The Impact of Foreign Direct Investment on Economic Growth in Zambia

Abstract

This article adds to scarce literature on the nexus between Foreign Direct Investment (FDI) and economic growth in Zambia. The study looked at overview of FDI in Zambia, literature of FDI- economic growth nexus, using Ordinary Least Square (OLS) Multiple Regression statistical technique and policy implications from findings. The aim is to see how FDI has worked in Zambia in terms of human capital accumulation, infrastructural development, trade liberalisation and macroeconomic stability. We focus on the period between 2014 and 2021. Data was collected from government departments, journals and on internet. Questionnaires were also used to collect primary data which was analysed using the OLS multiple regression. Results revealed that overall effects of FDI are positively associated with growth. It also showed a positive relationship between FDI and human capital accumulation, trade liberalisation and macroeconomic stability. Infrastructural development had a transposed effect on FDI. The results suggest that FDI is an efficient tool in economic growth. At this, the paper recommends amongst others that government should put mechanism to attract capital flows. This can be in terms of policies relating to increase trade, and government should ensure that the needed infrastructural facilities are provided to attract more investors. This article also contributed existing literature. It contributed to the current understanding of the FDI-EG nexus. The holistic analysis of this study added to existing research by identifying the variables that influence both FDI and economic growth in Zambia which has not been done before.