Harnessing Foreign Direct Investment for Local Development? Spillovers in Apparel Global Value Chains in Sub-Saharan AfricaCornelia Staritz / Stacey Frederick
Wien, December 2016
At the beginning of the 2000s, the introduction of the African Growth and Opportunity Act contributed to a boom in foreign direct investment (FDI) in the Sub-Saharan African (SSA) apparel industry. The possibility of exploiting the spillover potential of this FDI raised significant hopes of developing a locally-embedded SSA apparel export industry. The paper explores the level and nature of FDI spillovers and the factors supporting and constraining them focusing on three of the leading SSA apparel exporter countries - Kenya, Lesotho, and Swaziland. We find that despite significant investments to attract FDI, there are very limited spillovers to local firms and industries. In addition to domestic absorption capacity, the potential for and the nature of FDI spillovers is importantly determined by the strategy of foreign investors and the governance of global value chains (GVCs).