MJAMR

Determinants of Foreign direct investment In Uganda. A case study of Kampala District

Asiimwe Isaac Kazaara, Irumba Alex


Abstract

Foreign direct investment plays a imperative role in facilitating economic growth, technology transfer and employment creation especially in developing nations seeking to diversify and transform their production structures. While Uganda has witnessed considerable increases in approved FDI stock and inflows averaging around 20% annually from 2000 to 2018, attracting sustainable foreign capital remains an ongoing priority area given the country's developmental objectives. Similarly, Kampala District as the epicenter of economic activity has retained over half of total FDI projects yet faces constraints influencing its capacity to maximize benefits accrued from foreign capital. Considering these factors, this study aimed to conduct an in-depth investigation of the key determinants influencing location choice behavior of foreign investors established in Kampala District. Specifically, the research objectives were to identify and rank order the most important factors drawing multinational corporations to set up operations in the district as well as evaluate post-investment experiences to provide strategic guidance on bolstering FDI competitiveness. To achieve this, a mixed methods approach including analytical review of time-series FDI data spanning 2000 to 2020 coupled with a survey of 124 senior managers from foreign owned companies active over three years in Kampala was employed between January to June 2021. The quantitative analysis revealed an overall upward pattern in approved FDI projects, capital and employment numbers as per Uganda Investment Authority records, indicating gradual expansion. However, volatility especially during economic crises underscored susceptibility to external shocks. Survey findings ranked access to large domestic and regional markets as the foremost location motivator followed by infrastructure availability specifically related to transportation links. Meanwhile, skills availability outranked costs as an attractive human capital attribute signaling a shift toward skill-intensive ventures. Perceptions of the policy framework were largely positive regarding stability yet inconsistent application brewed uncertainty. Factor and correlation analyses identified market access and infrastructure as primarily driving FDI while policy factors played a supportive role. Major challenges cited included transportation bottlenecks, skills mismatches and regulatory inconsistencies. Based on these insights, strategic recommendations center on prioritizing infrastructure upgrades, skills reform and incentives strategy refinement to propel Kampala's FDI potential. Periodic assessments can track progress on reforms instituted to maximize benefits from foreign partnerships over the long term. In conclusion, the study provides a nuanced understanding of location choice dynamics among foreign investors operating from within Kampala District.

Keywords

imports FDI and economic growth
Metropolitan Journal of Academic Multidisciplinary Research

Cite This Article

Asiimwe Isaac Kazaara & Irumba Alex (2024). Determinants of Foreign direct investment In Uganda. A case study of Kampala District. Metropolitan Journal of Academic Multidisciplinary Research, 3(2). https://journals.miu.ac.ug/pages/article.php?article_id=1701

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