Abstract:
Foreign direct investment (FDI) has various effects on economy of the host country. Especially, that in developing country. Theoretically, FDI also has spillovers on manufacturing industry. The objective of this study is to study the impact of foreign direct investment on labour productivity. The data used in this study mainly based on collecting by NSO during 1997-2003. Descriptive analysis is used to explain overall perspective of FDI transferred to the manufacturing. Multiple regression analysis (OLS) in used to analyze the impact on labour productivity. The finding of the model shows that the rate of change in labour productivity toward the rate of change in FDI causes the change in opposite direction. The rate of change in labour productivity toward the rate of change in capital intensity, firm size and labour quality cause the changes in same direction. Descriptive analysis also shows that manufacturing sub sectors with high capital intensity, large firm size and many skilled labours will have high labour productivity but there is no consistence between FDI and labour productivity. From this study, The government should reduce restricition of technology transfer in order to increase more benefit from FDI to manufacturing sector. Moreover, private sector should support labour training. These policies lead to increasing in labour productivity.