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Analysis of factors influencing foreign direct investment on the Namibian economy

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  • Tjiramba, Utjevera
  • Mbai, Salomo

Abstract

This study aims to analyse factors influencing foreign direct investment (FDI) on Namibian economy using yearly data from 2000-2020. FDI is designed to invest and build long-term relationships with companies outside of the investor's economy. It is an important source of private capital, especially for developing countries, which enhances economic growth by increasing market share, economic diversification, reducing labour costs, human capital development, and enhancing access to managerial knowledge. The agricultural sector is the backbone of the economy in developing nations and FDI stimulates growth of the sector. Mitigation strategies have been adopted to attract higher FDI inflows to host countries, but investments remain inadequate to support and expand the economic base. The autoregressive distributed lag (ARDL) approach to cointegration was used to measure the impact of FDI on the agricultural sector, granger causality test was used to analyze the causal relationship between FDI and GDP. The results indicate that in both the short/long run, FDI has a positive impact on the sector. The results from the granger causality test indicate a bidirectional relationship between FDI and GDP. Hence, the current empirical study advised that policies and incentives for foreign investment, as well as the institutional structure of farmers, should be encouraged to play a crucial role in boosting investment in the agricultural sector. In addition, it is crucial that public policies concentrate on FDI inflows to the agricultural sector, as this sector fostered growth throughout the country.

Suggested Citation

  • Tjiramba, Utjevera & Mbai, Salomo, 2023. "Analysis of factors influencing foreign direct investment on the Namibian economy," 2023 Seventh AAAE/60th AEASA Conference, September 18-21, 2023, Durban, South Africa 365945, African Association of Agricultural Economists (AAAE).
    • Handle: RePEc:ags:aaae23:365945
    DOI: 10.22004/ag.econ.365945
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    References listed on IDEAS

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    4. Don Gunasekera & Yiyong Cai & David Newth, 2015. "Effects of foreign direct investment in African agriculture," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 7(2), pages 167-184, May.
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