TITLE:
Harnessing Foreign Direct Investment and Regulatory Quality to Transform the Resource Curse into Economic Growth in the East African Community
AUTHORS:
Niyongabo Carmel, Xinyue Qiu, Tenglong Zhong
KEYWORDS:
Resource Curse, FDI, Regulatory Quality, FE AR(1), GMM, OLS, 2SLS, Economic Growth, EAC
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.15 No.1,
January
31,
2025
ABSTRACT: The analysis of natural resources for economic growth is well-documented in the literature. However, previous studies have often pointed out the potential of FDI and regulatory quality to either make the resource curse worse or mitigate it. The objective of this study fills a gap observed in the literature by seeking to delve deeper into this complex interplay by focusing specifically on how the quality of regulation and FDI can mitigate the resource curse when each interacts with natural resources in the EAC. The main models used are the OLS and 2SLS methods, based on panel data covering a long period: from 1996 to 2022. Aside from these, some other approaches are used, like FE without AR(1) specifications and GMM, to check results and assure the stability of findings. The empirical results first confirm the resource curse; second, when FDI and regulatory quality are combined with natural resources, the negative impact of natural resources on GDP growth can be reversed to bring out the resource blessing in EAC countries. The paper suggests that the EAC countries should strengthen the regulatory frameworks that ensure transparency and sustainability in the management of their resources. By attracting strategic FDI and promoting economic diversification, these countries can transform natural resource wealth into sustainable growth.