A Study on strategies to boost foreign direct investment (FDI) inflows for improving economic growth
a case of Zimbabwe
As nations of the world have gradually opened their borders for trade and investment, FDI is increasingly becoming an impeccable engine for economic growth and development for developed, emerging market economies as well as developing countries such as Zimbabwe. In light of this fast paced global economy which has become a borderless society, a nation’s comparative advantage is no longer only confined to God given natural resources, but also to knowledge advantage. Today’s dynamic world calls for strategic agility, implying that there is need for a competitive, nimble and agile IPA team to beat competition. More importantly, FDI is vital to the host country since it brings technological and managerial know-how to the recipient country. Furthermore, it brings fresh capital and liquidity into the host economy. The issue of liquidity is of fundamental importance in dollarized economies such as Zimbabwe whose economy thrives on a basket of multiple currencies dominated by the US dollar. The fresh capital is used to increase economic production and create employment for the host populace as well as generating revenue for government. In addition, FDI capital also “crowds in” domestic investors through creating forward and backward linkages in the host economy. However, the flow of FDI across borders happens in a global FDI market characterized by “cut throat” competition, in which nations fiercely compete amongst one another for FDI capital. To assess Zimbabwe’s performance in attracting FDI for her economic development, this research has benchmarked Zimbabwe’s performance against that of its neighbors Zambia and Mozambique, against that of two global FDI attracting success stories – South Korea in Asia and Ireland in Europe as well as against the world average performance for the twenty five (25) year period 1990 – 2014. Regression analysis of FDI inflows data for the twenty five (25) year period 1990 – 2014 and individual country policy analysis revealed that Zimbabwe, Zambia, Mozambique, South Korea and Ireland attract approximately 3%, 20%, 40%, 136% and 300% of mean world FDI inflows, respectively. Individual country policy analysis and primary data also revealed the following as factors impeding FDI capital inflows to Zimbabwe – economic sanctions, macro-economic policy inconsistency, unfavorable ease of doing business and economic freedom indicators as well as lack of robust FDI marketing and promotion policies. In light of the above findings, this research proffers recommendations that the government of Zimbabwe can adopt to attract adequate FDI capital for its economic development.
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