africa

Africa at a Fork in the Road: Taking Off or Disappointment Once Again?
Figure 23.3: Employment Effect of U.S. Foreign Direct Investment in Manufacturing
and Extractive Industries: Number of Employees per US$1 million
of Foreign Direct Investment Stock in US Foreign Affiliates Abroad
Source: Authors’ compilation based on Bureau of Economic Analysis data.
23.5 Determinants of FDI in non-extractive industries
Our discussion so far suggests that one of the challenges facing countries in SSA,
and in particular the oil-exporting countries in the region, is to find ways to attract
FDI in non-extractive industries. In analyzing this issue, it is important to note that
extractive-industry FDI is mainly driven by access to natural resources in host
economies (Asiedu, 2002). In contrast, non-extractive-industry FDI is sensitive to the
conditions in host economies—in particular, the size of the local market, quality of
physical infrastructure, productivity of the labor force, openness to trade, FDI policy,
and the quality of institutions. The differences in factors that drive natural resource
and non-natural resource FDI are evident in Asiedu and Lien (2011), who find that
democracy in host countries facilitates FDI in non-resource exporting countries, but
does not significantly affect FDI in resource-exporting countries. Also, according to
a survey conducted in 2007 by UNCTAD (2009), for MNCs in manufacturing and
services the most important location criterion is market size (while for MNCs in the
extractive industry the number one criterion is availability of natural resources in the
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