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

Ly Slesman ()
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Ly Slesman: Centre for Advanced Research (CARe), Universiti Brunei Darussalam

Malaysian Journal of Economic Studies, 2023, vol. 60, issue 2, 163-188

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.

Keywords: Foreign aid; sectoral aid; donors’ specific aid; foreign direct investment; post-conflict Cambodia; ARDL (search for similar items in EconPapers)
JEL-codes: F21 F35 O53 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:mjr:journl:v:60:y:2023:i:2:p:163-188

DOI: 10.22452/MJES.vol60no2.2

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