The World Bank's contribution to fighting poverty in Zambia through the promotion of foreign direct investment(FDI) from 199 to 2009: A critical examination

Abstract

This study provides a critical analysis of the World Bank’s contribution to fighting poverty in Zambia through the promotion of foreign direct investment (FDI) from 1999 to 2009 through its specialized institutions. Although the World Bank does not directly promote foreign direct investment (FDI), it provides the foundation to ensure that foreign direct investment happens. It facilitates an enabling business environment to reduce the cost of doing business. It also helps the macroeconomic stability which is the basis and essence of promoting foreign direct investment. Therefore, the promotion of foreign direct investment is either direct or indirect through various institutions of the World Bank by giving grants, credits, loans and technical assistance. The discussion in this dissertation is mainly focused on the projects and activities that have been funded by the International Development Association (IDA) and the International Finance Corporation (IFC). Both secondary and primary data were collected under the study, mainly focused on four specific objectives. These were: examining the extent of technical and financial assistance given by the World Bank to promote foreign direct investment in Zambia, identifying and examining any foreign investors that invested in Zambia through the assistance of the International Finance Corporation and its contribution to employment creation, comparing financial and technical assistance given by the International Finance Corporation to local and foreign investors and lastly analysing changes in poverty levels from 1999 to 2009 in Zambia. The analysis of changes in poverty levels from 1999 to 2009 was included in this dissertation to contrast with the level of investment inflows in the Zambian economy and determine whether the investment inflows received had contributed to poverty reduction based on the conceptual and operational definitions of poverty and foreign direct investment introduced in this dissertation. For the survey component, 32 key informants were purposively selected from 16 institutions. Two key informants from each institution consisting of top management were interviewed by the researcher using a structured interview guide and secondary data was collected from official documents, such as books, reports, articles, periodicals, publications and relevant internet materials from verified sources. The key informants were drawn from institutions that included the World Bank Office in Zambia, selected key government ministries, statutory bodies and the private sector to make the findings of the research more comparable. The key findings in the study generally were that the World Bank Group had contributed significantly towards the promotion of foreign direct investment, as a means of fighting poverty as evidenced by the number of projects and activities implemented during the period 1999 to 2009. However, the analysis on changes in poverty levels showed that poverty in Zambia was still high despite the large inflows of foreign direct investment especially in the rural areas. Most rural areas lacked infrastructure, access to markets and financial resources, as revealed from data collected.