The Impact of Foreign Direct Investment on Economic Growth in Somalia

International Journal of Economics and Management Studies

© 2017 by SSRG - IJEMS Journal

Volume 4 Issue 8

Year of Publication : 2017

Authors : Mohamed Mire Mohamed, Najibullah Nor Isak

10.14445/23939125/IJEMS-V4I8P105

How to Cite?

Mohamed Mire Mohamed, Najibullah Nor Isak, "The Impact of Foreign Direct Investment on Economic Growth in Somalia," SSRG International Journal of Economics and Management Studies, vol. 4,  no. 8, pp. 24-31, 2017. Crossref, https://doi.org/10.14445/23939125/IJEMS-V4I8P105

Abstract:

After the end of civil war of Somalia, the integration of the country with the global economy increased and Somalia has started to attract with greater inflow of foreign direct investment (FDI). FDI is assumed to benefit the developing economy by supplementing domestic investment, generating employment and through the transfer of technology. Many Studies investigated the impact of foreign capital on economic growth in developing countries and some of them found that negative relationship between impact of FDI and Economic growth while others found positive relationship between FDI and Economic growth. Therefore this paper examines the impact of FDI on economic growth in Somalia using detailed sectoral data for FDI inflows to Somalia over the period 1980-2015s. Multiple Regression Analyses were used to measure the relationship between independent (FDI) and dependent variables (macroeconomic indicators). The results obtained in this research signify a negative correlation between FDI and economic growth and may be a concern for the government of Somalia. The government might focus on required reforms and policy implications to make foreign investment more beneficial. The implication of this is that the policy linkage between real GDP and FDI is weak and there is need for policy to ensure provision of adequate infrastructure to maximize the potential benefit of FDI in Somalia.

Keywords:

Foreign Direct investment, Economic growth, Somalia, Empirical analysis.

References:

1) Adams, S. (2009). Foreign direct investment, domestic investment, and economic growth in Sub-Saharan Africa. Journal of Policy Modeling, 31(6), 939-949.
2) Balasubramanyam, V. N., Salisu, M., & Sapsford, D. (1996). Foreign direct investment and growth in EP and IS countries. The economic journal, 92-105.
3) Choe, J. I. (2003). Do foreign direct investment and gross domestic investment promote economic growth? Review of Development Economics, 7(1), 44-57.
4) Chowdhury, A., & Mavrotas, G. (2003). Foreign Direct Investment and Growth: What Causes What. Department of Economics, Marquette University.
5) Mahutga, M. C., & Bandelj, N. (2008). Foreign investment and income inequality: The natural experiment of Central and Eastern Europe. International Journal of Comparative Sociology, 49(6), 429-454.
6) Zhang, P., Ding, S., Wang, G., & Zhou, D. (2001). An FDI approach for sampled-data systems. Paper presented at the American Control Conference, 2001. Proceedings of the 2001.
7) Ang, J. B. (2009). Financial development and the FDI-growth nexus: the Malaysian experience. Applied Economics, 41(13), 1595-1601. 
Eller, M., Haiss, P., & Steiner, K. (2006). Foreign direct investment in the financial sector and economic growth in Central and Eastern Europe: The crucial role of the efficiency channel. emerging Markets review, 7(4), 300-319.
8) Kunle, A. M., Olowe, S., & Oluwafolakemi, F. O. (2014). Impact of foreign direct investment on Nigeria economic growth. International Journal of Academic Research in Business and Social Sciences, 4(8), 234.