Topic: BusinessManagement

Last updated: December 5, 2019

Usiri (2014) conducted a study on the Effects of Foreign Direct Investment on Economic Growth the Case of Tanzania. The results from Econometric analysis indicate that FDI investment in
Manufacturing sector has no significant effect on economic growth of Tanzania while the results from the Econometric analysis indicate that FDI investment in Mining and Quarrying sector has a positive effect on economic growth of Tanzania. This variable has a positive coefficient and is statistically significant at 5 per cent Onakoya (2012) conducted a study on Foreign Direct Investments and Economic Growth in Nigeria: A Disaggregated Sector Analysis basing on the sectors in order to give better insight into the variations inherent therein. The finding shows that FDI has a significant impact on output of the economy but that the growth effects of FDI differ across sectors. The impact on manufacturing sector was insignificant while of the agricultural sector was positively less sensitive but significant. The paper recommends sector-specific policies, enhanced trade openness, import substitution development strategy incentives to existing investors, and potential overseas investors so as to enhance the development of the country. Abala (2014) investigated the main drivers of real Gross Domestic Product growth in Kenya as well as those that drive the foreign direct investment (FDI) in Kenya. The findings show that FDI in the mining sector was insignificant while significant in the manufacturing sector. The reasons behind was pointed out to be the nature of FDI attraction in Kenya to be market seeking in which case the manufacturing sector was in favor compared to other sectors like mining, tourism and service sectors.
There are many benefits of FDI both to the host country and the home country these benefits are noted by different authors. For instance, Alfaro (2003) said that in addition to the direct capital financing it supplies, FDI can serve as a source of valuable technology and know-how to the host developing countries by fostering linkages with local firms. These technological innovations by MNEs play a central role in the economy and they are some of the most important areas where MNEs as catalyst in developing countries. MNEs have the financial strength to invest in large plants. This might be very difficult for local investors due to their lack of huge investment fund which MNEs can afford. Through FDI ?scarce capital can be made available to the developing countries. This is very crucial to economic growth. Johannes (2006) notes that the transfer of capital by MNEs can supplement domestic savings and contribute to domestic capital formation for countries that are capital constrained and this can increase domestic investment. Some investments are better off if managed under foreign control. This will put the level of government interference at its minimal. More often than not, FDI brings along solid ownership and independent management.


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