Analysis for the determinants of foreign direct investments (FDIS) in Uganda for the period 1997-2016

Abstract

The study used regressive model to investigate the impact for the determinants of foreign direct investments (FDIs) on FDIs inflows in Uganda for the period between 1997 and 2016. As Uganda’s economy was striving to achieve the Millennium Development Goals (MDGs) by 2015 and the vision 2040 through bridging the gap between domestic savings and investment, bringing the latest technology and management know-how from developed countries. FDIs can play an important role in achieving rapid economic growth in developing countries through industrialization to reduce the high levels of unemployment. The government had issued several investment and policy incentives as “sweeteners” which included reductions in import and export duties; reductions in corporate tax rates -including tax holidays; creating a one -stop shop to reduce time needed to approve and register investments; reducing minimum capital requirement; expansion of markets through economic integrations; ensuring economic and political stability. Hence this study strived to identify the factors that determine FDI inflows to Uganda. Based on a comparative analysis focusing on why there was an increase or a decrease in FDIs in Uganda, related with Gross Domestic product (GDP) growth rate, Tax rates, Inflation rates on consumer prices and annual average exchange rate. Using ordinary least squares models to explain whether the stylized of FDIs affect FDI inflows to Uganda based on a panel data set for 20 years over the period (1997 to 2016). The study identified the following factors as significant for FDIs inflows to Uganda: Economic growth rates, Tax rates, and on contrary Inflation rate and Average exchange were found to not have been more important for FDIs inflows to Uganda within the study period.