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Foreign Aid as a Catalyst for FDI-Driven Development

Ramnebro, Milla LU (2025) EOSK12 20251
Department of Economic History
Abstract (Swedish)
The last century has been a turbulent period in Cambodia, yet in the recent decades it has emerged from conflicts and humanitarian crises and become one of the world’s fastest-growing economies. This transformation was enabled in large part by foreign aid (ODA) and foreign direct investment (FDI). This thesis analyses the mechanisms by which ODA and FDI influenced the economy individually and in combination, exploring whether ODA laid the foundation for FDI to drive economic growth. The study is grounded in the Solow growth model and endogenous growth theory. Using post-conflict Cambodia as a case study, this paper carries out a historical narrative, investigating how foreign capital, combined with gains in human capital and governance... (More)
The last century has been a turbulent period in Cambodia, yet in the recent decades it has emerged from conflicts and humanitarian crises and become one of the world’s fastest-growing economies. This transformation was enabled in large part by foreign aid (ODA) and foreign direct investment (FDI). This thesis analyses the mechanisms by which ODA and FDI influenced the economy individually and in combination, exploring whether ODA laid the foundation for FDI to drive economic growth. The study is grounded in the Solow growth model and endogenous growth theory. Using post-conflict Cambodia as a case study, this paper carries out a historical narrative, investigating how foreign capital, combined with gains in human capital and governance quality, influenced economic growth. The study finds that targeted ODA towards social sectors such as education and health increased human capital. This subsequently enhanced the economy’s productive capacity, both attracting more FDI and allowing it to be more effective, especially within the service sector. Contrastingly, ODA targeting government and institutions did not affect the quality of government. Building upon previous research that emphasises an economy’s internal capacity as a key determinant of the extent to which FDI drives economic growth, this thesis suggests that ODA is essential in laying the groundwork for FDI to be successful. (Less)
Please use this url to cite or link to this publication:
author
Ramnebro, Milla LU
supervisor
organization
alternative title
Evidence from Post-Conflict Cambodia (1995–2019)
course
EOSK12 20251
year
type
M2 - Bachelor Degree
subject
language
English
id
9199173
date added to LUP
2025-06-16 11:44:02
date last changed
2025-06-16 11:44:02
@misc{9199173,
  abstract     = {{The last century has been a turbulent period in Cambodia, yet in the recent decades it has emerged from conflicts and humanitarian crises and become one of the world’s fastest-growing economies. This transformation was enabled in large part by foreign aid (ODA) and foreign direct investment (FDI). This thesis analyses the mechanisms by which ODA and FDI influenced the economy individually and in combination, exploring whether ODA laid the foundation for FDI to drive economic growth. The study is grounded in the Solow growth model and endogenous growth theory. Using post-conflict Cambodia as a case study, this paper carries out a historical narrative, investigating how foreign capital, combined with gains in human capital and governance quality, influenced economic growth. The study finds that targeted ODA towards social sectors such as education and health increased human capital. This subsequently enhanced the economy’s productive capacity, both attracting more FDI and allowing it to be more effective, especially within the service sector. Contrastingly, ODA targeting government and institutions did not affect the quality of government. Building upon previous research that emphasises an economy’s internal capacity as a key determinant of the extent to which FDI drives economic growth, this thesis suggests that ODA is essential in laying the groundwork for FDI to be successful.}},
  author       = {{Ramnebro, Milla}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Foreign Aid as a Catalyst for FDI-Driven Development}},
  year         = {{2025}},
}