Impact of Inward FDI'S On Economic Growth or Development of an Emerging Country

by

Table of Contents

EXECUTIVE SUMMARY1

TASK 1: CRITICAL REVIEW OF AN ARTICLE2

Definition2

TASK 2: MINI REPORT4

INTRODUCTION4

Background of the Study4

Objectives4

Scope/ rationale of the study5

LITERATURE REVIEW6

FDI in Uganda6

FDI Inflows and Economic growth7

Balance of Payment effects7

Impact on employment8

METHODOLOGY9

Questionnaire Survey9

Reliability9

Research Validity10

Ethical Considerations11

FINDINGS AND ANALYSIS12

CONCLUSION AND RECOMMENDATIONS17

Recommendations18

REFERENCES20

APPENDIX - A25

Survey Questionnaire25

APPENDIX - B27

Tables27

EXECUTIVE SUMMARY

Foreign Direct Investment presents an important source of development finance to developing countries by filling the gaps created by domestic savings, foreign exchange, government revenue, human capital and the level of resources required for growth and development in developing countries. Because of these reasons developing countries for example Uganda, is now encouraging the inflow of FDI by providing generous investment or tax incentives like exemption of certain investors from import duties and sales tax, as well as ability to obtain credit facilities from domestic sources. However FDI flows into Sub-Saharan Africa has been dismally low compared to flows into other parts of the world. Specifically, the capacity of developing countries to attract FDI is a function of economic, financial and political risk factors, with political risk exacting the most significant influence in the joint determination of FDI inflows. Each year, more and more FDI is flowing not only from developed into developing countries but from one developing country to another. FDI inflows rose approximately from 19% in 2000 to 52% in 2010, of which half of the top 20 FDI recipients in 2010 were developing countries.

TASK 1: CRITICAL REVIEW OF AN ARTICLE

Definition

Foreign direct investment, in its classic definition, is defined as a company from one country making a physical investment into building a factory in another country.

Uganda is said to be gifted by nature such as lakes, rivers, mountains, wildlife and some mineral deposits such as Gold, Copper and oil recently discovered in Lake Albert. The population of Uganda as at 2010 is 32,369,558, and therefore has a labour force of over 14.5 million people. The biggest and most important sector of Uganda's economy is agriculture which employs 82% of the labour force and also accounts for most of the country's foreign exchange earnings, the major products being flowers, coffee, tea, cotton, corn, cassava etc. Coffee however the biggest export is coffee accounting for 27% of exports (Shrestha, 2006, pp 89). Uganda's economy has been growing at a rate of 6% per annum over the years. This growth has been attributed to industrial production, improved security, restoration of macroeconomic stability, improvement in terms of trade. However the level of per capita income in Uganda is still very low leading to consistent poverty in the country.

Foreign Direct Investment presents an important source of development finance to developing countries by filling the gaps created by domestic savings, foreign exchange, government revenue, human capital and the level of resources required for growth and development in developing countries. Because of these reasons developing countries for example Uganda, is now encouraging the inflow of FDI by providing generous investment or tax incentives like exemption of certain investors from import ...