To answer to this question, data from 43 Sub-Sahara African countries was collected for 2017. Correlation and regression were performed to find the relationship between gross domestic product (GDP) and foreign direct investment inflows (FDI) in selected countries.
The results show that FDI did not impact significantly GDP for 2017.
The estimated regression coefficient of FDI on GDP is 13.394. This coefficient is not statistically significant. The p-value of the coefficient is 0.119, R-squared: 0.0581, Adjusted R-squared: 0.03512. The results are not surprising because the correlation between GDP and FDI, is weak, and the relationship can be ignored. The test of Pearson's product-moment correlation fails to reject the null hypothesis of the no existence of a significant linear relationship between FDI and GDP.
It is possible if the matter is organized and with appropriate management a balance between the local and the external
I think not. This region is still not among the "interests" of developed countries.
Thank you Drs.Mutasem,Rabin,Silvia, and Joan for your views.
Best.
Yes, FDI is expected to contribute to growth in Sub-Saharan African countries. However, most of the contributions are being undermine by weak institutions, infrastructural deficits, and other major challenges facing most of the SSA countries.
Hi Stephen,
Thank you for your comment on the findings of the impact of FDI on GDP in SSA. However the analysis using data for 2017 found the contrary of the general theory on FDI.
Best Antoine
Dear Lamia, the result of the analysis shows that for 2017, Sub-Sahara African countries did not get enough FDI to increase their GDP. However, this does not mean FDI does not contribute to increase GDP.
Contrast results were found, when a comparative analysis was made for 2015,2016,2017, and 2018. For 2015,2016,2018, FDI had a significant impact on GDP. These results are in line with the theory. In other words, there is a minimum level of FDI that has impact on GDP. Under such minimum, FDI does not have significant impact on GDP in Sub-Sahara African countries.
Best.
Dear Niyungeko Antoine
I highly recommend the opinion provided by Artur Braun .
Regards
Si son de inversión en la producción manufactura con la transferencia de tecnología a los africanos sí (como en la China, India), pero si es una inversión de de explotación de recursos de materias primas y consumo (con cadena de mercados de consumos, y otras cadenas monopolistas), de ocio, es de bajo nivel, como se ha demostrado con la globalización de mercados.
This is subject to empirical investigations. The contribution can either be positive or negative. But theoretically fdi contributes positively to economic growth. Thank you.
The word "investment" in the term FDI is very unfortunate and misleading. Most economists mix it up with investment in the sense of National Accounts (One could say terms function as a trap). In fact, an FDI does not change anything real in the inflow and outflow countries. Therefore, these transactions cannot have any direct influence on GDP and other NA variables. It does not matter, if the "investor" is domestic or foreign. In the first case, it is not FDI, in the second it is. But the economic effect is the same (nothing), the only change is in the BoP.
The effect depends on what the new owner is doing. She may e.g. close a purchased firm, because she bought it to get rid of a competitor. This would, in principle, mean a disinvestment in the NA (but, in general, not booked as such) of the country in question and a reduction of production (and GDP) later on. If the buyer decides to enlarge the firm, there would be a higher (domestic) investment and higher production later on. The effect also depends on what the seller is doing with her money. If she spends it e.g. on domestic products, this would increase GDP (but likely not much in the same period).
Therefore, it would be very surprising to see a statistical effect in the period when an FDI takes place. In the following years, the effects depend on the decisions of the FDInvestors, sellers and many other factors, that one cannot expect a clear statistical picture, too. One would have to go into the FDI cases one by one.
Anton,Hi,
thank you for your comment on the impact of FDI on GDP. I quiet agree with you. That why my research is mediation analysis. How FDI can have effects on GDP through other variables like imports, exports, house hold consumption, gross capital formation,etc. Some authors even say that it is difficult to evaluate the impact of FDI on GDP. They confirmed that FDI have more indirect effect than direct effect on GDP.
I agree with mutasem
It is possible if the matter is organized and with appropriate management a balance between the local and the external
The future academic research should also focus on what is good for the people there, when multinationals from economically advanced nations go and invest in rather in their term slowly developing areas. Perceiving FDI only in its original "western terms" and trying to fit it like a ready made cloth to a completely different region cannot yield the results the FDI "pretends" to aim. Is the FDI tailor made? Fitting to the requirements and givens of the region? Is the FDI realistically taking into account the real needs of the people in the area? Or does the FDI aim to get most out of the region? Who will benefit from this investment? Which parts of the society? Is the rate of unemployment going down for long term? Are the regional lifestylea of people, their culture and habits taken into consideration while this FDI is planned? Does the FDI require a big big change in their lifestyles? Does this lead to a cultural indoctrination, cultural change and adaptation and the majority of the people are either left out of it or cannot cope with it or follow it. These questions cross my mind each time, when I hear about the FDI contribution margin in economically less developed regions in the world.
But beyond the economic and business research... Here is my favorite literature about Africa.. For warm summer afternoons a great journey to enjoy.
I would like to recommend everybody: Paul Theroux (2013). The Last Train to Zona Verde. Overland from Cape Town to Angola. Houghton Mifflin Harcourt, NY.
It is possible if the matter is organized and with appropriate management a balance between the local and the external
Dear Niyungeko Antoine
I highly recommend the opinion provided by Artur Braun .
Regards
- Badges
- Science topic
- Similar topics
- Geoscience
- Asia
- India