Foreign Direct Investments into Eastern Africa Region: The Infrastructure Development Nexus

Eric Mokwaro Bosire    


Infrastructure development is an essential element in economic growth and development. Good infrastructure fosters low transaction costs hence making production efficient and attracting foreign direct investments. However, there has not been adequate scholarly focus on how infrastructure development can affect the flow of foreign direct investments hence this paper sought to fill this gap. This paper utilized panel data from 12 eastern Africa countries from 2004 through 2017. Data on Infrastructure development variables was obtained from the Africa Development Bank?s, Africa Infrastructure Development Index, that of control variables from the World Development Indicators kept by the World Bank and that of Foreign direct investments from UNCTAD. Due to the presence of heteroscedasticity in sample data, the study opted for a Generalized Least Squares (GLS) estimation method. The study established a significant relationship between infrastructure development and foreign direct investment inflows into the eastern Africa region. However, only Africa Infrastructure Index and Electricity Composite Index were positive while Transport Composite Index, ICT Composite Index and Water Supply and Sanitation Index were negative. Reasons being, Transport, ICT, water and sanitation are considered as social development factors. One of the control variables, total tax and contribution rate was negative indicating a unit increase in tax leads to a decrease in foreign direct investments whereas market size was positive and significant. The study recommends to policy makers to allocate resources into infrastructure development as an enabler of production efficiency, appraise the tax system to ensure a balance is stroked between taxing of investment returns and generating adequate tax revenue from multinationals and enhance its markets through multilateral and preferential trade agreements and regional integration agreements.Keywords: Africa Infrastructure Development Index, Transport Composite Index, Electricity Composite Index, ICT Composite Index, Water Supply and Sanitation Index, Foreign Direct InvestmentsJEL Classifications: C33, F21, H4, R4DOI:

 Artículos similares

Emrah Bese,Haven Swint Friday     Pág. 1 - 11
This is the first study in the single country studies that analyze the relationship between life expectancy, short-term external debt, and long-term external debt for Turkey for the period from 1974 to 2017. This study analyzed the direct effect of long-... ver más

Poppy Camenia Jamil, Restu Hayati     Pág. 477 - 484
The role of the capital market for the economy of a country according to capital market education by PT. There are two functions of the Indonesia Stock Exchange, namely as a means of business funding or as a means for companies to obtain funds from inves... ver más

Jongkers Tampubolon,(University of HKBP NommensenIndonesia)Tongam Sihol Nababan,(University of HKBP NommensenIndonesia)Aaron Loh,(Assumption UniversityThailand)     Pág. 10 - 24
This study investigated the relationship between exports, foreign direct investment (FDI), financial development and economic growth in North Sumatra, Indonesia. Using autoregressive distributed lag (ARDL) bound test to cointegration, this study confirms... ver más

Abi Revyansah Perwira     Pág. 22 - 31
As the fourth populated country in the world, Indonesia?s automobile production is the seventhrank among automobile producer developing countries. With the production capacity of more than2 million units, the industry only produces less than 60% of its c... ver más

Zihné Coetzee,Henri Bezuidenhout,Gabriel Mhonyera    
AbstractOrientation: Retail sector multinational enterprises (MNEs) face challenges and follow diverse strategies when they expand into foreign markets.Research purpose: The major aim of this article is to determine how three well-established retail sect... ver más