To what extent does inward Foreign Direct Investment (FDI) alleviate Essay

To what extent does inward Foreign Direct Investment (FDI) alleviate poverty in Sub Saharan Africa (SSA) - Essay Example Although SSA has relatively poor economic conditions, FDI inflows has significantly risen from $5 billion to $18 billion in the year 1995 to 2005 respectively (World Bank, 2003, p.92). The FDI inflows have played significant roles in the SSA economy because it has contributed to increased world trade, which has also contributed major changes including increases in employment opportunities and economic growth. This is relevant as they are among the key determinants for poverty alleviation in the SSA economy. Many Sub-Saharan countries including Angola, Uganda, Niger and Botswana, among others, have significantly benefited from FDI inflows - many of these countries have increased their GDP per capita performance. Although poverty is still a major problem in most of the SSA countries, many of them have highly benefited from inward FDI flows; thus reducing poverty levels. Effects of Inward Foreign Direct Investment (FDI) In SSA Economy Positive Effects FDI flow has played significant rol es of contributing to increased technology advancement, access to new technologies, the creation of new knowledge and the transfer of existing foreign technology (Asiedu, 2006, p. 65). One of the positive effects is the increased use of technology; that has enabled the developing nations improve productivity and innovative commodities, which are of high demand in the global market. It is less costly to learn to utilise existing technology than generating a new one; thus developing nations have the potential of growing at a faster rate. However, the convergence prospective is restricted on the level of human capital in the state. This is especially labour force quality, accumulated experience, knowledge and economic ability to create new ideas. Besides, progress in education system and human capital are fundamental for adaptingoverseastechnological know-how; thus generating sustainable long-run fiscalexpansion.The significant vehicle for international technology transfer is FDI; thus multinational companies undertake significant part in controlling most of the global advanced technology. For instance, when a multinational company sets up a foreign affiliate, the associates receive some amount of proprietary technology. This may constitute the parent’s firm particular advantage, which enables the company to compete favourablywith other local industries, which have superior knowledge of consumer preferences, local markets and business practices. Therefore, this contributes to geographical diffusion of technology; thus contributing to increased technology advancement. Secondly, FDI has contributed to increased domestic employment opportunities as a result of the development of new industries, which require labour to reach its maximum potential and goal. The construction of new companies in a country is believed to improve economic welfare and the living standards of people, through the creation of domestic employment opportunities.Many scholars have attempt ed to address the way FDI plays significant and key elements in the global economy. Anyanwu (2012, p.425) argues that FDI is the