Introduction
The impact of foreign direct investment (FDI) on economic growth is a well-investigated issue by many economists over around the world especially in the developed countries, while it is less-studied especially in African countries. Foreign direct investment plays an important role in the performance of the economy as a whole. The FDI is expected to have spillover effects among all sectors in the economy of the host country, such as increasing the export of goods and services, importing advance technology, adopting new advanced production processes, decreasing the rate of unemployment by the job creation and increasing the fund and finance for the local investors. These spillover effects could be much higher in a particular business environment such as improved infrastructure stock, high level of human capital and developed financial sector .
The foreign direct investment inflows in Africa is the lowest comparing to other regions, even it increased in recent decades but still lower in the world [3]. Attracting more FDI flows to come-in the region needs more improvement in the business environment such as human capital and infrastructure to gain more advantages from the FDI spillover effects [4,5]. Business environment in African countries is inadequate, since the infrastructure stock and human capital are too low comparing to other regions (See doing business report 2013). Recent reports show that only 27% of African population has access to internet, 22% of African population is telephone subscribers, transportation cost in Africa is the highest in the world and access to electricity in Africa is the lowest in the world [3].
It is most important thing to understand the nature of the impact of FDI and business environment on economic growth. The recent studies are less-focused in African countries, for example [6–13] studied the relationships of interest in different regions, while the studies in Africa are quite rare. So it is very important to fill the gap in addressing this issue in Africa to help policy-makers to develop and introduce effective polices to grow the economy of the region. From this end, the aim of this study is to examine the relationships between foreign direct investment, business environment and economic growth.
The rest of the paper organized as follows. Section 2 literature review, Section 3 outlines our empirical strategy, which encompasses specifying an appropriate dynamic model, econometrics method and describes the various data sets that are utilized in the methodology. Section 4 reports and discusses the econometric results, reports robustness checks, makes comparisons to related literature. Finally, Section 5 summary and conclusion.
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