Inclusive Social Policy and the Promise of FDI in Africa : Human Security Imperatives

This study underscores the essence of national social protection policies, in promoting investments that further the objectives of poverty reduction, as well as social inclusion. It provides answers and directions to the following questions: What are the contrasting impacts of foreign direct investment (FDI) in the presence of strong social policy and when social protection is absent? What constitutes the best institutional and economic framework for negotiating, cooperating and maximizing FDI with multinational corporations to promote inclusive and sustainable growth? The analytical construct for this study is based on the institutions framework and it establishes the role of socio-political institutions in attracting FDI while promoting social welfare. The study draws on a sample of African countries from the World Bank's Country Policy and Institutional Assessment dataset, which captures quality of policy performance of public sector institutions and policies for social inclusion inter alia. This data is complemented with relevant variables on FDI performance and potential as well as multidimensional poverty indicators. We find that though many African countries have low-FDI potentials, resource rich countries are attracting high levels of FDI. However, high FDI inflows do not necessarily commensurate with better living standards and in some cases, FDI has been accompanied with inequalities, low human development indicators, social and environmental costs. The study recommends that host countries should develop inclusive social policies and institutions to protect the poor and vulnerable, spreading the benefits of FDI so that it is profitable to all