Investigating FDI linkages in developing countries

Foreign investment into Uganda has been increasing in recent years. However, the extent to which this investment is yielding significant returns for the local economy is uncertain. To date, there is little known about the differential performance and impact of foreign firms in Uganda, and therefore limited evidence from which to design policies to make the most of Foreign Direct Investment (FDI).

This project aims to fill this gap by leveraging firm-to-firm transaction level Value Added Tax data and combines this with a novel dataset on FDI firms in Uganda. This project will shed light on the foreign investment in Uganda by examining:

1. The differential performance of FDI firms in Uganda, in terms of employment, revenue, local sales, exports, and suppliers.
2. The extent to which FDI firms are integrated into the local economy in terms of supplier inputs and indirect employment, how this is changing over time, and how this compares with standard measures of FDI linkages (constructed based on the sector-level input-output table).
3.  In what ways sourcing patterns of FDI firms differ from those of domestic firms.
4. Potential ‘priority sectors’ for supplier development programmes.

This project complements similar analysis conducted by members of the research team in Costa Rica. We will compare findings between Uganda and Costa Rica to examine commonalities and differences in FDI sourcing behaviour and employment.