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Does Foreign Aid Promote Foreign Direct Investment in Post-conflict Cambodia?

Author

Listed:
  • Ly Slesman

    (Centre for Advanced Research (CARe), Universiti Brunei Darussalam)

Abstract

Post-conflict Cambodia has experienced a significant increase in foreign aid and foreign direct investment (FDI) inflows since the early 1990s. This paper investigates whether (aggregate, donor-specific, and sectoral-based disaggregate) foreign aid has any short- and long-run crowding-in effects on FDI inflows using autoregressive distributed lag (ARDL) bound test for cointegration over the 1992–2018 post-conflict period. Robust findings reveal that aggregate development aid and ‘donor-specific’ aid from Australia and United Nations Development Programme (UNDP) crowding-in FDI in the long run. Donor-specific aid from the EU, the US, Japan and France, and sectoralbased ‘governance aid’ and ‘other aid’ either have non-robust positive or no significant long-run effects on FDI. In the short run, however, only EU-aid and other-aid have crowding-in effects on FDI. Foreign development aid can catalyse FDI inflows in postconflict Cambodia, especially in the long run.

Suggested Citation

  • Ly Slesman, 2023. "Does Foreign Aid Promote Foreign Direct Investment in Post-conflict Cambodia?," Malaysian Journal of Economic Studies, Faculty of Business and Economics, University of Malaya & Malaysian Economic Association, vol. 60(2), pages 163-188, December.
    • Handle: RePEc:mjr:journl:v:60:y:2023:i:2:p:163-188
    DOI: 10.22452/MJES.vol60no2.2
    as

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    More about this item

    Keywords

    Foreign aid; sectoral aid; donors’ specific aid; foreign direct investment; post-conflict Cambodia; ARDL;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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