Abstract
It is often argued that foreign investors are reluctant to invest in a country having unstable political, social and economic conditions. Pakistan has been facing such instability, resulting deleterious repercussions for the economy. An upsurge in the frequency and scale of criminal activities in Pakistan may have ousted Foreign Direct Investment (FDI). Keeping in view this fact, the present study is an effort to have an empirical insight. Time series data has been used from 1974 to 2011; Auto Regressive Distributed Lag (ARDL) model has been used for the estimation purposes. The results reveal negative and statistically significant impact of crimes on FDI in flows. As the regular manifestations of disorder in the shape of criminal activities create an unfavorable business climate which seriously grinds down the risk-averse foreign investor’s confidence in the local investment climate and thereby dissuades FDI in Pakistan. Appropriate measures are needed to eliminate criminal activities in order to gain the confidence of foreign investor.
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