What Determines Inward Foreign Direct Investment In East Africa?

The FDI plays an important role in the economic development of host countries.Their entry contributes to the formation of human capital,integration into the international trade.This entry is also subordinated to number of factors which we have tried to determine in 5 East African countries.This study focus on what determines foreign direct investment that has been most significant in attracting FDI Inflows in East Africa.The study used both Empirical and descriptive statistical methods to analyze the current stance of East Africa with aspect to the general set of determines of FDI.The study used a panel dataset from 1997 to 2017 of five East African countries.We use Hausman?s specification test,we were able to determine fixed Effect and Random Effect.Analytically we use Random Effect econometric method.Considering our empirical results,we found that gross domestic product,export goods and services,exchange rate,natural resources and labor force are determinants of FDI whiles infrastructure,Inflation rate and political stability are not determinants of inward foreign direct investment in the East Africa.Gross domestic product is positive and significant in overall 5 East African countries implies that an expansion of the gross domestic product will attract FDI to East Africa.Export is also determines of the FDI and exchange rate,natural resources and labor force are major determinant of inward foreign direct investment into East Africa and this indicates that the fluctuated exchange rate policy adopted by the East Africa countries increases the inward of foreign direct investment in these countries.Therefore,the policy makers and responsible authority should continue to adopt effective policy measures so as to attract more foreign investors.Labor force is positive and significant that means the workforce of these countries includes both the employed and the unemployed are key determinants in attracting FDI to the East Africa.