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  • Lombeh K

Analysis of Liberia's Foreign Direct Investment Inflows And Outflows



Foreign Direct Investment (FDI) is a critical element in the economic development of Liberia, contributing to the financing of the country's current account deficit and providing capital for investment in key sectors of the economy. FDI in Liberia is defined as direct investment equity flows in the reporting economy, and it includes equity capital, reinvestment of earnings, and other capital. It is associated with a resident in one economy having control or a significant degree of influence on the management of an enterprise that is resident in another economy. Ownership of 10 percent or more of the ordinary shares of voting stock is the criterion for determining the existence of a direct investment relationship.


An analysis of Liberia's FDI inflows from 2016 to 2021 reveals fluctuations in investment levels, with peak inflows observed in 2016 and a decline thereafter. Specifically, Liberia received FDI inflows of $0.31 billion (9.17% of GDP) in 2016, which declined to $0.05 billion (1.30% of GDP) in 2021. The most significant decline was observed between 2020 and 2021, with FDI inflows dropping by 47.47% from $0.09 billion (2.86% of GDP) to $0.05 billion (1.30% of GDP). Notably, the decline in FDI inflows coincides with the impact of the COVID-19 pandemic, which disrupted global investment flows and had economic implications for many countries, including Liberia​[1]


The sectoral distribution of FDI inflows in Liberia is influenced by the country's rich natural resources and investment opportunities in the mining, agriculture, fishing, and forestry sectors. Additionally, investments in specialized sectors such as energy, telecommunications, tourism, and financial services have been targeted by foreign investors.


The origin of FDI in Liberia is diverse, with investors from various countries contributing to the investment landscape. The influence of FDI on the Liberian economy is multifaceted, including its role in financing the current account deficit, contributing to employment generation, transfer of technology and management skills, and fostering economic diversification.


In summary, the analysis of Liberia's FDI inflows and outflows provides valuable insights into the country's investment climate, sectoral focus, and the impact of global economic events such as the COVID-19 pandemic on investment levels. As Liberia continues to seek ways to attract FDI and foster economic development, understanding the trends and dynamics of FDI will be essential in shaping policies that support investment and economic growth.


To obtain a more detailed and updated analysis of Liberia's FDI inflows and outflows, including specific countries of origin or destination, it is recommended to consult additional sources, such as the Central Bank of Liberia and the Ministry of Commerce and Industry of Liberia.


Foreign Direct Investment (FDI) plays a crucial role in the economic development of countries, and Liberia is no exception. An analysis of FDI inflows into Liberia over the years reveals fluctuations in the levels of investment, with both positive and negative trends observed.


In 2018, Liberia recorded foreign direct investment inflows of $0.13 billion. However, this figure saw a significant decline of 47.9% in the subsequent year, with FDI inflows amounting to $0.09 billion in 2019. Despite this drop, Liberia experienced a marginal increase in FDI inflows of 0.32% in 2020, reaching $0.09 billion. Nevertheless, this brief upward trend was short-lived, as FDI inflows to Liberia experienced a sharp decline of 47.47% in 2021, totaling $0.05 billion​1


A closer examination of the sectors attracting FDI in Liberia and the countries of origin or destination of these investments could shed light on the underlying factors driving these trends. Additionally, an assessment of the impact of FDI on Liberia's economy, including its contributions to economic growth, employment, and infrastructure development, could provide valuable insights into the role of foreign investment in shaping the country's economic trajectory.


Overall, it is evident that FDI inflows into Liberia have experienced considerable volatility, with periods of growth followed by periods of decline. Understanding the drivers of these changes and the impact of FDI on the country's economy is essential for developing policies and strategies that can enhance the attractiveness of Liberia as an investment destination and leverage FDI for sustainable economic development.


Foreign direct investment (FDI) is a significant source of capital for Liberia. In 2021, FDI inflows to Liberia totaled $0.05 billion, or 1.3018% of GDP (World Bank, 2022). The majority of FDI inflows into Liberia come from the United States, China, and the European Union.

FDI inflows have been increasing in recent years, driven by the country's natural resources, including iron ore, rubber, and gold. FDI has also been supported by the government's efforts to improve the business climate, including the passage of a new investment law in 2010.


FDI has had a positive impact on the Liberian economy. It has helped to create jobs, increase exports, and improve infrastructure. FDI has also helped to improve the country's image and attract more investment.


However, there are some challenges that need to be addressed in order to maximize the impact of FDI. These challenges include:

  • Infrastructure constraints. Liberia's infrastructure is underdeveloped, which can make it difficult for businesses to operate.

  • Corruption. Corruption can discourage investment and trade.

  • Uncompetitive business environment. Liberia's business environment is not as competitive as it could be. This can make it difficult for businesses to succeed in the global market.

Source

Liberia Foreign Direct Investment 1970-2023 | MacroTrends


World Bank (2022). Liberia Economic Update: Sustaining Recovery and Inclusive Growth. Washington, D.C.: World Bank.


African Development Bank (2022). African Economic Outlook 2022: The Path to Economic Transformation. Tunis, Tunisia: African Development Bank.


United Nations Conference on Trade and Development (2022). World Investment Report 2022: Investing in a Changing Climate. Geneva, Switzerland: United Nations Conference on Trade and Development.

 

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