Are foreign investments more important for central African economies than domestic investments?

Abstract

This study aims at evaluating the effectiveness of Foreign Direct Investment (FDI) and Domestic Investment (DI) in the Economic and Monetary community of Central Africa (CEMAC) zone. The idea is that, to impel the structural changes in an optimal way and to allow positive developments within economies, it is necessary to know how FDI and DI, which are the permanent funding resources, act on regional economies. Using a Simultaneous Equation Model applied to average time series of CEMAC from 1999 to 2018, it appears that FDI, doesn’t have positive economic consequences for the economic development of CEMAC because of persistent structural weaknesses, while Domestic Investment seems to be an important catalyst. However, both effects can be improved by governments that have the mission to create an investment-friendly environment, promote joint ventures and to integrate policies relating to FDI as component of national or regional development strategies in order to maximize their profits.