Foreign Direct Investment: The Role of Foreign Capital in Zambia and Botswana
The purpose of the this research is to empirically investigate the relationship between Foreign Direct Investment and Economic Growth in Botswana and Zambia with economic growth being seen through an expansion in trade as well as Gross Domestic Product for the respective countries from 1990- 2000. The motivation for the investigation of the presence of foreign investments and the relationship they have to economic growth is a result of debates within the field of economics regarding the role that foreign investments play in a economy. Scholars [Moral, Graham, Blomstrom, 2005 & Rothberg, 1989] have explored the topic with some focusing on statistical evidence [OL' 1922, Hou 1965] whil others provide the theoretical frameworks through which foreign investments have been viewed [Rothgeb, 1996]. Ol's approach provides the best framework of analysis for the relationship between foreign investments and economic growth. The Statistical approach analyzes data during a specific time for a particular country and extrapolates from the data whether the host country experienced economic growth as reflected through the various indicators such as an increase in production in the industry that received the foreign capital or on a more macro-level an overall increase in GDP. 1990- 2000 is a perfect timeframe for looking at Botswana and Zambia because the years represent a time in which the world was viewed to be relatively flat and becoming smaller in the sense that capital moved at a faster rate and was voluminous [Friedman, 2005]. As a consequence, the level of capital flows would be expected to be high since the world was becoming less regulated in terms of capital flows and most countries were taking on a liberal view of economic theory and were opening up.