Ease of doing business and investment among West African countries

Abstract

This study assessed the link between ease of doing business (EBD) and investment among 11 selected countries in West Africa covering 2006-2020. The study used the fixed-effects estimator, the random-effects estimator, the augmented mean-group method, and the Half-Panel Jackknife Wald-type test.The study found a bidirectional relationship between the EBD and foreign direct investment (FDI) and a unidirectional relationship running from EBD to domestic investment. The findings further revealed that the EBD and national income have a strong influence in determining the level of domestic investment and FDI inflows, and that some indicators of EBD, such as the procedure for starting a business, access to credit facilities, tax, and security threats, discourage domestic investment and FDI inflows, in contrast to the influence of obtaining electricity and national income on investment. The study suggests that West African governments reduce taxes, ease the procedures and costs of starting a business and dealing with construction permits, and increase the availability of credit facilities at lower interest rates to promote investment in the region.domestic investment, ease of doing business, foreign direct investment, investment, West Africa | INTRODUCTIONSeveral economies rely on their level of investment to achieve economic and developmental goals. As explained by Keynes, national income rises when investment increases (Ono, 2011). This means that investment determines the growth and development of developing nations. It also helps in the transfer of technology and skills that accelerate the growth process in developing countries (Ho & Rashid, 2011). A higher level of investment also creates jobs and generates income that is spent and reinvested. Developing and underdeveloped economies in their developmental quest and process are becoming increasingly conscious of the fact that investment is a major stimulus to economic growth given the inadequacy of financial resources, technology, and skills. According to Ijirshar et al. (2019), investment improves the standard of living of citizens and drives economic growth. It is one of the major components in aggregate income analysis (Kukaj & Ahmeti, 2016). Anyanwu ( 2006) also shows the relevance of investment as an engine of economic growth for developing economies.