Foreign Direct Investment in Mining Industry and Fiscal Revenue Mobilization: Evidence from a Resource Abundant Country of the Democratic Republic of Congo
Abstract
Foreign direct investment (FDI) in extractive industries is a major source of capital inflows for resource-rich developing economies; however, whether these investments translate into sustainable fiscal revenues remains contested. This study investigated the fiscal effects of mining FDI in the Democratic Republic of Congo (DRC) and examined the institutional and macroeconomic conditions shaping government revenue mobilization. A mixed-methods design was employed, combining documentary time-series econometric analysis, survey-based logistic regression, and qualitative institutional interpretation. Annual macroeconomic data for 1990-2023 were analyzed using an Autoregressive Distributed Lag (ARDL) model, complemented by logistic regression based on 545 stakeholder responses and qualitative evidence from 14 key informants. The ARDL results confirmed a stable long-run relationship between mining FDI and fiscal revenue (Bounds F = 4.41; ECM = −1.403, p < 0.01), with excellent explanatory power (R² = 0.986). However, mining FDI exhibited a negative and only marginally significant long-run effect on fiscal revenue (β = −0.850, p = 0.080), indicating that investment inflows alone do not guarantee higher public revenues. By contrast, governance quality significantly enhanced fiscal revenue (β = 0.392, p = 0.006), whereas inflation exerted a significant adverse effect (β = −0.00014, p = 0.013). Survey findings corroborated these results, showing that base erosion risk (OR = 3.923, p < 0.001) and generous fiscal incentives (OR = 0.416, p < 0.001) substantially shaped perceived fiscal outcomes. The findings demonstrate that the fiscal benefits of mining FDI depend primarily on governance quality, institutional capacity, and fiscal regime design rather than investment volume alone. Strengthening fiscal governance and regulatory oversight is therefore essential for transforming mineral wealth into sustainable public revenue in resource-rich economies.
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