Are abundant natural resources in the Democratic Republic of the Congo a blessing or curse?
DOI:
https://doi.org/10.22219/jibe.v8i01.30330Keywords:
Congo, economic growth, FDI, institutional quality, natural resourcesAbstract
This study investigates how natural resources and institutional quality (IQ) impact the economic growth of the Democratic Republic of the Congo (DRC). Based on data annually from 1985 to 2022 using ordinary least squares regression the findings highlight that human capital development, inflation, foreign direct investment (FDI), oil rents, forest rents, political instability, conflict, and corruption significantly hinder the country's economic progress. This suggests that despite its abundant natural resources, the DRC faces more economic challenges than benefits from them. As a result, the study recommends stringent monitoring and oversight of mineral revenue management, establishment of stable political conditions, and aggressive measures to combat corruption and conflict. These actions are crucial in transforming the current curse of natural resources into a potential blessing for the country.
Downloads
References
Abdulahi, M. E., Shu, Y., & Khan, M. A. (2019). Resource rents, economic growth, and the role of institutional quality: A panel threshold analysis. Resources Policy, 61, 293-303. https://doi.org/10.1016/j.resourpol.2019.02.011
Acemoglu, D., & Robinson, J. A. (2012). Why nations fail: The origins of power, prosperity, and poverty. Crown Business.
Adams, D., Adams, K., Ullah, S., & Ullah, F. (2019). Globalisation, governance, accountability, and the natural resource ‘curse’: Implications for socio-economic growth of oil-rich developing countries. Resources Policy, 61, 128-140. https://doi.org/10.1016/j.resourpol.2019.02.009
Afolabi, J. A. (2023). Natural resource rent and environmental quality nexus in Sub-Saharan Africa: Assessing the role of regulatory quality. Resources Policy, 82, 103488. https://doi.org/10.1016/j.resourpol.2023.103488
Ampofo, G. K. M., Cheng, J., Asante, D. A., & Bosah, P. (2020). Total natural resource rents, trade openness and economic growth in the top mineral-rich countries: New evidence from nonlinear and asymmetric analysis. Resources Policy, 68, 101710. https://doi.org/10.1016/j.resourpol.2020.101710
Asamoah, L. A., Mensah, E. K., & Bondzie, E. A. (2019). Trade openness, FDI, and economic growth in sub-Saharan Africa: Do institutions matter? Transnational Corporations Review, 11(1), 65-79. https://doi.org/10.1080/19186444.2019.1578156
Asiamah, O., Agyei, S. K., Bossman, A., Agyei, E. A., Asucam, J., & Arku-Asare, M. (2022). Natural resource dependence and institutional quality: Evidence from Sub-Saharan Africa. Resources Policy, 79, 102967. https://doi.org/10.1016/j.resourpol.2022.102967
Asif, M., Khan, K. B., Anser, M. K., Nassani, A. A., Abro, M. M. Q., & Zaman, K. (2020). Dynamic interaction between financial development and natural resources: Evaluating the ‘Resource curse’hypothesis. Resources Policy, 65, 101566. https://doi.org/10.1016/j.resourpol.2019.101566
Australia, G. (2018). Australia's identified mineral resources 2017.
Auty, R.M. (1995). Economic Development and the Resource Curse Thesis. In: Morrissey, O., Stewart, F. (eds) Economic and Political Reform in Developing Countries. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-13460-1_4
Aziz, O. G. (2018). Institutional quality and FDI inflows in Arab economies. Finance Research Letters, 25, 111-123. https://doi.org/10.1016/j.frl.2017.10.026
Badeeb, R. A., Lean, H. H., & Clark, J. (2017). The evolution of the natural resource curse thesis: A critical literature survey. Resources Policy, 51, 123-134. https://doi.org/10.1016/j.resourpol.2016.10.015
Banzouzi, J. M. K., Atsamekou, C. S. A., & Etoka-Beka, A. S. (2022). Effects of Chinese FDI on Congolese Exports. Theoretical Economics Letters, 12(6), 1608-1623. https://doi.org/10.4236/tel.2022.126089
Brander, J. A., Cui, V., & Vertinsky, I. (2017). China and intellectual property rights: A challenge to the rule of law. Journal of International Business Studies, 48, 908-921. https://doi.org/10.1057/s41267-017-0087-7
Christian, M. N (2023). Determinants of Inflation in the Democratic Republic of Congo: An Application of ARDL Modelling. https://doi.org/10.51505/IJEBMR.2023.7718
Ciulla, G., & D'Amico, A. (2019). Building energy performance forecasting: A multiple linear regression approach. Applied Energy, 253, 113500. https://doi.org/10.1016/j.apenergy.2019.113500
Collier, P., & Hoeffler, A. (2005). Resource rents, governance, and conflict. Journal of Conflict Resolution, 49(4), 625-633. https://doi.org/10.1177/0022002705277540
Conrad, J. M., Greene, K. T., Walsh, J. I., & Whitaker, B. E. (2019). Rebel natural resource exploitation and conflict duration. Journal of Conflict Resolution, 63(3), 591-616. https://doi.org/10.1177/0022002718755853
Danysz, O. A. (2021). The Impact of Country-Specific Contextual Factors on the Outcome of Section 1502 of the Dodd-Frank Act Regulating Conflict Minerals in the Democratic Republic of Congo.
De Rosa, D., & Iootty, M. (2012). Are natural resources cursed? An investigation of the dynamic effects of resource dependence on institutional quality. An Investigation of the Dynamic Effects of Resource Dependence on Institutional Quality. World Bank Policy Research Working Paper, (6151).
Dramani, J. B., Abdul Rahman, Y., Sulemana, M., & Owusu Takyi, P. (2022). Natural resource dependence and economic growth in SSA: Are there threshold effects? Development Studies Research, 9(1), 230-245. https://doi.org/10.1080/21665095.2022.2112728
Eissa, M. A., & Elgammal, M. M. (2020). Foreign direct investment determinants in oil exporting countries: Revisiting the role of natural resources. Journal of Emerging Market Finance, 19(1), 33-65. https://doi.org/10.1177/0972652719880153
Ellefmo, S. L., Søreide, F., Cherkashov, G., Juliani, C., Panthi, K. K., Petukhov, S., ... & Snook, B. (2019). Quantifying the unknown: marine mineral resource potential on the Norwegian extended Continental shelf. Nordic Open Access Scholarly Publishing. https://doi.org/10.23865/noasp.81
Flatt, C., & Jacobs, R. L. (2019). Principle assumptions of regression analysis: Testing, techniques, and statistical reporting of imperfect data sets. Advances in Developing Human Resources, 21(4), 484-502. https://doi.org/10.1177/1523422319869915
Frankel, J. A. (2010). The natural resource curse: A survey. NBER Working Paper Series, No. 15836. https://doi.org/10.3386/w15836
Galli, N., Chiarelli, D. D., D'Angelo, M., & Rulli, M. C. (2022). Socio-environmental impacts of diamond mining areas in the Democratic Republic of Congo. Science of The Total Environment, 810, 152037. https://doi.org/10.1016/j.scitotenv.2021.152037
Gulley, A. L. (2022). One hundred years of cobalt production in the Democratic Republic of the Congo. Resources Policy, 79, 103007. https://doi.org/10.1016/j.resourpol.2022.103007
Gustafsson, M. T., & Scurrah, M. (2019). Strengthening subnational institutions for sustainable development in resource-rich states: Decentralized land-use planning in Peru. World Development, 119, 133-144. https://doi.org/10.1016/j.worlddev.2019.03.002
Hassan, A. S., Meyer, D. F., & Kot, S. (2019). Effect of institutional quality and wealth from oil revenue on economic growth in oil-exporting developing countries. Sustainability, 11(13), 3635. https://doi.org/10.3390/su11133635
Ibrahim, R. L., & Ajide, K. B. (2021). The dynamic heterogeneous impacts of nonrenewable energy, trade openness, total natural resource rents, financial development, and regulatory quality on environmental quality: Evidence from BRICS economies. Resources Policy, 74, 102251. https://doi.org/10.1016/j.resourpol.2021.102251
Jianguo, D., Ali, K., Alnori, F., & Ullah, S. (2022). The nexus of financial development, technological innovation, institutional quality, and environmental quality: evidence from OECD economies. Environmental Science and Pollution Research, 29(38), 58179-58200. https://doi.org/10.1007/s11356-022-19763-1
Kabundi, K. (2019). The effect of government expenditure on economic growth in the Democratic Republic of the Congo: A time series analysis from 1960 to 2016. International Journal of Economics and Finance, 11(12), 115-129.
Kalombo, A. M. (2022). Strategic Natural Resources and Sustainable Development in DR Congo: Perspectives on Interests and Confrontation between Actors. International Journal of Innovation and Applied Studies, 36(2), 347-360.
Kaufman, R. L. (2013). Heteroskedasticity in regression: Detection and correction. Sage Publications. https://doi.org/10.4135/9781452270128
Kaufmann, D., Kraay, A., & Mastrorillo, M. (2010). The worldwide governance indicators: Methodology and analytical issues. World Bank Policy Research Working Paper No. 5430.
Kayode-Ajala, O. (2023). Establishing Cyber Resilience in Developing Countries: An Exploratory Investigation into Institutional, Legal, Financial, and Social Challenges. International Journal of Sustainable Infrastructure for Cities and Societies, 8(9), 1-10.
Keefer, P., & Knack, S. (1997). Why Don’t Poor Countries Catch Up? A Cross-National Test of An Institutional Explanation. Economic Inquiry, 35(3), 590–602. https://doi.org/10.1111/j.1465-7295.1997.tb02035.x
Knutsen, C. H., Kotsadam, A., Olsen, E. H., & Wig, T. (2017). Mining and local corruption in Africa. American Journal of Political Science, 61(2), 320-334. http://www.jstor.org/stable/26384734
Kumari, K., & Yadav, S. (2018). Linear regression analysis study. Journal of the practice of Cardiovascular Sciences, 4(1), 33-36. https://doi.org/10.4103/jpcs.jpcs_8_18
Lassila, M. M. (2018). Mapping mineral resources in a living land: Sami mining resistance in Ohcejohka, northern Finland. Geoforum, 96, 1-9. https://doi.org/10.1016/j.geoforum.2018.07.004
Lessmann, C., & Steinkraus, A. (2019). The geography of natural resources, ethnic inequality, and civil conflicts. European Journal of Political Economy, 59, 33-51. https://doi.org/10.1016/j.ejpoleco.2019.01.005
Lu, W., Kasimov, I., Karimov, I., & Abdullaev, Y. (2020). Foreign direct investment, natural resources, economic freedom, and sea-access: Evidence from the commonwealth of independent states. Sustainability, 12(8), 3135. https://doi.org/10.3390/su12083135
Manojlovic, B., & Kabanga, E. (2023). Extractivism and Conflict: Comparative Study of Serbia and the DRC. The Journal of Social Encounters, 7(1), 66-86. https://doi.org/10.69755/2995-2212.1162
Marques, A. C., & Pires, P. S. (2019). Is there a resource curse phenomenon for natural gas? Evidence from countries with abundant natural gas. Resources Policy, 63, 101466. https://doi.org/10.1016/j.resourpol.2019.101466
Medase, S. K., Ahali, A. Y., & Belitski, M. (2023). Natural resources, quality of institutions and entrepreneurship activity. Resources Policy, 83, 103592. https://doi.org/10.1016/j.resourpol.2023.103592
Mlambo, C. (2022). Politics and the natural resource curse: Evidence from selected African states. Cogent Social Sciences, 8(1), 2035911. https://doi.org/10.1080/23311886.2022.2035911
Mulowayi, F. K., & Pinshi, C. P. (2023). Lucas paradox, institutional quality, and corruption: Evidence from DR Congo (MPRA Paper No. 117370). https://mpra.ub.uni-muenchen.de/id/eprint/117370
Murhula, P. K., & Achiza, N. A. (2021). Mining boom, economic growth, and sustainable development in the Democratic Republic of the Congo. MPRA Paper No. 113330. https://mpra.ub.uni-muenchen.de/id/eprint/113330
Narice, N. (2023). High-value non-fuel mineral resources and intrastate armed conflict; a comparative case study of North Kivu in eastern and Tshopo in the northeast in the Democratic Republic of Congo (DRC).: How do high-value non-fuel mineral resources lead to an outbreak of intrastate armed conflict?. urn:nbn:se:uu:diva-507052
Ndjungu, C. Y. (2020). Blood Minerals and the Curse: The Invisible Hand, State Failure, War and Mining in the Democratic Republic of the Congo (Doctoral dissertation, Howard University).
Nichols, E. (2018). The Resource Curse: A Look into the Implications of an Abundance of Natural Resources in the Democratic Republic of Congo. Scholarly Horizons: University of Minnesota, Morris Undergraduate Journal, 5(2), 6. https://doi.org/10.61366/2576-2176.1062
Ogunnoiki, A. O. (2019). Armed conflict in resource-endowed african states: A case study of the Democratic Republic of Congo (DRC). International Journal of Advanced Academic Research, 5(1), 18-37.
Okombi, I. F. (2018). The impact of government expenditure on economic growth in Congo. International Economic Research, 9 (1), 19-36.
Olaniyi, C. O., & Oladeji, S. I. (2021). Moderating the effect of institutional quality on the finance–growth nexus: insights from West African countries. Economic Change and Restructuring, 54, 43-74. https://doi.org/10.1007/s10644-020-09275-8
Ongo Nkoa, B. E., & Song, J. S. (2022). Does institutional quality increase inequalities in Africa?. Journal of the Knowledge Economy, 13(3), 1896-1927. https://doi.org/10.1007/s13132-021-00771-4
Otamonga, J. P., & Poté, J. W. (2020). Abandoned mines and artisanal and small-scale mining in Democratic Republic of the Congo (DRC): Survey and agenda for future research. Journal of Geochemical Exploration, 208, 106394. https://doi.org/10.1016/j.gexplo.2019.106394
Pagan, A. R., & Hall, A. D. (1983). Diagnostic tests as residual analysis. Econometric Reviews, 2(2), 159-218. https://doi.org/10.1080/07311768308800039
Qiang, Q., & Jian, C. (2020). Natural resource endowment, institutional quality, and China's regional economic growth. Resources Policy, 66, 101644. https://doi.org/10.1016/j.resourpol.2020.101644
Raghupathi, V., & Raghupathi, W. (2020). Healthcare expenditure and economic performance: insights from the United States data. Frontiers in public health, 8, 156. https://doi.org/10.3389/fpubh.2020.00156
Rahmé, M., & Walsh, A. (2022). Corruption challenges and responses in the Democratic Republic of Congo.
Rapanyane, M. B. (2022). China’s involvement in the Democratic Republic of Congo’s resource curse mineral driven conflict: an Afrocentric review. Contemporary Social Science, 17(2), 117-128. https://doi.org/10.1080/21582041.2021.1919749
Ren, S., Hao, Y., & Wu, H. (2022). The role of outward foreign direct investment (OFDI) on green total factor energy efficiency: Does institutional quality matters? Evidence from China. Resources Policy, 76, 102587. https://doi.org/10.1016/j.resourpol.2022.102587
Riyadi, B. S. (2020). Culture of abuse of power due to conflict of interest to corruption for too long on the management form resources of oil and gas in Indonesia. International Journal of Criminology and Sociology, 9, 247-254. https://doi.org/10.6000/1929-4409.2020.09.23
Rodrik, D. (2004). Institutions and economic performance. In Aghion, P., & Durlauf, S. N. (Eds.), Handbook of economic growth (Vol. 1. 853-892). https://doi.org/10.1016/S1574-0684(04)01015-0
Ross, M. L. (1999). The political economy of the resource curse. World politics, 51(2), 297-322. https://doi.org/10.1017/S0043887100008200
Sachs, J. D., & Warner, A. M. (2001). The curse of natural resources. European economic review, 45(4-6), 827-838. https://doi.org/10.1016/S0014-2921(01)00125-8
Sala-i-Martin, X., & Subramanian, A. (2013). Addressing the natural resource curse: An illustration from Nigeria. Journal of African Economies, 22(4), 570-615. https://doi.org/10.1093/jae/ejs033
Shinwari, R., Zakeria, I., Usman, M., & Sadiq, M. (2023). Revisiting the Relationship Between FDI, Natural Resources, and Economic Growth in Afghanistan: Does Political (in) Stability Matter?. Journal of the Knowledge Economy, 1-30. https://doi.org/10.1007/s13132-023-01264-2
Shirley, M. M. (2005). Institutions and development. In Handbook of new institutional economics. 611-638. Boston, MA: Springer us. https://doi.org/10.1007/0-387-25092-1_25
Sovacool, B. K. (2019). The precarious political economy of cobalt: Balancing prosperity, poverty, and brutality in artisanal and industrial mining in the Democratic Republic of the Congo. The Extractive Industries and Society, 6(3), 915-939. https://doi.org/10.1016/j.exis.2019.05.018
Staines, N., & Villafuerte, M. (2022). Reaping the Benefits of Good Governance in the Democratic Republic of Congo. and Lessons, 153. https://doi.org/10.5089/9781513584058.071
Sun, H. P., Sun, W. F., Geng, Y., & Kong, Y. S. (2018). Natural resource dependence, public education investment, and human capital accumulation. Petroleum science, 15, 657-665. https://doi.org/10.1007/s12182-018-0235-0
Titeca, K., & Edmond, P. (2019). The political economy of oil in the Democratic Republic of Congo (DRC): Corruption and regime control. The Extractive Industries and Society, 6(2), 542-551. https://doi.org/10.1016/j.exis.2018.12.003
Tshinu, G. M. (2022). Unpacking the resource curse and realism challenges on economic development in the democratic republic of Congo (DRC): Case of gecamines. In Handbook of research on resource management and the struggle for water sustainability in Africa, 318-336. IGI Global. https://doi.org/10.4018/978-1-7998-8809-3.ch015
Van der Ploeg, F. (2011). Natural resources: Curse or blessing?. Journal of Economic Literature, 49(2), 366-420. https://doi.org/10.1257/jel.49.2.366
Wakenge, C. I. (2020). ‘Ne Manges-Tu Pas Avec Eux’’? Cobalt, Copper Mining and Corruption in Democratic Republic of Congo.’ Conjontured de l’Afrique Centrale Nr, 95, 291-309.
Waku, Y. M., von der Heyden, B. P., Hurst, G., Lawrence, D., Mwandale, E., & Glynn, S. (2023). Pyrite analysis enhanced by dimensionality reduction: investigating texture, trace elements, and sulphur isotope signatures in the Kibali gold district, DRC.
World Bank Group. (2018). Democratic Republic of Congo Systematic Country Diagnostic: Policy Priorities for Poverty Reduction and Shared Prosperity in a Post-Conflict Country and Fragile State. World Bank.
World Bank. (2017). WASH Poor in a Water-Rich Country: A Diagnostic of Water, Sanitation, Hygiene, and Poverty in the Democratic Republic of Congo. World Bank.
Zallé, O. (2022). Natural Resource Dependence, Corruption, and Tax Revenue Mobilization. Journal of Economic Integration, 37(2), 316-336. https://www.jstor.org/stable/27130223
Zeeshan, M., Han, J., Rehman, A., Bilal, H., Farooq, N., Waseem, M., ... & Ahmad, I. (2021). Nexus between foreign direct investment, energy consumption, natural resource, and economic growth in Latin American countries. International Journal of Energy Economics and Policy, 11(1), 407-416. https://doi.org/10.32479/ijeep.10255
Zhan, J. V. (2017). Do natural resources breed corruption? Evidence from China. Environmental and Resource Economics, 66, 237-259. https://doi.org/10.1007/s10640-015-9947-4
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Lawal Olamilekan Abdulwahab, Egi Arvian Firmansyah
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
