The effect of mining foreign direct investment inflow on the economic growth of Zimbabwe

Goche o, Plaxedes; Boopen, See anah A icle The e ec o mining o eign di ec in es men in low on he economic g ow h o Zimbabwe Jou nal o Economic S uc u es P o ided in Coope a ion wi h: Pan-Paci ic Associa ion o Inpu -Ou pu S udies (PAPAIOS) Sugges ed Ci a ion: Goche o, Plaxedes; Boopen, See anah (2020) : The e ec o mining o eign di ec in es men in low on he economic g ow h o Zimbabwe, Jou nal o Economic S uc u es, ISSN 2193-2409, Sp inge , Heidelbe g, Vol. 9, Iss. 54, pp. 1-17, h ps://doi.o g/10.1186/s40008-020-00230-4 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/261601 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen (insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en, gel en abweichend on diesen Nu zungsbedingungen die in de do genann en Lizenz gewäh en Nu zungs ech e. Te ms o use: Documen s in EconS o may be sa ed and copied o you pe sonal and schola ly pu poses. You a e no o copy documen s o public o comme cial pu poses, o exhibi he documen s publicly, o make hem publicly a ailable on he in e ne , o o dis ibu e o o he wise use he documen s in public. I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h ps://c ea i ecommons.o g/licenses/by/4.0/ The e ec o mining o eign di ec in es men in low on heeconomic g ow h o Zimbabwe Plaxedes Goche o1* and See anah Boopen2 1 In oduc ion Fo eign di ec in es men (FDI) is c ucial o de eloping na ions like Zimbabwe. I is e y impo an o indus ial de elopmen because i p o ides a unique combina ion o long- e m inance, echnology, aining, echnical know-how, manage ial expe ise and ma ke ing expe ience. Acco ding o Hill (2011), i is a way o exploi ing long- e m p o i oppo uni ies in a o eign ma ke apa om expo ing and licensing. In di ec in es - men , he in es o pa icipa es in he con ol and managemen o such business en u e which is ou side he in es o ’s coun y (Dunning and Lundan 2008).Fo eign i ms se up plan s o supply he hos coun y`s ma ke as well as he hos na ion`s neighbo ing coun ies. Fo eign i ms can also in es in o he coun ies o he sake o supply chain con ol (Demi han and Masca 2008). Manu ac u ing companies ha e a g ea desi e o con ol he low o ma e ial om supplie s, h ough he alue-adding p ocesses and dis- ibu ion channels, o cus ome s. FDI c ea es an oppo uni y o de eloping coun ies o educe dependence on o eign aid which helps in boos ing so e eign y agains dono policies. Howe e , FDI may also ha e a nega i e e ec which is he eason why some go e nmen s o de eloped coun ies p e e ee mo emen o capi al and pu e o s on es ic ing he en ance o o eign in es men (Zilinske 2010). These nega i e e ec s Abs ac The s udy employs he au o eg essi e dis ibu ed lag (ARDL) app oach o examine he ela ionship be ween o eign di ec in es men (FDI) in he mining sec o on he Zimbabwe economy, while con olling o bo h non-mining FDI and domes ic in es - men . Using da a o e he pe iod 1988–2018, his esea ch esul s show ha o eign di ec in es men in he mining sec o has a signi ican posi i e ela ionship wi h he coun y’s GDP in he long un. Mining FDI is e ealed o ha e ela i ely highe e ec s as compa ed o FDI in non-mining sec o and domes ic in es men . The sho - un analy- sis obse ed ha mining FDI as well as non-mining and domes ic in es men s ill has posi i e and signi ican impac s on g ow h bu a a ela i ely lowe ex en . This implies ha i akes some ime o such in es men s o ha e hei ull e ec on he economy. Keywo ds: Fo eign di ec in es men in low, The Zimbabwean mining sec o Open Access © The Au ho (s) 2020. This a icle is licensed unde a C ea i e Commons A ibu ion 4.0 In e na ional License, which pe mi s use, sha ing, adap a ion, dis ibu ion and ep oduc ion in any medium o o ma , as long as you gi e app op ia e c edi o he o iginal au ho (s) and he sou ce, p o ide a link o he C ea i e Commons licence, and indica e i changes we e made. The images o o he hi d pa y ma e ial in his a icle a e included in he a icle’s C ea i e Commons licence, unless indica ed o he wise in a c edi line o he ma e ial. I ma e ial is no included in he a icle’s C ea i e Commons licence and you in ended use is no pe mi ed by s a u o y egula ion o exceeds he pe mi ed use, you will need o ob ain pe mission di ec ly om he copy igh holde . To iew a copy o his licence, isi h p://c ea i eco mmons .o g/licen ses/by/4.0/. RESEARCH Goche oand Boopen Economic S uc u es (2020) 9:54 h ps://doi.o g/10.1186/s40008-020-00230-4 *Co espondence: goche [email protected] 1 Open Uni e si y o Mau i ius, Redui , Moka, Mau i ius Full lis o au ho in o ma ion is a ailable a he end o he a icle Page 2 o 17 Goche oand Boopen Economic S uc u es (2020) 9:54 include inc eased inancial isks, o eign exchange a es c ises, ans e s o obsole e and di echnologies which a e su e ed by de eloping coun ies (Djoko o and Dzeha 2012). A ican go e nmen s ha e ied o de elop policies ha encou age inwa d FDI lows. Despi e e o s by A ican go e nmen s, FDI lows o he con inen con inue o decline. Uni ed Na ions Con e ence on T ade and De elopmen (UNCTAD) Wo ld In es men Repo (Wo ld In es men Repo 2017) s a es ha FDI lows o A ica ell by 3 pe cen om $61 billion in 2015 o $59 billion in 2016, bu wi h a iance ac oss egions and coun ies. This o e all decline o FDI lows o A ica is la gely a esul o weak commod- i y p ices. In A ica, many de eloping coun ies had a ge ed 2015 as he yea by which he millennium de elopmen goals (MDGs) we e o ha e been achie ed; howe e , mos de eloping coun ies ac oss Sub-Saha an A ica ha e missed he a ge lea ing hem despe a e o signi ican le els o o eign in es men s o hem o es o e hei ea lie economic s a us. The belie is ha mos o hese de eloping coun ies a e lagging behind o he simple eason o no ha ing adequa e esou ces o inance long- e m in es men s which is a huge se back o economic g ow h (Uni ed Na ions, MDGs Repo 2015). G ow h e ec s o FDI di e om coun y o coun y because o economic, poli ical and social di e ences ac oss hese de eloping coun ies. Zimbabwe1 like o he de el- oping coun ies in A ica has ecei ed FDI o i s de elopmen and is s ill s i ing o a ac his impo an esou ce low. I is a ac ha Zimbabwe has expe ienced se i- ous sho ages domes ic in es men o und c i ical inpu s in he a ious g ow h induc- ing sec o s o he economy, mining sec o included du ing he pas decades, and i is belie ed ha FDI has been o c i ical suppo o he economy. This implies ha ecei ing o eign capi al and in es men enables Zimbabwe o make in es men s in human and physical capi al as well as exploi a ion o oppo uni ies ha o he wise could no be used o de elopmen . I is no ewo hy ha since independence in 1980 and ill 1991, he go e nmen o Zimbabwe was qui e de ensi e is-a- is o eign in es men , and each p oposal was sub- jec ed o ca e ul sc u iny and o eign in es o s we e equi ed o ge pe mission om he Fo eign In es men Cen e o he de elopmen o any new en e p ise in he coun y. In 1991, al hough he e was some e isions o hose egula ions, he emphasis on indi- geniza ion s ill emained s ong. Poli ical u bulence and he go e nmen ’s de iance o he IMF in he la e 1990s inc eased in es o isk signi ican ly and subsequen ly, o eign di ec in es men lows was b ough o a s ands ill. Indeed, in 1998, FDI eached o e $444 million and by 2001, FDI in low ell hea ily o $5.4 million. FDI lows eco e ed since 2008 due o he so-called p ocess o economic no maliza ion and he enhancemen o he coun y’s business clima e, al hough FDI emained a unde hei po en ial. In 2018, o al FDI s ock s ood a USD 5.4 billion and ep esen ed 20.8% o he GDP. The FDI in lows inc eased signi ican ly o USD 745 million in 2018, compa ed o p e-c isis pe iod and 2017 (USD 349 million), acco ding o he UNCTAD’s 2019 Wo ld In es - men Repo . In e es ing o no e om his epo is he ac ha FDI is cu en ly mainly 1 Due o a long d ough , Zimbabwe’s economy slowed down in 2016, bu i eco e ed in 2017 (2,8% o GDP) hanks o excep ional ag icul u e e u ns. In 2018, he economy pe o med be e han expec ed, eco ding a 3.5% GDP g ow h, d i en by ag icul u e, suppo ed by ela i ely peace ul elec ions. Fo he nex couple o yea s, g ow h is expec ed o inc ease and each 4.2% in 2019 and 4.7% in 2020. Page 3 o 17 Goche oand Boopen Economic S uc u es (2020) 9:54 in he mining sec o ,2 in as uc u e, he wood indus y heal hca e, wa e and sani a ion, inancial se ices, ou ism, manu ac u ing, and ag icul u e. China is he i s in es o in Zimbabwe. Russia, I an and India a e also impo an in es o s in he coun y. The mining sec o o Zimbabwe’s emains a key d i e o sus ainable economic de el- opmen . Indeed, his sec o con ibu es a lo o expo s as well as ha ing c ucial in e - linkages wi h o he sec o s o he economy. FDI in he mining sec o is c i ical o ca ying ou mine al explo a ion, ex ac ion, p ocessing and ma ke ing because Zimba- bwe lacks enough capi al and echnological esou ces o inance such capi al in ensi e la ge-scale p ojec s (Chimuka 2007). I is no ewo hy ha in 2017, he sec o con ib- u ed abou 10% o GDP and 60% o expo s which is a e y signi ican con ibu ion o GDP (Go e nmen o Zimbabwe 2017). This s udy, hus, aims a examining he e ec o o eign di ec in es men in lows in he Zimbabwean mining sec o on coun y’s economic pe o mance o e he pe iod 1988– 2018. I also akes in o accoun FDI in non-mining sec o and domes ic in es men , p o iding addi ional compa a i e insigh s. The esea ch employs dynamic ime se ies eg ession, namely an ARDL amewo k o model he dynamic FDI–g ow h nexus, while also analyses bo h he sho - and long- un g ow h e ec s o mining FDI. The es o he pape is o ganized as ollows: Sec .2 p o ides a b ie e iew o he li - e a u e, Sec .3 dwells in o he me hodology and analyses he esul s o he eg ession es ima es while Sec .4 concludes. 2 Li e a u e e iew 2.1 Theo e ical li e a u e one ec s o  o eign di ec in es men onhos coun y ingene al FDI has g own bo h in ela ion o ade and in absolu e e ms in he las wo decades due o globaliza ion (Wo ld Economic Fo um 2013). I is e y impo an because i is a majo sou ce o ex e nal inance ha enables coun ies wi h limi ed amoun s o capi al like de eloping coun ies o bene i by ecei ing unds om weal hie coun ies. I is impo - an in ans e ing skills and echnology om he de eloped coun ies o hos coun ies (Be ge and Diez 2008). Howe e , he e ec o FDI on ans e o echnologies and skills has been inconclusi e al hough i is belie ed o be sou ces o echnology ans e s ound in di e en pa s o he wo ld (Fo d e al. 2008). FDI is ega ded a supe io sou ce o cap- i al because o i s las ing p ospec s as well as mul iple pu poses when compa ed o o he p i a e capi al sou ces. I has become he la ges componen o ne esou ce lows o de eloping coun ies since 1994. Adding o he p o ision o new capi al, he e a e many channels h ough which FDI can boos g ow h a es o example FDI is accep ed as a means o inco po a e new knowledge om ab oad. This new knowledge is bene icial o hos coun y as hey imi a e, lea n and inc ease compe i ion in local ma ke . Theo y o he TNCs s a es ha mul ina ional co po a ions ha e echnology ad an ages o e local i ms ha ou weigh he cos o doing business in ex e nal ma ke s (Rug a and Hansen 2011). I o e s a long- e m commi men compa ed o o he o ms o inancial in lows like po olio equi y lows. 2 The coun y has a e y ich na u al po en ial (second la ges ese e o pla inum and ch ome; diamonds, coal, gold, pla inum, coppe , nickel, in). The o al numbe o p ojec s app o ed by he Zimbabwe In es men Au ho i y o he pe iod 2016–2018 is, espec i ely, 54 (USD 160m), 60(USD 577) and 135 (USD 1382). Page 4 o 17 Goche oand Boopen Economic S uc u es (2020) 9:54 Al hough FDI is gi en c edi o posi i e impac on human capi al o ma ion in hos coun y, he e is ano he side o i . Ma xis poli ical and economic heo y iews T ans Na ional Co po a ions (TNCs) as an ins umen o impe ialis domina ion. The Ma x- is ega d TNCs ins i u ions ben on making p o i , epa ia ing i o home coun y and hese TNCS nei he in end o ans e echnology o hos coun y no play any ole in employmen c ea ion (Ku ishi-Kas a i 2013). TNCs could b ing obsole e and di y echnology was he a gumen o Djoko o (2012). Ou da ed obsole e machine y would be ine icien and inding spa e pa s o such machine y would be di icul . Fu he , di echnologies con ibu e signi ican ly o en i onmen al pollu ion and deg ada ion lead- ing o unsus ainable de elopmen , hence de ea ing he ini ial pu pose o he mo e ha is o a ac FDI (Chambe o Mines 2009). Acco ding o Mencinge (2008), TNCs some imes hinde he g ow h o indigenous i ms and monopolize ma ke s because hey a e mo e powe ul. While ini ial e ec s o FDI on hos coun ies balance o paymen a e usually posi i e in he long un, balance o paymen is nega i ely a ec ed because o subsequen ou low o ea nings and di es - men s as well as inc eased impo s o in e media e goods and se ices. To con ol his, some coun ies es ic o limi p o i epa ia ion by imposing axes and sanc ions. The ex en o which o eign owned i ms bo ow om domes ic ma ke educes he bene i s o FDI (Sal a o e 2007). Fo eign i ms bo ow om domes ic ma ke esul ing in c owding ou o local domes ic in es men as a esul o inc eased in e es a es. This inc eases he isk o epa ia ion o unds bo owed (İpek and Kizilgöl 2015). Nega i e e ec s o excessi e bo owing a e ha he en u e becomes mo e isky ending up wi h hos coun y and no he TNC ca ying he isk o he en u e (Sal a o e 2007). This si ua ion can esul in he TNC ge ing easie exi in di icul imes in which case FDI is made mo e oo loose. FDI could b ing inapp op ia e esou ces, asse s and p ac ice o hos coun y. TNCs also a ec indus y ela ions nega i ely and could own o e en unde mine he so e eign y o he hos coun y. Mos li e a u e p omo es he idea ha FDI is bene icial o hos coun ies ( o example, Mou a 2010). De eloping coun ies a e encou aged o y and acqui e FDI and po olio equi y in lows o s imula e long- e m g ow h chances a he han limi hemsel es o na ional sa ings (Wo ld Bank 2017). As a esul , many go e nmen s ha e encou aged FDI in lows and y as much as possible o gi e incen i es. This shows ha he gene al belie is ha he posi i es ou weigh he nega i es when de eloping coun ies such as Zimbabwe decide on FDI issues. Mo eo e , despi e he con adic o y a gumen s, he need o FDI is ising g adually. Coun y le el and c oss coun y s udies ha e come up wi h mixed indings on he e ec s o FDI on hos coun y and canno be gene alized om coun y o coun y o egion o egion. This impac is a unc ion o many ac o s like mic oeconomic en i onmen , poli ical s abili y and many o he ac o s (Mou a and Fo e 2013). Bene i s o o eign di ec in es men s in hos coun y also include enhancemen o compe i i e business con ibu ion o in e na ional ade in eg a ion and imp o emen o en e p ise de elopmen (Kas a i 2013; Al a o 2017). Apa om economic bene i s, FDI is bene icial o hos coun y by imp o ing he en i onmen and social condi ion in he hos coun y h ough b inging in/ eloca ing cleane echnology as well as guid- ing he hos coun y o mo e socially esponsible coope a e policies. These bene i s Page 5 o 17 Goche oand Boopen Economic S uc u es (2020) 9:54 con ibu e o economic g ow h which leads o he alle ia ion o po e y in hese hos economies, Al a o (2017). Measu ing wi h accu acy, he economic e ec s o FDI a e no an easy ask since bene i s a y om coun y o coun y, and hence di icul o sepa a e and measu e. In mos cases, he assessmen o he de elopmen e ec s o FDI is done ollowing wo app oaches, econome ic analysis o he ela ionship be ween inwa d FDI and he nume ous aspec s o TNCs impac s o quali a i e analysis o he a ious aspec s o TNCs e ec s (UNCTAD 2009). The e is a g oup o heo ies ha p o ide he a ionale o he e ec o FDI on economic g ow h called he FDI nexus (Helphman and G ossman 1991). An example is ha he mode n endogenous g ow h heo y shows ha long- un economic g ow h o an econ- omy can esul om mo e open libe alized go e nmen policies conduci e o FDI in lows. Capi al highly inc eases e u ns o scale such ha changes in FDI in lows can be an impo an means o long- un economic g ow h in de eloping coun ies. The o he g oup o heo ies a emp s o ela e heo e ical conside a ion o he impac o FDI on he en i onmen in de eloping coun ies. This g oup is known as he FDI en i onmen nexus (Copeland and Taylo 1994; Po e and Van de Linde 1995). Examples a e he pollu ion ha en model [Copeland and Taylo (2003) and he Po e ’s hypo hesis, Po e and Van de Linde (1995)]. 2.2 Empi ical li e a u e one ec s o  o eign di ec in es men 2.2.1 E ec o FDI andhos coun y economic g ow h Economic g ow h can be achie ed when FDI enables employmen o people, b idging he gap be ween sa ings and in es men s as well as axes. Th ough axes, FDI enhances capi al o ma ion o he go e nmen and also de uses balance o paymen p essu e; echnical knowledge, ad ancemen and quali a i e imp o emen s in labo o ce a e also conside ed as impo an ac o s ha con ibu e o economic g ow h (Mou a and Fo e 2013; Knoe ich 2017). The ac o s ha con ibu e owa ds economic g ow h a e in e - dependen such ha p og ess in one ac o can acili a e ad ancemen in ano he . Poo pe o mance in one ac o can hinde p og ess o he ac o s. Fac o s such as hos coun- y capi al, human capi al, echnology, in as uc u e, ade and p oduc i i y a ec he e ec o FDI on economic g ow h o hos coun ies (Heliso 2014). Al hough FDI a ec s hos coun y’s economic g ow h, i seems ha de eloping coun- ies need o gain a ce ain le el o de elopmen in educa ion and o in as uc u e o be able o eap he po en ial bene i s ha come h ough FDI. S udies (Heliso 2014)ha e p o ed ha ce ain condi ions ha e o be me o he posi i e e ec s o be expe ienced. These condi ions o ac o s include, o example, he le els o human capi al, le els o educa ion, ade openness in he hos coun y as well as he abili y o abso b echnology by he hos coun y as al eady men ioned (Noo mamode 2008; Solomon 2011). Ea lie s udies by Khan (2007) ound ha he same amoun o inc ease in FDI gene a ed h ee imes mo e addi ional g ow h in inancially well-de eloped hos coun ies han coun- ies ha a e poo ly de eloped in e ms o inance. Al a o e al. (2007) con ibu ed o exis ing li e a u e ha emphasizes how local policies and ins i u ions may ac ually limi he po en ial bene i s ha FDI could p omo e o a hos coun y. They concluded ha , local condi ions such as he de elopmen o inancial ma ke s and educa ional le el o he coun y a ec s he impac o FDI on economic g ow h. They also ecommended ha Page 6 o 17 Goche oand Boopen Economic S uc u es (2020) 9:54 policy make s should exe cise cau ion when ying o a ac FDI ha is complimen a y o local p oduc ion. The issue o echnology has also been emphasized (Be ge and Diez 2008). The smalle he echnology gaps be ween he hos and he home coun y, he la ge he impac o FDI on economic g ow h. This implies ha coun ies ha a e less echnologically ad anced may, he e o e, ha e a limi ed FDI impac on economic g ow h (OECD 2002). Technol- ogy is impo an especially o small coun ies ha ely on expo pe o mance in o de o hem o imp o e hei expo composi ion. The s eng h o expo pe o mance o a la ge ex en depends on echnology (Sandua and Ciocanelb 2014). Apa om p omo - ing hos coun y’s g ow h h ough p oduc ion o new/ad ancemen echnology, FDI also enables he hos coun y o ha e a g ea e ou pu om any combina ion o inpu (OECD 2002). Empi ical s udies examining he FDI–G ow h nexus, using di e en da a and me h- odologies, ha e ound ha FDI ends o ha e posi i e impac s on economic g ow h (Kooja oenp asi , 2012; Melnyk e al. 2014; Mun ah e al. 2015; among o he s).O he s udies came up wi h con as ing esul s o he e ec ha FDI ends o ha e non-sig- ni ican o e en nega i e impac s on economic g ow h in hos coun ies (Ja o cik 2004; Ru anga and Kabe uka 2013). S udies on de eloped coun ies show posi i e e ec s in gene al, ye hose on de eloping coun ies a e usually inconsis en p oducing posi i e e ec s, nega i e e ec s o no e ec s (Beugelsdijk e al. 2008; Demissie, 2015). Noy and Vu (2007) applied sec o ial FDI in low da a o e alua e he sec o -speci ic impac o FDI on g ow h. The esul s exhibi ed ha , o he wo de eloping ansi ions economies China and Vie nam, FDI has a posi i e s a is ically signi ican e ec on eco- nomic g ow h ope a ing di ec ly and indi ec ly h ough i s in e ac ion wi h labo in hose sec o s. The esul s we e di e en ac oss economic sec o s wi h almos all ben- e icial impac limi ed o indus ial sec o . The o he sec o s appea ed o gain li le om he sec o -speci ic FDI and mining was concluded o be he leas bene icia y. As a gued by Fo aine (2003), he de e minan s and e ec s o such FDI need o be con ex ualized. Indeed, esul s p o ided by Noy and Vu (2007) a e a guably esul s om a coun y wi h low o ze o diamonds which is no anywhe e close o Zimbabwe which apa om ha - ing 38 o he mine als claims o ha e a qua e o he wo ld’s ge m and o be he hi d la ges p oduce o pla inum ollowing Sou h A ica and Russia, hence he need o seek a deepe insigh in o his deba e. Al a o e al. (2007, 2016) and Fasanya (2012) ecommended ha , o coun ies o e ec- i ely eap he bene i s o FDI, he e is a need o p ope economic planning ha c e- a es a heal h and enabling business en i onmen o encou age bo h o eign and local in es o s. P o iding incen i es o inno a ion and skills imp o emen ha con ibu es o compe i i e co po a e clima e has been p oposed by mos o he schola s who ha e s udied FDI and economic g ow h in any way. Howe e , wha mos o hem did no add ess is, which sec o hese policies should a ge a ques ion ha has been a emp ed by a ew esea che s (Vu e al. 2006; Khaliq and Noy 2007). Khaliq and Noy (2007) s udied he impac o FDI on economic g ow h in Indonesia in di e en sec o s using FDI da a om 1997 o 2006. Al hough he s udy concluded ha a agg ega e le el, FDI does ha e a posi i e e ec on he economic g ow h, a sec o ial le el, he e ec s o FDI and economic g ow h a y ac oss sec o s and ha e no agg ega e Page 7 o 17 Goche oand Boopen Economic S uc u es (2020) 9:54 e ec s. They also made simila obse a ions o hose o Noy and Vu (2007), in ha FDI in he mining sec o had nega i e e ec s on he economic g ow h. These esul s con- i med he a gumen ha ex ac i e FDI migh no enhance economic g ow h by Vu, e al. (2006) b inging doub o he expec ed gene al bene i s o FDI in lows. Moyo (2013) s udied he de e minan s o FDI in he pos dolla iza ion pe iod o 2009– 2012 using mon hly da a. The au ho used a mul iple eg ession model ha linked FDI as well as o he mac oeconomic a iables such as go e nmen expendi u e and p i a e sa ing o g oss domes ic p oduc . I should also be no ed ha he s udy was based only on mac o-FDI da a. Tha da a we e based on he whole na ion and no sec o s which is he scope o his s udy. The s udy concluded ha FDI o eign di ec in es men had a signi ican posi i e impac on economic g ow h in he coun y. The e a e models which sugges ha FDI leads o p omo ion o economic g ow h only unde ce ain condi ions. Mou a and Fo e (2013) s udy concluded ha he e ec s o FDI on economic g ow h a e dependen on exis ing o subsequen ly de eloped in e nal condi ions o he hos coun y’s economic, poli ical, social, and cul u al which is in line wi h he eclec ic heo y o Dunning (1993). They main ain ha local au ho i ies ha e a ole o play o achie e he desi ed e ec s and i is he go e nmen s ha should design policies ha a e app op ia e o a coun y o enjoy he posi i e e ec s o FDI and mi i- ga e he nega i e e ec s. Mou a and Fo e (2013) a gues ha he local au ho i ies ha e o be p oac i e abou a ac ing and di ec ing FDI i he a ious sec o s o he economy a e o bene i om i , a con ibu ion which was di e en om hose by o he schola s men ioned ea lie . Hong (2014) employed GMM o e-e alua e he e ec o FDI on he economic g ow h in China and he ele an ac o o FDI du ing he pe iod 1994–2010, based on dynamic panel da a om 254 p e ec u e-le el ci ies in China. The esul s we e ha FDI exe posi i e impac on he economic de elopmen . I was u he epo ed ha economies o scale, human capi al, in as uc u e le el, wage le els, egional di e ences in e ac ac i ely wi h FDI and p omo e economic g ow h in China, while he openness o ade does no induce FDI signi ican ly. Hong (2014) also concluded ha i is likely ha FDI has c owded ou he domes ic capi al and le he domes ic capi al and huge o eign exchange ese es wi h he p oblem o a ional usage. Maliwa and Nyambe (2015) sub- sequen ly s udied he impac o FDI on economic g ow h in Zambia. They used da a om Wo ld Bank de elopmen indica o s 1980–2012. The indings we e ha FDI does no g ange cause economic g ow h in Zambia. The implica ion was ha unless he Zambian go e nmen conside s e o ming policies, FDI will no se e as he p elude o he desi ed economic g ow h. Zeka ias (2016) analyzed he impac o FDI on Economic g ow h in 14 Eas e n A ica coun ies by employing 34yea s (1980–2013) panel da a, using dynamic GMM es ima- o s a e checking o au oco ela ion and model speci ica ion es s. The indings con- i m ha FDI is a key de i e o economic g ow h and a ca alys o economic condi ional con e gence in Eas e n A ica; so, he sub- egion needs o a ac mo e FDI by imp o - ing in es men en i onmen , s eng hening egional in eg a ion, de eloping human cap- i al and basic in as uc u e, and p omo ing expo -o ien ed in es men . Baka i (2017) also in es iga ed he ela ionship be ween domes ic in es men and economic g ow h in Malaysia. Annual da a o he pe iods be ween 1960 and 2015 we e es ed using Page 8 o 17 Goche oand Boopen Economic S uc u es (2020) 9:54 Co ela ion analysis, Johansen coin eg a ion analysis o Vec o E o Co ec ion Model and he G ange -Causali y es s. Resul o he analysis p o ed ha he e is a posi i e e ec o domes ic in es men , expo s and labo s on economic g ow h in he long un; howe e , he e is no ela ionship be ween domes ic in es men and economic g ow h in he sho - un e m. A summa y o he li e a u e shows ha no much empi ical s udies ha e been ca ied ou on he e ec s o sec o ial, pa icula ly o he mining sec o , o eign di ec in es - men in low on he economic g ow h. Neglec ing sec o ial s udies on e ec s o FDI migh be he explana ion as o why some economies a e ye o eap he ull ui s o FDI. Mo eo e , exis ing s udies ha e in gene al igno ed he issue o dynamism, an elemen which emain c ucial in he FDI–g ow h modeling. 3 Me hodology andanalysis 3.1 Concep ual amewo k The concep ual amewo k is based on an augmen ed Cobb Douglas model oo ed in he endogenous g ow h heo y. Indeed, om he basic Cobb Douglas model, he ou pu le el o he coun y is dependen on capi al and labo . The capi al componen in ou case is b oken down in o domes ic and FDI, wi h FDI u he seg ega ed in o Mining and Non-mining FDI, allowing us o es ima e he e ec o Mining FDI which is o in e - es o his s udy. Mo eo e , he Cobb Douglas model is ex ended o include a ew o he de e mining ac o s o g ow h such as educa ion, openness le el and inancial de elop- men . Simila app oach has been used by Khada oo and See anah (2008), Mou a and Fo e (2013), See anah and Tee oo engaum (2019) in hei s udies o economic g ow h. I is o be no ed ha he ocal poin o his s udy is o assess he e ec o FDI in he min- ing indus y on he coun y’s g ow h. Capi al is, hus, disagg ega ed in o domes ic and FDI in he i s ins ance, and subse- quen ly FDI is decoupled in o mining and non-mining capi al. The esul ing p oduc ion speci ica ion is: The Cobb–Douglas unc ion is bo h homo he ic and s ongly sepa able. Y deno es he economy’s ou pu , A is he shi in he p oduc ion unc ion a ibu ed o echnical p og ess, which is assumed o be isk neu al, K is he domes ic in es men , L is labo , FDIM is he FDI in he mining sec o , and FDINM is he FDI in he non- mining. In such a se -up, an inc ease in his capi al aises ou pu h ough i s posi i e e ec on he ma ginal p oduc i i y o capi al and labo . The impo ance o FDI has been discussed ea lie in he pape . The Cobb–Douglas p oduc ion unc ion has a numbe o con enien p ope ies. The pa ame e s o he explana o y a iables measu e he elas ici ies o ou pu . The pa am- e e A may be ega ded as an e iciency pa ame e , since o ixed inpu s K and L, he la ge is A, he g ea e is he maximum ou pu ob ainable om such inpu s. Equa ion(1) is linea ized by applying na u al loga i hm on bo h sides. By allowing a s ochas ic dis u bance e m o en e he p oduc ion echnology, he ollowing log-linea eg ession equa ion is ob ained om Eq.(2). (1) Y = A (K )β1(FDIM )β2(FDINM )β3(L )β4. 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