Introduction: Foreign direct investment, or FDI, is a type of investment that involves the injection of foreign funds into a business operating in a country of origin other than that of the investor ” (economy watch) . The determinants of foreign direct investment can be the socioeconomic, financial and cultural factors which usually have positive and negative effects on foreign direct investment. The risk is linked to the determinants of foreign direct investment. This article examines the main determinants of the foreign direct investment exchange rate, market size, political instability, infrastructure, market openness and military rule. Data constraints in Pakistan are considered inefficient by some determinants. Regardless, many determinants such as infrastructure have a positive impact on foreign direct investment. Rehman et al(2010). GDP is positively correlated with foreign direct investment. Khan and Nawaz (2010). While Anjum and Nishat find the positive relationship of exchange rate with foreign direct investment. Akthar found the negative impact of political instability and military rule. Due to data constraint, political instability is considered inefficient. It also found that market openness is positively related to foreign direct investment. The main objective of the paper is to examine the relationship between the determinants of foreign direct investment and analyze the determinants of foreign direct investment and their significance. Literature Review: One of the studies exploring locational determinants with reference to Pakistan is carried out by Akthar (2000). Use the multivariate regression technique to determine the determinants. Uses market size (openness to trade), relative interest rate and exchange rate, political instability...... middle of paper...... Nawaz Atif Muhammad (2010)“Economic Determinants of Foreign Direct Investment in Pakistan" Journal of Economics: 99-104 (2010) Saeed Nazir (2001) "An economic analysis of foreign direct investment and its impact on trade and growth in Pakistan" Thesis submitted to Islamia University Bahawalpur. Aqeel Anjum and Nishat Mohmmad “The Determinants of Foreign Direct Investment in Pakistan” The Pakistan Development Review 43: 4 Part II (Winter 2004) pp. 651–664 Dar, A. Humayun. , Presley.R.John Malik.H.Shahid(2003) Determinants of Foreign Direct Investment Inflows into Pakistan (1970-2002) unpublished, Loughborough University, UK www.economywatch.com/foreign-direct-investment/ definition.html Holland Dawn and Pain Nigel “The determinants and impact of foreign direct investment in transition economies: a panel data analysis” National Institute of Economic and Social Research