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The role of foreign direct investments in the economy of Ghana
Acheampong, Anthony
Foreign Direct Investment (FDI) has a major role in enhancing economic growth and development. In Ghana, the prospects of attracting new FDIs is high because of its natural resources, low cost of production, and an economically active population age bracket. While scholars emphasized the need to attract FDI to facilitate the rapid economic development of Ghana, little attention is paid to the effect on specific sectors of the Ghanaian economy. The study examines the factors that attract the inflow of FDIs and its effect on economic growth. Using secondary data and quantitative method of analysis, in addressing the third and fourth objective of the study that examine a cause and effect relationship between the flow of FDI into specific sectors of the economy (Industry and Service Sector). We adapt the empirical model of Girma (2015). In our model, a multiple linear estimation technique is specified to examine the factors that causes the inflow of FDI into an economy. Based on our findings, the hypothesis that Ghana could potentially attract foreign direct investment through the building of human capacity and fostering economic growth and not entirely relying on natural resources as a driver of FDI inflow is partly true. We conjecture that FDI inflows into some sectors of the economy has harmed the economy both environmentally and socio-culturally. From the study, it was identified that FDI has contributed to job creation, GDP growth, and increase in the employment rate which has significantly improved the country’s economy. The thesis recommends the channeling of FDIs into comparative sectors of the economy and also should be guided at getting a chunk of FDIs into export oriented sector to help stabilize the economy.
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