The Determinants of Foreign Direct Investment in Somalia

ABSTRACT
This study examines determinants of foreign direct investment (FDI) in Somalia, measured FDI inflow. Used time series data obtained from World
Bank and SESRIC for a period of 41 years that is 1970-2010. Augmented Dickey-Fuller test was used for the unit root test and ordinary least square
statistical technique was used to assess the degree of influence the variables have on each other. The results show a negative and significant relationship
in exchange rate and FDI, while, a positive and significant relationship is observed between inflation, external debt and domestic investment of FDI.
Also a negative but insignificant relationship is observed between lack of government and gross domestic product FDI. Therefore, there is need for
the government to retain tight monetary and fiscal policies in order to attract FDI. This study therefore recommends that central bank of Somalia
should control the fluctuations of the exchange rate in order to increase the FDI. Since the inflation is higher, the study also recommends having a
good government to recover the financial institutions that manage the monetary policy of Somalia.
Keywords: Exchange Rate, Foreign Direct Investments, Somalia
JEL Classifications: F21, F31