Management and Administrative Sciences Review ISSN: 2308-1368 Volume: 2, Issue: 3, Pages: 322-335 (2013) © 2013 Academy of Business & Scientific Research *Corresponding author: Nosheen Rafi, Lecturer at Department of management Sciences, University of Lahore, Lahore (54000) Pakistan. E-Mail:m4maina@gmail.com 322  Research Paper Foreign Direct Investment: A Stimulus of Poverty Reduction Nosheen Rafi 1 * and Amjad Hussain 2 1. Lecturer University of Lahore, Gulberg Campus, Lahore (54000) Pakistan. 2. Subject Specialist of Commerce, Govt. of the Punjab, Pakistan. The present study was done to determine the impact of foreign direct investment on the poverty reduction in the Pakistan. The present study was also done to determine the effect of foreign direct investment on the per capita income, GDP, and labor market in the context of Pakistan. The data of the study was conducted on the previous five years records on the poverty ratio in Pakistan. Statistical analyses like correlation and regression test were applied to analyze the data. The results of the study showed that the almost all the variables have significant relationship with each other. Similarly the results of regression analysis showed that he FDI has significant negative relationship with the poverty reduction in Pakistan (t = - 2.618, p = 0.047). Further advantages and disadvantages were discussed in the discussion head. After that the study implications and limitations of the study were discussed. Lastly, suggestions are provided about the poverty reduction in Pakistan in the conclusion head of the study. Keywords: FDI, GDP, Per capita income, Labor market, Pakistan. INTRODUCTION Foreign direct investment (FDI) has considered as a major source of private external flows for Pakistan. FDI inflows has provided important source of non-debt creating inflows. During the last two decades countries have liberalized their FDI system and pursued investment- friendly economic policies to attract investment to maximize the benefits of foreign presence in the host economy. In many developing countries, FDI has triggered technology spillovers, assisted human capital formation, contributed to international trade integration, helped in creating a more competitive business environment and promoted enterprise development. These developments contributed positively to higher poverty reduction in many developing countries, which is the most powerful tool for alleviating poverty. The foreign direct investment which has attained new heights at $ 6.5 billion last year has shown some signs of moderation but still FDI inflow of $3.0 billion in July-April 2007-08 as against $3.9 billion in the comparable period of last year augur well for investor confidence on Pakistan‟s economy (FIAS C.A 2000). The Foreign direct investment in Pakistan has reduced the foreign exchange constraints for imports to greater event and supported the