The Impact of Foreign Direct Investment on Economic Growth in Libya

Abstract

After the end of civil war of Somalia, the integration of the country with the global economy increased and Somalia has started to attract with greater inflow of foreign direct investment (FDI). FDI is assumed to benefit the developing economy by supplementing domestic investment, generating employment and through the transfer of technology. Many Studies investigated the impact of foreign capital on economic growth in developing countries and some of them found that negative relationship between impact of FDI and Economic growth while others found positive relationship between FDI and Economic growth. Therefore this paper examines the impact of FDI on economic growth in Somalia using detailed sectoral data for FDI inflows to Somalia over the period 1980-2015s. Multiple Regression Analyses were used to measure the relationship between independent (FDI) and dependent variables (macroeconomic indicators). The results obtained in this research signify a negative correlation between FDI and economic growth and may be a concern for the government of Somalia. The government might focus on required reforms and policy implications to make foreign investment more beneficial.The implication of this is that the policy linkage between real GDP and FDI is weak and there is need for policy to ensure provision of adequate infrastructure to maximize the potential benefit of FDI in Somalia.