Developing country FDI and development: the case of the Chinese FDI in the Sudan

Abstract

This paper examines the development implications of Chinese investment in the Sudan to enable a better understanding of the impact of foreign direct investment (FDI) from developing countries. By examining China’s early investment in the Sudan by the Chinese National Oil Corporation (CNPC) and the consequent cascade effect on the Sudan’s significant economic growth during the decade between 1997 and 2007, this paper highlights how progress was achieved through interaction between Chinese FDI and host institutions. It demonstrates that developing country FDI can make positive contributions to development particularly in developing countries, due not only to its capacity appropriate for developing countries, but also to its strategies and mindset more adaptable to the development needs and institutional environment in the host country. While extant research often emphasizes how institutions make FDI’s impact on host countries differ and how institutions in developing countries should be improved in order to attract FDI, this research indicates that proactive adaptation of strategy by transnational corporations (TNCs) to fit local needs and institutions may be more effective for improving institutions and consequently the development in host countries.