural environment. Our unit of analysis is individual as we
got response from each individual. We used questionnaire as a research instrument for
date gathering and the sample size for our research is sixty, and geographical premise for
research is Islamabad and Rawalpindi. We have done hypothesis testing to test our
variables by using statistical techniques including descriptive analysis and linear
regression. And accept and reject the variables on the basis of hypothesis testing.

DATA CODING:
In data coding we assign the numerical values to variables for analysis. Provided in
appendix, from table 4.1.1 to 4.1.11.

CODE BOOK:
PVTI = Private Investment
FDI = Foreign Direct Investment
QIES = Quality of Institute & Entrepreneurial Skills
PI = Political Instability
CG = Corporate Governance
IGI = Infrastructure Government Investment
IR = Interest Rates
EI = Exchange Rate
IFR = Inflation Rate
GA = Government attitude towards Private Investment
PGC = Problem of getting credit

DATA ANALYSIS AND DICUSSION:

In order to meet our research, we have done descriptive analysis, regression analysis and
hypothesis testing.

DATA SAMPLE INFROMATION:

Our sample size is 60 and our respondents were businessmen, employees, professors and
students.

DESCRIPTIVE ANALYSIS:
Table 4.2.1 shows the estimated means and standard deviations for the dependent
variable (Private Investment) and independent variables (Foreign Direct Investment,
Quality of Institute & Entrepreneurial Skills, Political Instability, Corporate Governance,
Infrastructure Government Investment, Interest Rates, Exchange Rat, Inflation Rate,
Government attitude towards Private Investment, Problem of getting credit).

REGRESSION ANALYSIS:

13
The estimated results of regression analysis are shown in table 4.2.3. Foreign direct
investment has negative but insignificant relationship with the private investment, same
results are found by the Hafeez-ur-Rehman, Sajawal Khan and M. Arshad Khan (2009).
According to them the most traditional factors have little or no impact on private
investment which includes foreign direct investment. Quality of institute and
entrepreneurial skills has positive but insignificant relationship with private investment.
Political instability has negatively and significantly affecting the dependent variable
(private investment). Same results are founded by the Mauro, Palo (1993) in his research.
He suggests that Govt instability with policy uncertainty e.g. threat to property rights and
socio political unrest crucially affects the investment decision. Corporate governance has
the negative and insignificant relationship with private investment.
Table 4.2.3 shows that infrastructure government investment has positive but
insignificant relationship with dependent variable (private investment). Same results are
provided by the Hafeez-ur-Rehman (2009). His findings show the relationship between
public and private investment is positive but insignificant.
Table 4.2.3 shows interest rate has positive and insignificant relationship with private
investment. McKinnon (1973) and shaw (1973) provide the same results, that there could
a positive relationship between investment and interest rate, because higher rate of
interest would increase savings and also equilibrium investment will be higher. Hafeez-
ur-Rehman (2009) suggests that the negligible impact in long run as well as in short run
of real interest rate on private investment shows the non-responsiveness of private
investment to interest rate. Exchange rate shows negative and insignificant relationship
with private investment.
Table 4.2.3 also shows that inflation rate has positive and insignificant relationship with
dependent variable (private investment). Hafeez-ur-Rehman, Sajawal Khan and M.
Arshad Khan (2009), mention that the inflation has the minor impact on private
investment. It has insignificant relationship with private investment, other then this there
are many factors having negative and significant affect on investment like exchange rate.
In developing countries we see in some situations inflation shows positive relationship
with private investment. In case of existing firms, we see these are growing rapidly
because of increasing inflation rate. They generate high profits due to high prices.
Government attitude towards private investment shows positive but insignificant
relationship with private investment.
Table 4.2.3 also shows the negative but insignificant relationship between problem of
getting credit and private investment. Khaled Sakr (1993) also provides the same results
in his research. This shows credit availability and private investment has positive
relationship.
Table 4.2.2 shows that the R square of the model is 0.154(15.4%) which shows the weak
relationship between dependent variable (private investment) and independent variables
(foreign direct investment, quality of institute & entrepreneurial skills, political
instability, corporate governance, infrastructure government investment, interest rates,
exchange rate, inflation rate, government attitude towards private investment, problem of
getting credit).

HYPOTHESIS TESTING RESULTS:

14
We tested ten hypotheses by using statistical techniques.

Model: Multi regression model of variables is as following,

PVTI= f (FDI, QIES, PI, CG, IGI, IR, EI, IFR, GA, PGC)
PVTI=a-b1FDI+b2QIES–b3PI+b4CG+b5IGI–b6IR-b7EI–b8IFR+b9GA-b10PGC+e
PVTI=1.278-.096FDI+.146QIES–.271PI-.063CG+.171IGI+.003IR-.053EI+.118IFR
+.092GA -.100PGC+.49867

1. Private investment and foreign direct investment:

Linear regression shows the negative relationship between foreign direct investment and
private investment. Negative sign of the coefficient of FDI (b1= -0.096) support over
alternative hypothesis. So we accept our alternative hypothesis and reject null hypothesis
and can say that if foreign direct investment increases then private investment will
decreases.

2. Private investment and Quality of institute & entrepreneurial skills:

Linear regression shows the positive relationship between quality of institute &
entrepreneurial skills and private investment. Positive sign of the coefficient of QIES
(b2= 0.146) support over alternative hypothesis. So we can say that if there is more
quality of institute & entrepreneurial skills then private investment will increases.

3. Private investment and Political instability:

Linear regression shows the negative significant relationship between political instability
and private investment. Negative sign of the coefficient of PI (b3= -0.271) support over
alternative hypothesis. So we accept our alternative hypothesis and reject null hypothesis
and can say that if there is political instability in our country then private investment will
decreases.

4. Private investment and Corporate Governance:

Linear regression shows the negative sign of the coefficient of CG (b4= -0.063). Which
don’t support over alternative hypothesis? So we reject our alternative hypothesis and
accept null hypothesis. The rejection purpose of is this variable is, there are many other
factors which are having more importance than corporate governance. In Pakistan, now a
day people seriously consider the government attitude towards private investment and
quality of institute & entrepreneurial skills more than corporate governance. We can say
that good corporate governance can not increase the private investment. There are having
no relationship.

5. Private investment and Infrastructure Government Investment:

Linear regression shows the positive relationship between private investment and
infrastructure government investment. Positive sign of the coefficient of IGI (b5= 0.171)
support over alternative hypothesis. So we can say that if there is more infrastructure
government investment then private investment wills increases.

6. Private investment and Interest rates:

15
Linear regression shows the positive sign of the coefficient of IR (b6= 0.003). Which
reject over alternative hypothesis? McKinnon (1973) and shaw (1973) provide the same
results, that there could a positive relationship between investment and interest rate,
because higher rate of interest would increase savings and also equilibrium investment
will be higher. Hafeez-ur-Rehman (2009) suggests that the negligible impact in long run
as well as in short run of real interest rate on private investment shows the non-
responsiveness of private investment to interest rate. So we can say that increasing rates
of interest will not decrease the private investment. These are having no relationship.

7. Private investment and Exchange rate:

Linear regression shows the negative relationship between exchange rate and private
investment. Negative sign of the coefficient of EI (b7= -0.053) support over alternative
hypothesis. So we accept our alternative hypothesis and reject null hypothesis and can
say that if exchange rate increases then it is difficult for people to start or expend there
businesses.

8. Private investment and Inflation rate:

Linear regression shows the positive sign of the coefficient of IFR (b7= 0.118). Which
reject over alternative hypothesis. Hafeez-ur-Rehman, Sajawal Khan and M. Arshad
Khan (2009), mention that the inflation has the minor impact on private investment. It has
insignificant relationship with private investment, other then this there are many factors
having negative and significant affect on investment like exchange rate. So we can say
that increasing rates of inflation will not decrease the private investment. These are
having no relationship.

9. Private investment and Government attitude towards Private investment:

Linear regression shows the positive relationship between government attitude towards
private investment and private investment. Positive sign of the coefficient of GA (b9=
0.092) support over alternative hypothesis. So we can say that if there is more
government attitude towards private investment then private investment will increases.

10. Private investment and Problem of getting credit:

Linear regression shows the negative relationship between problems of getting credit and
private investment. Negative sign of the coefficient of PGC (b10= -0.100) support over
alternative hypothesis. So we accept our alternative hypothesis and reject null hypothesis
and can say that if there is more problem of getting credit then it is difficult for people to
start or expend there businesses.

CONCLUSION AND RECOMMANDATION:

16
Objective of our research is identifying main factors which are affecting the private
investment in Pakistan. We want to create the awareness among people regarding private
investment. Providing guidelines to people who are confused about their investment
decision or business expansion issues and unable to find out what factor they consider
their decision making. And what type of benefit they are getting from it and what type of
constraints they are facing in tier private investment decisions. We want to know general
perception of people about the private investment in Pakistan. We estimated our results
by using statistical techniques including descriptive analysis and linear regression. And
accept and reject the variables on the basis of hypothesis testing.

Our findings are the private investment is positively correlated to quality of institute &
entrepreneurial skills, infrastructure government investment and government attitude
towards private investment.And negatively correlated to FDI, political instability,
exchange rate and problem of getting credit. One of the traditional factors that is political
instability has negative and significant relationship with private investment in Pakistan,
other have little or no impact on private investment that includes interest rate and
inflation rate.

The findings of our research provide following recommendations for the improvement of
level of private investment in Pakistan.

• Government plays a very important role in private investment mostly when

resources are limited. It must focus on it; provide subsidies to private businesses
for flourish of private investment.

• Important consideration must be given to maintaining political stability which is

essential to stimulate sustained private investment in productive activities.

• Policy needs to focus on quality of institute and entrepreneurial skills in order to

facilitate the private investment in developing countries like Pakistan.

BIBLIOGRAPHY:

17
Hafeez-ur-Rehman, Sajawal Khan and M.Arshad Khan “What Determines Private
Investment? The Case of Pakistan” A Research Journal of South Asian Studies
Vol. 24, No. 1, January 2009, pp. 52-68

Elizabeth Asiedu, James Freeman “The Effect of Corruption on Investment Growth:

Evidence from Firms in Latin America, Sub-Saharan Africa and Transition Countries”

Alexander Bilson Darku (2001) “Private Investment, Uncertainty, and Irreversibility in

Uganda” The African Finance Journal, Volume 3, Part 1, 2001.

Khaled Sakr (March 1993)” Determinants of Private Investment in Pakistan” IMF

Working Paper (International Monetary Fund).

Mauro, Palo (1993) “political instability, growth and investment “ Howard university
1993.

Adam Reiff (2006) “The Costs of Investment” Central European University library.
6 February, 2006.

Kalim hyder and Qazi Masood Ahmed (2003) “Why Private Investment in Pakistan has
Collapsed and how it can be restored” MPRA paper no. 16251.

Richard A. Booth (1999)” The Suitability Rule, Investor Diversification, and Using
Spread to Measure Risk” Business Lawyer, Vol. 54, Pp. 1599-1627.

Matthew L. Beville (2009) “Systemic Risk and Market Stability” Florida State University
Law Review, Vol. 36, p. 245.

Benjamin A. Templin (2008) “The Public Trust in Private Hands: Social Security and the
Politics of Government Investment” Kentucky Law Journal, Vol. 96, No. 3, p. 36.

Joaqu´ın Del Campo Revenga (1999) “Regulated investments and the valuation of capital
investment strategies through a real options’ approach”

APPENDIX:

18
 QUESTIONNAIRE

We want to research that “Which particular factors affecting private investment in

Pakistan”. For this purpose we need your help to identify those important factors. It is
assured that all information provided by you will be kept confidential. This research is
only for academic purpose, conducted by Management Sciences Department of
“COMSATS Institute of Information Technology, Islamabad”.

Name (Optional) __________________________

Occupation _____________________
Factor affecting Private Investment in Pakistan
Q.1. which type of investment would you like to do? If you are having certain amount of
money then.
Private investment
Government investment

Q.2. which economical condition wills you consider more while investing?
• Inflation Rate
• Exchange Rate
• Real Interest Rate
• All above are important

Q.4.What is your most significant obstacle to private investment?

• Uncertainty about the economy (uncertainty about interest rates, exchange rate, demand for
product, etc)
• Government attitude towards private investment
• Problem of getting credit
• Interest rates too high
• Infrastructure

Q.5.What is the most serious type of uncertainty?

• Exchange rate uncertainty
• Interest rate uncertainty
• Political uncertainty
• Inflation Rate

Q.6. Do you think Private investment is preferable on Government investment? Keeping

Risk and Return in mind? Yes No �

Q.7.Is any form of uncertainty about the economy a constraint to Private investment?
Yes No �

19
Q.8.If you were starting up your business today as a new investor, what sort of obstacles
would arise, and how serious would they be? (Rating as 0 = no problem, 1 = minor
problem, 2 = moderate problem, 3 = major problem)

1. Uncertainty about the economy ______

2. Government attitude towards private investment ______
3. Problem of getting credit ______
4. Interest rates too high ______
5. Infrastructure ______
6. Political instability ______
7. Cost of credit ______
8. Exchange Rate ______
9. Inflation Rate ______
10. Other (specify)....................................... ______

Q.9.Please indicates HOW MUCH YOU AGREE OR DISAGREE with each of the
Statements.

Strongly Disagree Neither Agree Strongly

Disagree Agree Agree
Nor
Disagree

1.Corporate Governance play role in investment

decision in Pakistan: 1 2 3 4 5
2. Do you consider the inflow of Foreign Direct
investment while making Private investment decision:
1 2 3 4 5
3.Infrastructure Government investment having impact
on your Private investment decision:
1 2 3 4 5
4.The quality of institutions & entrepreneurial skills
for the private sector to make big investment decision
are necessary: 1 2 3 4 5

Q10.What is your monthly income?

• >= Rs.100,000
• Rs.75, 000 =< income > Rs.100, 000
• Rs.30, 000=< income >Rs.75,000
• < Rs.30, 000

Q.11.What is the role of crucial issues in Private investment in Pakistan?

…………………………………………………………………………………………

……………………………………………………………………………………........

THANK YOU FOR YOUR TIME!

20
 Table 4.1
Type of Investment
S .No Variable Numerical Value
a. Government investment 1
b. Private investment 2

Table 4.2
Impact of FDI on Private Investment
S. No. Priory Numerical Values
a. Strongly Disagree 1
b. Disagree 2
c. Neither Agree non Disagree 3
d. Agree 4
e. Strongly Agree 5

Table 4.3
Impact of Quality of Institutions & Entrepreneurial Skills
on Private Investment
S. No. Priory Numerical Values
a. Strongly Disagree 1
b. Disagree 2
c. Neither Agree non Disagree 3
d. Agree 4
e. Strongly Agree 5

Table 4.4
Impact of Political Instability on Private Investment
S. No. Priory Numerical Values
a. No 0
b. Minor 1
c. Moderate 2
d. Major 3

Table 4.5
Impact of Corporate Governance on Private Investment
S. No. Priory Numerical Values
a. Strongly Disagree 1
b. Disagree 2
c. Neither Agree non Disagree 3
d. Agree 4
e. Strongly Agree 5

21
 Table 4.6
Impact of Infrastructure Government Investment on Private Investment
S. No. Priory Numerical Values
a. Strongly Disagree 1
b. Disagree 2
c. Neither Agree non Disagree 3
d. Agree 4
e. Strongly Agree 5

Table 4.7
Impact of Interest Rates on Private Investment
S. No. Priory Numerical Values
a. No 0
b. Minor 1
c. Moderate 2
d. Major 3

Table 4.8
Impact of Exchange Rate on Private Investment
S. No. Priory Numerical Values
a. No 0
b. Minor 1
c. Moderate 2
d. Major 3

Table 4.9
Impact of Inflation Rate on Private Investment
S. No. Priory Numerical Values
a. No 0
b. Minor 1
c. Moderate 2
d. Major 3

Table 4.10
Impact of Government attitude towards Private Investment
S. No. Priory Numerical Values
a. No 0
b. Minor 1
c. Moderate 2
d. Major 3

22
 Table 4.11
Problem of getting credit in Private Investment
S. No. Priory Numerical Values
a. No 0
b. Minor 1
c. Moderate 2
d. Major 3

Table 4.2.1
Descriptive Statistics for all Variables (N= 60)
N Minimum Maximum Mean Std. Deviation

Private Investment 60 1.00 2.00 1.6000 .49403

Foreign Direct Investment 60 1.00 5.00 3.4333 1.15519

Quality of Institute and 60 2.00 5.00 4.2667 .86095

Entrepreneurial Skills

Political Instability 60 .00 3.00 2.1667 .90510

Corporate Governance 60 2.00 5.00 3.8333 .76284

Infrastructure Govt. 60 2.00 5.00 3.2500 .98506

Investment

Interest Rate 60 .00 4.00 2.0333 .99092

Exchange Rate 60 1.00 3.00 1.9833 .83345

Inflation rate 60 .00 3.00 2.1833 .87317

Govt, Attitude towards PVTI 60 .00 3.00 2.2833 .92226

Problem of Getting Credit 60 .00 3.00 1.4167 1.19734

Valid N (list wise) 60

23
 Table 4.2.2
Model Summary
Adjusted R Std. Error of the
Model R R Square Square Estimate

1 .392a .154 -.019 .49867

a. Predictors: (Constant), Problem of Getting Credit, Govt. Attitude

towards PVTI, Political Instability, Inflation rate, Interest Rate, Corporate
Governance, Foreign Direct Investment , Exchange Rate, Quality of
Institute and Entrepreneurial Skills, Infrastructure Govt. Investment

Table 4.2.3
Estimated results of overall sample
Coefficients
Standardized
Un standardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 1.278 .714 1.789*** .080

Foreign Direct Investment -.041 .061 -.096 -.678 .501

Quality of Institute and .084 .082 .146 1.020 .313

Entrepreneurial Skills

Political Instability -.120 .062 -.271 -1.940** .058

Corporate Governance -.051 .118 -.063 -.433 .667

Infrastructure Gv0t. .086 .075 .171 1.134 .262

Investment

Interest Rate .002 .077 .003 .020 .984

Exchange Rate -.025 .068 -.053 -.371 .712

Inflation rate .067 .076 .118 .878 .384

Govt, Attitude towards PVTI .049 .076 .092 .647 .521

Problem of Getting Credit -.047 .063 -.100 -.737 .465

a. Dependent Variable: Private Investment

** Significant at 5% level of significant
*** Significant at 10% level of significant

24