Foreign Direct Investment and Human Development in Cameroon

Abstract

The objective of this paper is to analyze the effect of net foreign direct investment revenues on human development in Cameroon through its Human Development Index (HDI). The data used are from secondary sources, ranging from 1995 to 2019, and are mainly from the 2018 World Development Indicator (WDI) and the United Nations Development Program (UNDP). For this reason, we have carried out, through the estimation of an auto-regressive distributed lagged model (ARDL), tests of the stationary (Dickey-Fuller Augmented) and of the co-integration of (Johansen), on the variables defined before appreciating the Vector Error Correction Model (VECM). The results are at two levels. In the long term, there is a positive relationship between the two variables, which is simply justified by the fact that trade opening strengthens access to larger markets and thus contributes to the HDI. This situation offers wider consumer ranges and it could likely, therefore, help to attract more multilateral companies; in the short term, however, the relationship between the two variables is negative. This may be primarily due to the fact that export revenues are not used in the context of human capital enhancement, or that the HDI is influenced by spending on education. The government’s priority should be to maintain and diversify its investments in social infrastructure and to encourage investments in labor-intensive sectors that benefit the poorest, such as agriculture, social, and infrastructure.