Foreign direct investment and public sector management and institutions: the Acquaintances in Sub-Saharan Africa (SSA) low-income economies

Abstract

This study examines the direct role played by governments of the SSA low-income countries to attract potential FDI inflows in their accountabilities as advocates of public sector management and institutions for poverty reduction. The study employs panel data for 24 SSA low-income economies over the period 2005-2015. Panel unit root tests by IPS and Fisher-ADF are applied to test for data stationarity thus furthering the conduct of panel cointegration analysis using Pedroni tests. Both tests confirm for data stationarity and long-run relationships. The major finding using GMM estimator reveals that public sector in SSA low-income economies negatively influence FDI inflows. This implies that public sector is plagued with lack of transparency, accountability and corruption in delivering public services. Thus, the authorities and policy makers in SSA lowincome economies need to undertake meticulous measures by strengthening public institutions that adhere to the rule of law, accountability for achieving human development, safety and fairness to general public. The failure of public sector instigates catastrophe for the survival of private sector and market mechanisms. Moreover, amiable regulations, rule of law and control of corruption are vital for public and private sectors to work together towards poverty alleviation.

Keywords: FDI inflows, poverty reduction, public sector management and institutions, SSA low-income economies