The impact of foreign direct investment on the economic growth of Liberian economy

Abstract

Foreign direct investment (FDI) is that investment whereby a firm based in one country locates or acquires production facilities in other countries. Foreign direct investment is important to the future development of every country especially African nations, as it is a means of increasing the capital available for investment and the economic growth needed to reduce poverty and raise living standards in any given country. Foreign direct investment plays a vital role in the up gradation of technology, skills and managerial capabilities in various sector of the economy. Appropriate structure put in place by the Government will go a long way to achieve the spillovers foreign direct investment produces. The research showed significance benefits that foreign direct investment brings to host country. The main purpose of this study was to establish the relationship between foreign direct investment and economic growth in Liberia. This research also seeks to provide awareness among policymaker, institutional, multinational and local investors about FDI operations in Liberia. The empirical finding of this research project proved that foreign direct investment has a positive and weak relationship with GDP growth rate in Liberia. Foreign direct investment inflows to Liberia have been exponentially increasing over the period and majority of these inflows are concentrated within the extractive industry. Formidable effort is required to transform the foreign investment that had been attracted to Liberia in order to positively affect the lives of the ordinary Liberians. The study analyzed and presented findings on foreign direct investment ranging from 2003 to 2011 annual year. Proper monitoring, supervision and realistic policies controlling foreign investment in Liberia will open the way for the attracted foreign investment to improve the living standard of the ordinary Liberians