Determinants of Foreign Direct Investment (FDI) Inflow to the Agricultural Sector in Sudan (2005 – 2015)

Abstract

Sudan has a fertile agricultural land, large amount of fresh water and variety of animal resources. This beside it’s distinguishable geographic location in Africa. Nevertheless Sudan is characterized by low per capita income and high dependency ratio, therefore, savings is very low in both public and private level which is constraining capital formation and economic growth, so foreign direct investment is needed to bridge the wide domestic investment- gap, but the foreign direct investment is affected by economic determinants, investment climate and doing business environment. The study aims to describe the foreign direct investment in Sudan during (2005-2015), estimate the share of agricultural sector from foreign direct investment ,estimate the effect of some economic determinants in the inflow of foreign direct investment and determine the constrains facing the inflow of foreign direct investment .The study focused on some economic determinants affecting foreign direct investment which include domestic market size, infrastructure, exchange rate, economic stability and electricity and water as well as investment climate. The investment climate is the set of location – specified factors shaping the opportunity and incentives for the firms to invest, create jobs and to expand. The average rate of FDI inflow in agricultural sector to Sudan as the data has shown was 966.3 million SDG. during period (2005- 2015). The maximum amount of FDI for agricultural sector was 326.8 million SDG. in the year 2012, but the minimum size was in 2005 and it was 38.9SDG. To test the economic determinants of FDI to agricultural sector in Sudan, a regression model was formulated . The adjusted R is 0.32 which means that the variables included in the model explained 32% of the inflow of FDI to agricultural sector in Sudan during the period of the study (2005-2015). The other variables are related to doing business environment which are not included in the model strongly affect the inflow of FDI to agricultural sector in Sudan as indicated by the results of the regression and analysis. Although, the variables are very important but there are difficulties in obtaining them. These variables include the ownership of agricultural lands, cost of production, security, political instability, legal and legislative laws and regulations