Impact of Foreign Direct Investment on Poverty Reduction and Economic Development

Abstract

Purpose: The aim of the study was to investigate the impact of foreign direct investment on poverty reduction and economic development

Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries.

Findings: The study revealed that FDI significantly contributes to poverty reduction and economic development. FDI is linked to higher economic growth rates, driven by its infusion of capital, technology, and market access. This influx of investment creates jobs in host countries, particularly in labor-intensive sectors, effectively reducing unemployment and improving living standards. Additionally, FDI promotes technology transfer and innovation, enhancing the competitiveness of domestic industries. Furthermore, FDI's positive spillover effects extend to human capital development through skill training and improved employability, leading to higher wages and overall poverty reduction. These findings underscore FDI's multifaceted role in fostering sustainable economic growth and social progress.

Unique Contribution to Theory, Practice and Policy: Dependency Theory and Resource-Based may be used to anchor future studies on Foreign Direct Investment. Investment Promotion Agencies should establish effective investment promotion agencies to attract quality FDI, offering incentives, streamlined regulations, and investor support services. Stringent environmental regulations should be enforced to prevent FDI from causing negative environmental externalities and promote sustainable development practices.