International Journal of Management Sciences and Business Research, Oct-2016 ISSN (2226-8235) Vol-5, Issue 10

The spectacular growth of FDI flow over the world has consistently become an attractive subject. FDI is considered an important element to fill the gap in job creation and promotion, and knowledge transfer to the host country. Recently however, policies and accompanying incentives to attract FDI have become questionable. This paper has considerably reviewed available literature on FDI and juxtaposed how organizations in Madagascar can benefit from FDI inflow. This research is considered descriptive in nature and made use of secondary. The interdependencies between FDI and OD were econometrically analyzed in using data on Madagascar within the period 1980 to 2015 (inclusive), Data was mainly assessed from INSTAT and Madagascar Central Bank, while other parts were collected from the website of the World Bank and other research papers and magazines. OLS was used in analyzing the data collected and the findings show strong relationship between FDI and OD, but the interdependency between the two variables are marginally significant. KeywordsFDI, OD, Economic growth, OLS Introduction The challenges of the 21 st century cannot be wholly surmounted by a single country, relying only on domestic resources. Total dependence on domestic resources cannot assure an economy of the needed growth in organizations if these organizations can plunge into global prominence. It has been largely agreed that FDI has immensely contributed to economic growth of countries which have received them, in spite of the burden it seems to bring to local economies due to possible capital flight The past decades have witnessed spectacular growth of FDI in the global economic landscape. In recent times, it has shown to claim to bring more benefits than international trade, or even world output. However according to the fragility of the global economy, so thus FDI flows performance, slowdown or speedup. World Bank (2013) points out that FDI has grown 17% per year on average over the last 10 years, even when accounting for dramatic decline after Global Financial Crisis. In 2014 however, according to UNCTAD, FDI inflow to developing countries reordered 4% higher than 2013 but total global FDI inflows dropped by 8%. It also noted that previously, FDI flow has only moved from developed countries to developed countries. It still occupied a huge part of FDI flow even later on when they were opened up to developing countries. As a matter of fact, FDI flow to developing countries continuously increased. FDI flow to developing countries was reordered greater than that of developed countries in 2012, according to UNCTAD. Available information further shows FDI flow to developed economies declined by 14% in 2014 while developing countries reached a new high of 5% higher in 2014. It should be noted that the United States has been considered the world’s first largest recipient of FDI, from 2013; it gave way to China (with continuous increase of 3% since 2014). However among the top five FDI recipients in the world, three of them are developing economies. In spite of this remarkable economic phenomenon, developing Asian, African and Latin American countries remain faltered but this can be explained by high price of principal commodities export in these countries. Figure 1. FDI inflows: global and by group of economies from 1995 to 2015 (Billions of US dollars)