We empirically test whether neighbouring countries compete for and take the FDI inflows of each other. Using\ntime series data for the years 1991-2013, the impact of the FDI inflows to the neighbouring countries of Pakistan\n(i.e., China, India, and Iran) on the FDI inflows to Pakistan was tested. We found that the FDI inflows to China has a\nnegative impact on the FDI inflows to Pakistan while the FDI inflows to India has a positive impact on the FDI inflows\nto Pakistan, whereas the impact of FDI inflows to Iran on the FDI inflows to Pakistan is insignificant. Further, trade\nopenness and GDP growth were found to have a significant and positive impact on the FDI inflows to Pakistan. The\nstudy also found the existence of long run relationship between the FDI inflows to Pakistan, India, China and Iran.\nThe empirical findings of the study suggest that policies made in isolation based on country specific FDI\ndeterminants will have less significant results as compared to policies made on the relative FDI attractiveness score.\nThe ultimate impact of agglomeration of policies will helps in sustaining sustainable economic growth and\ndevelopment as well as improves largely society welfare of the neighbouring countries.
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