Undergraduate Thesis of Zhejiang University of Finance & Economics
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Graduation Thesis of Bachelor’s
Degree
Title: Foreign Direct Investment Inflows and Economic
Growth in D.R.Congo
Name: MIENANDI MISSAMOU FARGIE VANEL
Registration number: 2015D206
Supervisor:
金星
( JIN XING )
School: Zhejiang University of Finance and Economics
Major: International Trade and Economics
Year: 2015–2019
Date: 04/16/2019
Undergraduate Thesis of Zhejiang University of Finance & Economics
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Undergraduate Thesis of Zhejiang University of Finance & Economics
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FOREIGN DIRECT INVESTMENT ON ECONOMIC
GROWTH
—The Case of Democratic Republic of Congo
Abstract: This Thesis Examines the dynamic of foreign direct investment (FDI) inflows and
economic growth in the Democratic Republic of Congo. The Thesis analyzes the policies and
strategies that have been implemented in D.R.Congo to boost the FDI inflows and economic
growth. The study also highlights some of the challenges and constraints faced by D.R.Congo
in attracting and retaining FDI inflows. The study finds that during the 1990s and the early
2010s, the FDI inflows in D.R.Congo were largely subdued due to unfavorable policies, such
as import substitution, protectionism, heavy state ownership, as well as state controls and
interferences in the markets. In particular, policies such as socialism and centrally planned
economies, which were aimed at protecting infant industries against foreign competition .
However, following the implementation of economic liberalization, privatization and
economic structural adjustment programs (ESAP) in the late 2010s and 2015s, there was a
remarkable increase in FDI inflows which resulted in faster economic growth .
Notwithstanding a remarkable increase in FDI inflows in recent years in D.R.Congo , there
are still a number of challenges faced by D.R.Congo . These include, social unrest and
political strife, which have ravaged this country’s Economy during the 1990s and 2010s. My
thesis will be focused on the growth brought by FDI in this Economy .
Key words : Foreign, Direct, Investment, Economic, Growth, D.R. Congo.
Undergraduate Thesis of Zhejiang University of Finance & Economics
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对外经济增长的直接投资
++刚果民主共和国的情况
,-
: 本论⽂研究了刚果民主共和国外国直接投资（FDI）流⼊和经济增长的动态。
论⽂分析了 D.R.Congo 实施的政策和战略，以促进外国直接投资流⼊和经济增长。
该研究还强调了 D.R.Congo 在吸引和保留外国直接投资流⼊⽅⾯⾯临的⼀些挑战和
制约因素。该研究发现，在 20 世纪 90 年代和 2010 年初，由于不利的政策，例如进
⼜替代，保护主义，重型国家所有权，以及国家控制和市场⼲扰，D.R.Congo 的外国
直接投资流⼊基本上受到抑制。特别是社会主义和中央计划经济等政策，旨在保护新
兴产业免受外国竞争。然⽽，在 2010 年和 2015 年后期实施经济⾃由化，私有化和
经济结构调整计划（ESAP）之后，外国直接投资流⼊显着增加，从⽽加快了经济增长。
尽管近年来 D.R.Congo 的外国直接投资流⼊显着增加，但 D.R.Congo 仍然⾯临着
许多挑战。这些包括社会动荡和政治纷争，这些都在 20 世纪 90 年代和 2010 年期间
蹂躏了这个国家的经济。我的论⽂将侧重于外国直接投资在这⼀经济中带来的增长。
./0
:
外国，直接，投资，经济，增长，刚果民主共和国.
Undergraduate Thesis of Zhejiang University of Finance & Economics
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Contents
1.Introduction …………………………………………………………………..……..…6
1.1.Background………………………………………………………………………..….6
1.2.Statement of the questions ………………………………………………………..….8
1.3. Framework ………………………………………………………………………..…9
1.4. The contribution of this study ………………………………………………….….…11
2.Literature review…………………………………………………………………………12
3.General overview of FDI and growth in DRC. …………………………………………23
3.1.Origin of FDI …………………………….…………….…………………….……….23
3.2.Evolution of FDI …………………….………………………………………………23
3.3.Sectoral distribution of FDI flows entering DRC…………………………….…..…..25
3.4.Economic growth in DRC ……………………………….………………….…..…..26
3.5.Relation Between FDI And Economic Growth ………………………………..…..27
4.Assessing the effects of FDI on the growth of DRC……………………………..…….30
4.1Hypothesis …………………………………………………………………….………30
4.2.Method of estimation and presentation of variables ………………………….………30
4.3.Results of econometric estimation ……………………………………..……..………33
4.3.1.Stationarity of studied series……………………………………………..…………33
4.3.2.Brief presentation of the requirements of simultaneous equation models …………..33
4.3.3.Application of double least squares to DRC data ……………………………..……34
5.General conclusion…………………………………………………………….………..41
References 43
Acknowledge 45
Undergraduate Thesis of Zhejiang University of Finance & Economics
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1.Introduction
The advent of globalization has favoured the integration of economies and the distances that
paralyzed trade between States are increasingly overcome. New ways of financing growth
have emerged with the expansion of international financial flows. All developing countries
are now competing fiercely for foreign direct investment (FDI). In the 1950s and 1960s,
foreign direct investment was viewed with some suspicion by some developing countries. FDI
was seen as a factor of dominance, and multinational firms were suspected of reducing social
welfare through the manipulation of price transfers and the formation of economic enclaves.
Today, there is a radical change in the attitude of developing countries towards foreign direct
investment. Suspicion behaviour was now replaced by a promotion policy aimed at attracting
substantial flows of FDI. This change of attitude has been partly made possible thanks to an
abundant economic literature on the merits of foreign direct investment.
Indeed, several specialists (Caves, Dunning, Graham and Krugman, Moran, Lall, etc.) give
FDI an important place in economic development. The arguments put forward are: foreign
direct investment flows can increase capital formation and job creation, FDI can provide the
host country with special resources such as know-how in management, skilled labour, access
to international networks of production and distribution, FDI can promote manufacturing
exports, finally and most importantly FDI can lead to technology transfer and diffusion of
positive externalities.
1.1. Background
The Democratic Republic of Congo, a vast market in the heart of Africa, land with multiple
opportunities, offering abundant labor, qualified and cheap has been engaged since 2010 on
the path of stability and growth in opting for economic liberalism.
Faced with macroeconomic imbalances, the considerable rise in indebtedness and insufficient
liquidity to finance the various long-term development projects, the country has proceeded to
Undergraduate Thesis of Zhejiang University of Finance & Economics
the establishment of mechanisms to ensure freedom of trade and industry to create a favorable
climate for attracting foreign investors. Thus the transitional government, which included
representatives of several unarmed opposition political parties and representatives of civil
society, was formed in June 2013 with a mandate. to govern the country for two years or until
the next elections. The political situation has improved since the end of the war and the
medium-term challenge of the government was to create an environment that supports the
expansion that comes from the private sector and who takes advantage of its potential and its
large reserves of resources. To this end, the medium-term program of the authorities aims to
consolidate macroeconomic stability; increase production efficiency; develop public
institutions and capacity; put in place policies to strengthen the rule of law and justice; and
invest in the social sector to reduce poverty. The Executive Board of the IMF, commenting on
the 2015 IMF country report, acknowledged that “the transitional government has made
