Effects of Foreign Direct Investment on Poverty and Development

Abstract

Purpose: This study sought to investigate the effects of Foreign Direct Investment on poverty and development.

Methodology: The study adopted a desktop research methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through the online journals and library.

Findings: The findings reveal that there exists a contextual and methodological gap relating to Foreign Direct Investment on poverty and development. Preliminary empirical review revealed that Foreign Direct Investment (FDI) significantly contributed to economic growth and poverty reduction, particularly in countries with well-developed infrastructure, high levels of human capital, and robust governance structures. It highlighted the complexity of FDI's impact on poverty, noting that while FDI generally led to positive economic outcomes, the distribution of these benefits could be uneven, potentially exacerbating income inequality. The study emphasized the importance of a conducive policy environment and recommended a balanced approach that combined FDI with domestic investments to ensure sustainable development and poverty alleviation.

Unique Contribution to Theory, Practice and Policy: The Modernization Theory, Dependency Theory and Eclectic Paradigm (OLI Framework) may be used to anchor future studies on Foreign Direct Investment. The study recommended a multi-pronged strategy to maximize the benefits of FDI on poverty reduction and development. It suggested improving investment climates by enhancing infrastructure, education, and healthcare, and fostering stable regulatory frameworks. Policies should promote inclusive growth through progressive taxation, social safety nets, and support for SMEs. The study also advised aligning FDI with long-term development goals, strengthening institutions, and leveraging international support for capacity-building. Continuous monitoring and evaluation of FDI's impact were deemed essential to ensure it contributed positively to sustainable development and poverty reduction.