In the early 21 century many Chinese companies ranging from a small shop to medium size enterprises in various industries could be seen positioning themselves in various parts of Africa, and Cameroon in arriving to complement other multinationals from other investing countries like US, UK, France etc. that have been there to a lesser scale and or unnoticed and thus strengthening and ramifying their tentacle throughout various industries. It sounds interesting for one to see many Chinese people right at the sub urban settings and villages in Cameroon undertaking any imaginable economic activity from various industries. This has drawn in so many questions of various works of life and the impact and implication of FDI in Cameroon. The research proves that Chinese FDI has effective and efficient positive impacts on the Agriculture, Research and Development, Infrastructure, Producer Goods i.e. import and export to enhance other sectors. Mining and other areas that were not examine in this research. The implications of these investments to China and has boosted the import and export in these area to china and Cameroon. The relevance of these investment and Challenges faced by in Cameroon, basically, the FDI has a great impact on the employment innovation and research and development that edify the domestic country hence improve the growth of the domestic country.
CHAPTER ONE: GENERAL INTRODUCTION
1.1: BACKGROUND OF THE STUDY
The attraction of foreign direct investments (FDI) is one of the most pertinent strategies for developing countries to enhance capital formation and technology transfer in order to generate economic growth. Cameroon is not exception, as a developing economy, or emerging country is striving attracted significant FDI in the last decades pushed by fluctuations growth GDP rates and low-tech capabilities amongst other. In this perspective Chinese foreign direct investment spearheaded since the establishment of the diplomatic relations in 1976. The relevance or impact of the Chinese FDI on Cameroon’s economic performance and on the development of key industrial sectors makes up the main issues of this research. An attempt to quantify the determinants and impact of the FDI growth rate is pertinent. Different approaches to accomplish its relevance to the economies of Cameroon and to Chinese economy on the one hand.
Chinese investment in Cameroonian particular dates back to the era of establishing diplomatic relations with the fifty-four nations that makes up Africa. But the flow of china’s state owned as well as private companies witnessed a boom at the dawn of the twenty first century. The Chinese government has for the past decade increased the strategic investment in various sectors of the economy in Africa with Cameroon not left out from state owned investments to boosting support to the Chinese private owned companies employing various strategies to maximize their objectives and goals. Notwithstanding, the Chinese government has also not left the limping state of Cameroon with weak financial, humans and material resources to this regard, they promote support that could optimize the performance of various states companies in Cameroon. Strategically Chinese government has as a strategy to strengthen the human capital through various methods of training through joint investments transfer knowledge and on the job skill to strengthen Cameroon counterparts. To recap, the Chinese private as well as state owned companies invest in most of these sectors of activities in Cameroon such as; Oils and naturals gas exploration 19 % Rails/Roads rehabilitation 19.55% ,Other mining 10%, Hydroelectric dams 9.20%, Iron ore 7.40%, Copper 6.90%, Civil construction5.90%, Manufacturing 3.70%, Uranium 2.30%, Airport 2.0%, Aid 1.80%, Port construction1.60%, Water 0.50%, Retail and commercial activities 11.00, Gold 0.70%, Agriculture and others 4.02 % (Konings, P. 2007)
1.2: STATEMENT OF PROBLEMS
Notwithstanding fierce completion may be part is the effect of FDI to domestic firms, are there positive effects that FDI improves the local economy and how? Not undermining there are benefits and opportunities that the Chinese companies have impacted in Cameroon, there may be growing dissatisfaction and discontent among various stakeholders for the presence of Chinese companies in Cameroon, local Chinese workers at a limited extent to governments, local government, as well as the local African indigenes, communities to a greater magnitude. This is driven by fear of competition! Really it is vital to examine critically the relevance of Chinese FDI or Chinese firms to the economy of Cameroon. To this perspective, “It is unanimously agreed (review literature) that firms moves abroad to reap the benefits of the advantages in the form of location, firm-specific capabilities or and in the markets, with local firm capabilities there will be fierce competition that may limit the performance of the domestic firms. Irrespective of these potential challenges what the positive effect that FDI impact on the local or domestic economy in terms of the growth?”
1.3 RESEARCH QUESTIONS
This research seeks to answer the following research questions.
The main research question is a follow:
1. what is the relevance of Chinese FDI to growth of the receiving economy?
Specific research questions are as follow:
2. Does Foreign Direct Investment Accelerate Economic Growth in receiving economy?
3. How does China’s investment impact Cameroon growth and development
4. What are the challenges faced by Chinese companies in Cameroon?
5. Why is there misconception in Chinese companies doing businesses in Cameroon?
6. What are the effects of the Chinese companies in Cameroon?
Growth depends upon investments, be it internally or externally driven, increases assets and infrastructure development. Thus, Foreign Direct investment (FDI) in Cameroon economy shows that there is a good trend of investment which ultimately results in increasing firm growth and the ultimate domestic growth of Cameroon thus increasing trend of FDI increases the GDP of the receiving country, therefore Chinese FDI has a positive impact on Cameroons economic growth
1.5: OBJECTIVES OF THE STUDY
The research seeks to determine
1. The relevance of Chinese FDI inflow and its impact on GDP and Trade growth between the two economies.
In this perspective the research contributes to the literature by examining China’s investments in the context of a single country, thereby providing additional literature that could be used to optimize the efforts between the two economies in driving development.
Furthermore, this research seeks to add more light stakeholders and controversies surrounding Chinese investment in Cameroon and Africa in general and all those interested in exploring some truly fascinating issues that underlies China’s investments to Cameroon and Africa
1.6 SIGNIFICANCE OF THE STUDY
Chinese companies in Cameroon have some objectives, some of which are to impact the home economies, as well as are some challenges. Knowing these goals and challenges can help determine better ways to limiting these challenges and provide the solutions. It is very pertinent to acknowledge that these are objectives and challenges faced by Chinese companies. Going further to raise the real problems are a key to redress and optimize the main goals of the FDI and growth.
This also provides a means to communicating issues pertaining to the Chinese companies doing business in Cameroon in particular and Africa in general. It also helps induce the need for a faster and easier means to looking for solutions. In so doing provide each party to the challenge with first hand in formation, degree or the magnitude of the challenge as well as the views of other stakeholders.
Therefore, this work may be significant to the following stakeholder; Chinese investors, various state government, customers, environmentalist as well as the Chinese government.
Summarily the main objectives are to; the research envisages improving the understanding on the major impact of China’s investments in Cameroon and Africa as a whole. Compliment already existing literature on China’s investments to Cameroon This study could serve as a learning paradigm for stakeholders and actors when one looks at the controversy that surrounds China’s investments to these recipient countries.
1.7 DELIMITATIONS OF THE STUDY
This work will use exemplary Chinese companies investing in Cameroon. Further we use Cameroon as a focal point so as to have an impact in the research, which can provide credibility and to enhance the government wish to attract more FDI from china.
1.8 LIMITATIONS OF THE STUDY
This work is limited to Cameroon as stated above as opposed to the study of Chinese FDI in the entire Africa. It will also dwell only on one research question as opposed to the many questions that we have in the work. Furthermore, it is narrowed to a period of time from 1980-2016. Therefore, only one research question will be examined but due to time limits and resources, others could have been examined.
1.9 RESEACH METHODOLOGY AND STRUCTURE
The data is a time series data with Cameroon as country of study over 1980-2016. Time series data analysis can be defined as a suite of measurements occurred at (ordinarily- same-interval) systematic moment in time.
Further Regression analysis is an extremely important method that will be used in exploratory and confirmatory data analysis to investigate interactions between factors i.e. the interaction of Chinese FDI, Export, Import and inflation on economic growth in the receiving country Cameroon.
Figure 1:Structure of the thesis
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