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Digital Subscriptions > Cities Today > The State of African Cities 2018 > Chapter 5 Infrastructure Networks and Foreign Direct Investment

Chapter 5 Infrastructure Networks and Foreign Direct Investment

Liberia. Road transport in western Africa is slower and more expensive compared to other regions because of insufficient infrastructure
Cairo has a network of roads connecting it to other cities and attracts large volumes of FDI

Access to good infrastructure is considered to be one of the major factors guiding the investment decisions of multinational enterprises (MNEs). Therefore, this study explores to what extent Africa’s road infrastructure networks determine FDI attraction, with an emphasis on the Lagos-Abidjan (L-A) Corridor in Western Africa. This is done by means of a space syntax methodology, which measures a city’s road connectivity and regional integration.

According to the World Economic Forum (2015), strong and well-developed physical and virtual infrastructure networks enhance economic competitiveness and productivity. Such networks serve as a pull factor for FDI and foster global economic integration. Africa is the least integrated continent in the world, with comparatively low levels of inter- and intra-regional economic exchange, and has the least share of global trade of all major regions in the world. Integration can be facilitated by investments in infrastructure that, together with a stable economic outlook and good domestic institutions, will attract FDI. Conversely, insufficient and low-quality infrastructure impedes investment and economic integration both by raising transaction costs and by limiting access to local and international markets (Rehman et al., 2011).

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About Cities Today

The State of African Cities 2018 is published by IHS-Erasmus University Rotterdam and UN-Habitat in partnership with the African Development Bank. The aim of the report is to contribute to development policies that can turn African cities into more attractive, competitive and resilient foreign direct investment (FDI) destinations. Attracting global FDI is highly competitive and crosses various geographic scales, therefore regional cooperation by cities and nations is critical. But FDI is not a panacea since it has both positive and negative effects and careful choices need to be made by cities in their pursuit of FDI, if it is to lead to inclusive economic growth. This report aims to provide guidance on these choices and to facilitate understanding of the complexity of global investment in Africa.