Impact of foreign direct investment on economic growth in Rwanda

Abstract

The empirical study reveals controversies regarding the effect of foreign direct investment on the growth of the host economies .Some researchers found a positive effect whiles others found a negative effect. The main objective of this study was to assess the impact of foreign direct investment on the economic growth in Rwanda over the period of 1970 to 2014. The study has examined time series data over a period of fourty four years. Multiple regression technique and Eviews 10 econometric software were utilized to measure the relationship between independent (FDI) and dependent variable (GDP growth) .The result showed the positive but not statistical significant influence of the foreign direct investment on the economic growth in Rwanda. The findings also reveal the complementarily between FDI and domestic investment toward the growth .Therefore the study concluded that foreign direct investment has a positive but it is insignificant effect on the economic growth in Rwanda and is opposed to some findings that foreign direct investment has a negative effect on the growth of economy. It was recommended that government should improve the state infrastructure to encourage the meaningful investment from abroad. It is also recommended that more attention should be paid to formulate policies that will maximize the benefits from FDI inflows. Otherwise multinationals will potentially get profit than the country since there is not profit repatriation low CHAPTER ONE: INTRODUCTION AND BACKRAOUND 1.1 Introduction Foreign direct investment is the investment involving management control of resident entity in one country by an enterprise resident in foreign country or the foreign investor hold at least 10 per cent of the stake in the foreign enterprise. This means that the investor can exercise some considerable measures of influence over the enterprise or that the foreign investor invests directly (United Nation Conference on Trade and Development,2012). During the four decades foreign direct investment (FDI) has become increasingly important in the developing world, with a growing numbers of developing countries succeeding in attracting substantial and rising amounts of inward FDI .economic theory has id