The Effect of foreign direct investment on economic development in Egypt

Foreign Direct Investment (FDI) plays a vital role in supporting the economic development of developing countries such as Egypt, especially in light of the persistent need to bridge the gap between domestic savings and the investment levels required to achieve sustainable growth. This research aimed to analyze and measure the impact of FDI on Egypt’s economic development during the period 2000–2023, with particular emphasis on examining the nature of the relationship between FDI and domestic investment—whether it is complementary or substitutional. The study relied on official annual data and employed econometric analysis tools, specifically a multiple linear regression model estimated using the Ordinary Least Squares (OLS) method. The findings revealed several important results. First, there exists a positive complementary relationship between FDI and domestic investment in Egypt; a 1% increase in FDI leads to a 0.92% rise in domestic investment. Second, according to the t-tests, domestic savings and the economic growth rate were identified as the most influential variables explaining changes in domestic investment at the 5% significance level. Although the FDI coefficient was not individually significant, the overall analysis still confirmed the presence of a complementary relationship. Finally, the results indicated a positive relationship between exports and domestic investment, as a 1% increase in exports contributes to a 0.65% rise in domestic investment. This finding reflects the relatively diversified structure of Egyptian exports compared to certain rentier economies.