Impact of the greenfield-foreign direct investment on the economic growth of Afghanistan

Abstract

Afghanistan is a least developed country; during the liberation, about three-fourths of the economy was ruined, and over the past two decades, the country has geared up a slight economic growth. The study's objective is to assess the impact of greenfield foreign direct investment on the economic growth of Afghanistan during the interval 2002-2021. The research also investigates the effect of remittances, foreign aid, and population. In this study, the stationarity of all variables is checked via the Augmented Dickey-Fuller test (ADF). The results were analysed with ARDL and ECM techniques. The results show that greenfield investment and remittances are statistically significant in the short and long run. Foreign aid is insignificant in the short and long run. The population is insignificant in the long run but significant in the short run. First, the government of Afghanistan improved its friendly investment policy to attract foreign investors. Second, the government of Afghanistan signed an agreement with neighbouring countries, especially developed countries, to send their skilled and educated labour so they will easily earn their livelihood and send remittances to their families. Third, the government of Afghanistan should avoid foreign aid that may affect its economy in the short term.