Effects of Foreign Direct Investment on Domestic Investment in CEMAC Countries

This study aims to evaluate the effect of FDI on domestic investment in the countries of the Central African Economic and Monetary Community (CEMAC). To achieve this objective, we used the Generalized Moment Method in a dynamic panel. The results obtained from the estimations, using Stata 12.0 software for the sample of six (06) countries in the CEMAC zone over the period 1996-2015, show that FDI has a crowding out effect on domestic investments. Furthermore, we find that these foreign investments marginalize the contribution of the non-extractive sectors to the economy in these countries. These results are robust to the different econometric techniques used. The efforts made by CEMAC countries to attract foreign investment should not obscure the need to stimulate domestic investment and make it dynamic. The results of this study explicitly reveal that FDI to underdeveloped countries, which specialize in the export of raw materials, contributes little to the transformation of the economic structure of these countries.