Foreign direct investment and economic growth: the case of Uganda (1970-2007)

Abstract

Most countries strive to attract Foreign Direct Investment (FDI) because of its acknowledged advantages as a tool of economic development. Africa and Uganda in particular joined the rest of the world in seeking FDI as evidenced by the proactive role played by the UIA in attracting FDI in the country as a major component. This study investigated the empirical relationship between FDI and economic growth in Uganda for the period 1970 to 2007. Secondary annual data on both dependent and independent variables were sourced from the World Development Indicator CD-ROM 2008, Selected Statistics for African Countries by the African development bank, Background to the Budget of various years. The Ordinary Least Squares method was utilized for estimation of the augmented growth model to ascertain the relationship between FDI and other identified variables that influence economic growth. The empirical results like other previous studies confirmed that FDI impacts positively on Uganda’s economic growth. Therefore, taking a peek at Uganda through the lens of FDI we can see that this country is making bigger economic strides step by step and year by year. From the results, it was recommended that in order to encourage and finance economic growth, the government should continue striving to achieve a sound degree of infrastructural development, together with a good domestic labor force.