Governance-driven synergies between foreign direct investment, renewable energy capacity, and economic growth

Malawi is diligently advancing its energy infrastructure while concurrently attracting foreign direct investment (FDI) to foster economic growth. In this regard, comprehending the interaction between investments in renewable energy capacity and FDI inflows, with particular emphasis on governance, becomes imperative. This study is framed within the global transitions towards sustainable energy and regional endeavours to modernise infrastructure, rendering the investigation both pertinent and substantial. The study seeks to examine the correlation between Malawi’s renewable energy capacity and FDI inflows, to stimulate economic growth. The study utilised data spanning from 1990 to 2023 and employed an autoregressive distributed lag (ARDL) model to assess the short-run and long-run impacts on gross domestic product (GDP). Results suggest that a 1 per cent increase in renewable energy output correlates with a 32 per cent increase in GDP in Malawi, whereas a percentage increase in FDI correlates with a 20 per cent increase in GDP. In the short term, the results indicate a speed of adjustment of approximately 134 per cent to achieve equilibrium within the economic model. The study concludes that investing in renewable energy substantially enhances Malawi’s attractiveness to foreign investors and bolsters economic growth, recommending that the government prioritise these investments to synchronise energy policies while attracting external capital.