Relationship between Foreign Direct Investment (FDI) and Economic Development in Low-Income Countries in Botswana

Abstract

Purpose: The aim of the study was to assess the relationship between foreign direct investment (FDI) and economic development in low-income countries in Botswana.

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: While FDI has the potential to stimulate economic growth through capital infusion, technology transfer, and job creation, its impact varies across different contexts. Additionally, the type and sectoral composition of FDI inflows play a crucial role, with investments in productive sectors often yielding greater developmental benefits compared to those in extractive industries. Furthermore, the extent to which FDI contributes to sustainable development hinges on the host country's ability to leverage investments for inclusive growth, innovation, and skill development. Overall, while FDI can be a catalyst for economic development in low-income countries, policymakers must implement appropriate policies to maximize its potential benefits and mitigate potential drawbacks, ensuring that FDI aligns with broader developmental objectives.

Implications to Theory, Practice and Policy: Dependency theory, resource curse theory and institutional theory may be used to anchor future studies on assessing the relationship between foreign direct investment (FDI) and economic development in low-income countries in Botswana. Strengthen capacity-building initiatives to enhance the absorptive capacity of domestic firms and institutions, enabling them to effectively leverage FDI for technology transfer, skills development, and productivity enhancement. Develop targeted investment promotion strategies that align with the comparative advantages and development priorities of low-income countries, leveraging FDI to diversify economies, upgrade industrial capabilities, and promote export-led growth.