Foreign Direct Investment Spillovers: Evidence from Egypt, 2000-2020

Abstract: Foreign direct investment (FDI) is a crucial element of globalization; knowledge spillovers, increasing employment, and technology transfer through inward FDI promote economic growth. Egypt is the top FDI recipient in Africa, and empirical literature finds a positive correlation between FDI and economic growth in the country; however, there are limited academic discourses on the channels through which FDI positively affects the economy. The thesis investigates FDI spillovers in Egypt using FDI-led growth hypotheses and absorptive capacity theoretical insights. The following research question was analyzed through an exploratory mixed-methods approach; How have spillovers from inward foreign direct investment (FDI) contributed to Egypt's economic growth? The thesis indicates that there are infrastructural spillovers from FDI; however, considering the country's large amount of FDI, a more considerable amount of infrastructural-driven projects is expected. FDI has generated employment spillovers and potential for further job creation considering the sectors receiving the most investment. Evidence on technology spillovers is limited, yet there are more opportunities if the government promotes higher human capital development and policies that create incentives for FDI inflows. For Egypt to exploit FDI spillovers and increase its absorptive capacity, there is a need for lower corruption and further infrastructure development.