engleski

Impact of FDI in development of African countries

Experiences of developed countries, from the European Union as well as transition countries indicate that FDI can positively influence economical growth and development, export, technological progress and increase of employment. African countries can also use these experiences in their development plans without increasing their debts toward foreign countries. Foreign investors are investing their capital in African countries expecting to gain profit in two ways: through lower production costs resulting from lower costs of materials and energy resources, and especially low costs of labour and through placing their products on the large African market. Moreover, the prevalent strategies used for investments into African countries are based either on exploration of inexpensive inputs or on exploration of market size. Rarely do foreign investors combine these strategies. As a result we have a group of African companies exporting extremely inexpensive products to markets of developed countries, whereas other companies import more expensive products with very similar characteristics from developed countries. Binding domestic companies with companies owned by foreign investors has a special importance for the domestic country. Due to their mutual binding the positive effects achieved by foreign owned companies would gradually be forwarded to domestic companies. When defining their strategies towards the FDI, African countries should encourage foreign investors through incentives in order to include into their system more domestic companies which would later appear as deliverers of goods and services to companies owned by foreign investors.

FDI; development; investment incentives

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