Foreign Investment and State Conflicts in Africa

Abstract

Abstract:Rates of foreign direct investment (FDI) to Africa are increasing, yet little is known about how this will affect the political environment. One possibility, explored here, is that increasing levels of FDI within developing states will incentivize state conflict activity. Using an instrumental strategy, we show that in states with a low regard for civil liberties, or with unhealthy economies (i.e. states with a cash deficit), increased access to investment is associated with a higher number of conflict actions by the state. We argue that access to investment can push regimes into using violent strategies to secure their internal environment and to ensure their survival, specifically in their engaging in conflict against opposition and armed combatants. This underscores the need for extensive monitoring of state behavior following the receipt of investment, similar to the oversight of conditional aid.

Does Foreign Direct Investment Encourage State Militarization and Reduce Societal Security? An Empirical Test, 1980–2017

“…This study addresses concerns about the effects of foreign direct investment on armed conflict. Some argue that the connection between FDI and conflict, particularly in Africa, occurs because cash-strapped governments can use FDI to securitize rather than reform (Kishi, Maggio and Raleigh 2017). Using a global sample, this study tests these propositions directly by estimating the effects of FDI (inflows and stocks) on measures of state militarization; namely, military spending and the size of the armed forces.…”

“…While this logic is certainly operating in the civil war domain, the logic of political survival could drive rulers to take short term economic losses for longer-term political gain. A recent article on FDI and armed conflict in Africa provides an interesting proposition about how state dependence on FDI may increase the risk of armed violence (Kishi, Maggio and Raleigh 2017). The theoretical starting point harkens back to what one might call a dependency perspective because they suggest that states dependent on outside sources of unconditional financing are likely to be weak and motivated to please foreign sources of finance.…”

“…These older debates are repackaged in the newer globalization debates, where even orthodox economists have begun to argue that transnational capital makes it harder for governments in the poor world to act in the interests of their communities, perhaps not because of too much FDI but because open borders make capital more "footloose," shifting bargaining power away from states (Rodrik 2011, Stiglitz 2002. Using a recent study published by Kishi, Maggio and Raleigh (2017), who find that FDI increases state securitization, this study reexamines this question by examining the effect of FDI directly on the degree of state militarization defined as military spending and the size of the armed forces. If FDI, which is a badly-needed source of capital encourages wasteful militarization, then its net effect might indeed be harmful, and poor countries would be well advised to shun TNCs.…”

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Scholars debate the effects of foreign direct investment (FDI) on poor societies. Apparently, FDI could embolden governments to securitize rather than reform, an argument put forth recently by Kishi, Maggio and Raleigh (2017) who supply evidence within a sample of Sub Saharan African countries showing that FDI increases the number of conflict events. This study takes a critical view of their argument on conceptual and methodological grounds.

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Tracing the Distribution of Chinese and World Bank-Funded Projects and Public Demonstrations in Cameroon and Uganda

“…Carter, 2016) and peace (e.g. De Ree and Nillesen, 2009; Grossman, 1992; Kishi et al, 2017) in Africa, there is a dearth of literature on the effects of Chinese official finance due, at least in part, to the relatively more recent emergence of (and scarcity of reliable data on) Chinese official finance as a major source of external financial assistance to Africa.…”