Foreign capital towards SDGs 1 & 2—Ending Poverty and hunger: The role of agricultural production

Abstract

The Sustainable Development Goals of eradicating poverty in all its forms and ensuring zero hunger by 2030 remain among the main challenges facing humanity. Despite the high flows of foreign capital (foreign aids and FDI) and the importance of the agricultural sector in developing countries, the question that arises is why these countries still live in the vicious circle of poverty and food insecurity? To answer this question, we applied the three step-approach proposed by Baron and Kenny (1986) to demonstrate how foreign direct investment (FDI) and four types of foreign aids [social infrastructure aid (SIA), investment aid (IA), Non-investment aid (NIA), and agriculture-forestry-fishing aid (AFFA)] reduce poverty and ensure food security through the development of the agriculture sector. Using data for 50 developing countries over the period 1995–2015, we found, in the first step of this approach, that FDI and the four types of foreign aids have positive and statistically significant impacts on poverty reduction and food security, except for NIA, which has an insignificant impact on food security. In the second step, we found that FDI and only two types of foreign aids (SIA and AFFA) have positive impacts on agricultural production. In the third step, we found that agricultural production in developing countries played a mediating role between FDI, SIA, AFFA, and poverty reduction. It also explains the relationship between FDI, SIA, and food security. Accordingly, we can conclude that ending poverty and hunger in developing nations depends on the development of the agriculture sector, the inflows of FDI, and the composition of foreign aids given to the host countries.