The Impact of Foreign Investment on Capital Formation in Jordan during (2000-2009): A Case Study on Industry, Service, Agriculture and Construction Sectors

Abstract

This study aims at explaining the impact of foreign investment on capital formation in the private sectors of industry, services, agriculture and construction in Jordan during 2000-2009. To examine the hypotheses of the study, the present study resorted to four simple regression approaches. The study has revealed a positive relationship with statistical significance in between the Foreign Direct Investment (FDI) and the capital formation for the industrial sector, and between capital formations of the agriculture sector. This means that the foreign direct investment highly contributes to enhancing and reinforcing the economic activity and in supporting the economic development in Jordan. The study has also found that there is a positive relationship with statistical significance between foreign direct investment and capital formation of the construction sector, which means that foreign direct investment highly contributes to supporting the sector of estate and housing sector. This is attributed to the fact that it is a secure investment and it provides much more safety for the foreign investors. The study recommended taking care of the foreign investment, to explore new ways to generate new methods to enhance the capital formation in Jordan, to combat all the difficulties that challenge and hinder the national economy and provide a suitable environment that ensures the continuity of the foreign investment.

Key Words: foreign investment, capital formation, industry, services, agriculture, constructions, Economic development.