Determinants of FDI and their Impact on Economic Growth in Uganda

Abstract

Uganda, in an attempt to accelerate growth and development, has been encouraging foreign direct investment (FDI) through privatization programmes and generous incentive packages such as tax holidays and exemptions. However, the Ugandan experience shows that to attract FDI, macroeconomic and political stability and policy consistency are much more important than such incentive schemes. The paper discusses infrastructure and institutional bottlenecks that act as deterrents to FDI. The paper uses time series data to investigate the FDI-growth linkage. The empirical results indicate that FDI has a positive impact on GDP growth in Uganda. Résumé: L'Ouganda s'efforce d'accélérer la croissance et le développement en encourageant les IFD par le biais de programmes de privatisation et de généreuses mesures d'incitation, notamment des trêves et exonérations fiscales. Cependant, l'expérience ougandaise montre que pour attirer les IFD, la stabilité macroéconomique et politique et des orientations cohérentes sont bien plus importantes que de telles mesures. Le document examine les obstacles au niveau des infrastructures et des institutions qui limitent l'expansion des IFD. Il utilise les données de séries chronologiques pour déterminer les liens entre ces institutions et la croissance. Il ressort des résultats empiriques que les IFD ont un impact positif sur la croissance du PIB en Ouganda.

International Journal of Business and Management, Vol. 4, No. 12, December 2009, all in one PDF file

“…They find that FDI has a positive impact on economic growth, but the nexus is partly dependent on the availability of human capital in the host country. The Li and Liu (2005) find similar results from the sample of 84 countries over the period 1970. Obwona (2001 and Bengoa and Sanchez-Robles (2003) suggest that, for FDI to have positive impacts on economic growth, the host country must have macroeconomic and political stability, policy credibility and an increase in the openness of an economy.…”

Institutions and development in MENA region: evidence from the manufacturing sector

“…This result indicates that FDI plays an ambiguous role in contributing to economic growth. These mixed results on FDI have been debated in the FDI-Growth literature depending on the capacity of FDI in the host country to absorb the foreign technology and investment (Obwona, 2001). By the same line, Smarzynska (2004) argues that international firms may focus their activities in the highly productive sector leading less industrious firms to decrease their activities and to exit that sector.…”

The Effects of Inward and Outward Foreign Direct Investments on Economic Growth: Evidence from the G-7 and Selected Emerging Market Economies (1994-2015)

“…In empirical studies conducted in different countries or country groups within the scope of the cross section, time series and panel data analysis methodology since 1990s, it is reached the end of the long termed effects of foreign direct investments inflows in capital importer countries on real GDP generally positive and statistically significant. (Balasubramanyam et al, (1996), Borensztein et al, (1998), Bosworth andCollins (1999), De Mello (1999), Obwona (2001), Kumar and Pradhan (2002), Hermes and Lensink (2003), Li and Liu (2004), Khawar (2005), Lensink and Morrisey (2006), Alfaro and Charton (2007), Mun et al, (2008), Chowdhary and Kushwaha (2013), Zekarias (2016)). These results most of which were obtained from studies conducted in developing countries empirically bear the thought of the foreign direct investment inflows have positive effects on economic growth of capital importer countries as is predicted in theoretical framework out.…”