Abstract

Oman’s economy is greatly reliant on oil as a main source of income. On the other hand, diversification of economic activities needs enhancement in the technological infrastructure of the country to have positive effect on economic growth (gross domestic product GDP). Foreign direct investment (FDI) is considered a major source of economic growth. This paper tries to describe and analyze broad literature to find out the proper variables to explain the foreign direct investment from time series data. Based on the intricate linkage between FDI and growth, many other variables are explained like export and employment. The effectiveness of the government along with supporting policy framework makes Oman as gorgeous destination of FDI, which has an assenting spillover and considerable impacts over time through energetic effects on economic growth. The paper uses multiple regression analysis to find out the level of FDI impact on economic growth in Oman. The paper exploits time series data to determine the impact of FDI on economic growth within the period of time from 1994-2014. The main sources of data are the official publications of the Central Bank of Oman, Ministry of Finance Reports, World Bank Reports, United Nations (UN) conference on Trade and Development (UNCTAD) and its World Investment Report, Journals, other Periodicals and the Internet. The findings state that, FDI has been revealed as steam engine of economic growth. Also there was a bidirectional association between FDI and GDP. The trend of causation ran from FDI to GDP and from GDP to FDI at the same time, but from FDI to GDP found to be stronger which enables to conclude that FDI cause GDP. Clearly, the huge prospective of FDI for speed up the rate of economic progress of Oman, cannot be exaggerated and it is recommended. Clearly, the huge prospective of FDI for speed up the rate of economic progress of Oman, cannot be exaggerated.