The Effect of Business Incentives on Foreign Direct Investments in Uganda: A case of Selected Investment Companies in Kampala Capital City Authority

Abstract

This work presents study findings on the effect of business incentives on Foreign Direct Investment in Uganda. The study was based on the following objectives; to examine the effect of fiscal incentives on attraction of foreign investment in Uganda, to assess the effect of infrastructure on attraction of foreign investment in Uganda and to establish the effect of regulatory incentives on attraction of foreign direct investment in Uganda. In total, 70 respondents participated in the study out of a sample size of 85 members from different investment companies. The study used both qualitative and quantitative techniques to collect and analyze data. Study findings revealed that fiscal incentives have the strongest effect on foreign direct investment (r= 0.822**; p-value=0.000), followed by infrastructural incentives (r=0.658**; p-value=0.000), and regulatory incentives(r=0.628**; p-value=0.000). The study concluded that fiscal incentives, infrastructural incentives and regulatory framework affect foreign direct investment. The study recommends that Uganda Investment Authority reduces the corporate tax rate to attract more investors to Uganda. In addition, recommends that the government should provide more support on worker training. The study further recommends that Uganda Investment Authority should promote transparency while providing investment incentives and ensure impartial system of courts and law enforcement to provide favorable investment climate for investors.