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THE UNIVERSITY OF ZAMBIA SCHOOL OF HUMANITIES AND SOCIAL SCIENCES DEPARTMENT OF POLITICAL AND ADMINISTRATIVE STUDIES THE WORLD BANK’S CONTRIBUTION TO FIGHTING POVERTY IN ZAMBIA THROUGH THE PROMOTION OF FOREIGN DIRECT INVESTMENT (FDI) FROM 1999 TO 2009: A CRITICAL EXAMINATION DISSERTATION BY JOSEPH SELISHO COMPUTER NO .529002125 SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF ARTS IN POLITICAL SCIENCE JULY 2014 DECLARATION I Joseph Selisho, declare that this dissertation represents my own work and that it has not previously been submitted for a degree, diploma or other qualification at this or another university. Signature: --------------------------------------------------------------------------------------------------------- Date:--------------------------------------------------------------------------------------------------------------- i COPYRIGHT ______________________________________________________________________________ All rights reserved. No part of this dissertation may be reproduced or stored in any form or by any means without prior permission in writing from the author or the University of Zambia. © 2014 by Joseph Selisho ii APPROVAL This dissertation of Joseph Selisho is approved as fulfilling part of the requirements for the award of the Degree of Master of Arts by the University of Zambia. 1. Full Name ----------------------------------------------------------------------------------------------- Signature -------------------------------------- Date --------------------------------------------------- 2. Full Name ---------------------------------------------------------------------------------------------- Signature--------------------------------------- Date---------------------------------------------------- 3. Full Name------------------------------------------------------------------------------------------------ Signature -------------------------------------- Date --------------------------------------------------- iii 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. iv ACKNOWLEDGEMENTS The research project would not have been possible without the support of my friends, lecturers and my family. I wish to thank everybody in the Department of Political and Administrative Studies for tireless effort and support in ensuring that the project succeeded by providing technical and academic advice during its development to completion. Special thanks go to my Supervisor, Dr.L.C.W.Kaela, who spent his time with me in ensuring that my work met all the requirements of the academic standards. Among others to mention a few are Professor J.Momba, Dr A.M. Ngoma, Dr. P.Loloji, Dr.W.N. Mafuleka and Dr M.C.Bwalya for their excellent and professional duty during my studies. I would also like to recognize and thank my workmates and the entire “NAC Family” at the National HIV/AIDS/TB/STI Council for their encouragement and support morally and professionally during my studies. Among them to mention a few are, Dr.Ben.U.Chirwa, Mr. Mwilu L. Mumbi, Mrs. Monica M. Jalasi, Mr. Nyewani Soko, Mr. Kevin Chilemu and Dr. H.Witola. Finally, many thanks go to my wife, Chali Chisala Selisho, my daughter, Chipo Selisho, my two sons, Lumuno Selisho and Lusumpuko Selisho, for their understanding of the benefits of school and pressure of work. Without their support, my dream of obtaining a Master of Arts Degree in Political Science with a major in International Relations from the University of Zambia would not have been possible. v DEDICATION This work is dedicated to my wife, Chali Chisala Selisho, for her patience, moral and financial support during my studies at the University of London, when we both lived in Central London and survived the 7/7/05 London bombing. It was the University of London’s qualification that ushered me into the University of Zambia to pursue a Master of Arts Degree in Political Science with a major in International Relations. My gratitude also goes to my mother, Enala Naomi Maka, the “Great Makas “and my late Uncle, Gabriel Kanyenda Maka who walked on this earth and inspired many to aspire for success. From their source of wisdom, “we are who we are” as they were a great inspiration to many and the nation at large in their dedication to family morals and national duty in the interest of common man. Many thanks also go to my brother, Fackson Ntaimo, and his wife, Lina Kapiji Ntaimo for their contribution in my career development. Finally, I would like to thank my wife, Chali Chisala Selisho, for her love and care during my hard times and good times of my career development both in England and Zambia. vi ABBREVIATIONS ADB: African Development Bank AfDF: African Development Fund AIDS: Acquired Immune Deficiency Syndrome BOP: Balance of Payments BOZ: Bank of Zambia CAS: Country Assistance Strategy CEEC: Citizens Economic Empowerment Commission COMESA: Common Market for Eastern and Southern Africa CSO: Central Statistical Office CSSDP: Copperbelt Small and Medium Supplier Development Programme CRAIDS: Community Response to HIV/AIDS DAC: Development Assistance Committee DANIDA: Danish International Development Agency DFID: Department for International Development DSA: Debt Sustainability Analysis EU: European Union ESP: Environmental Support Project FDI: Foreign Direct Investment FMS: Financial Management System FSDP: Financial Sector Development Plan GDP: Gross Domestic Product GEF: Global Environment Facility GER: Gross Enrolment Ratio GNP: Gross National Product HIPC: Highly Indebted Poor Countries HIV: Human Immunodeficiency Virus IBRD: International Bank for Reconstruction and Development ICSID: International Centre for Settlement of Investment Disputes vii IDA: International Development Association IFC: International Finance Corporation IFMIS: Integrated Financial Management Information System IMF: International Monetary Fund IRS: Indoor Residential Spraying JAS: Joint Assistance Strategy LCMS: Living Conditions Monitoring Survey MDGs: Millennium Development Goals MDRI: Multilateral Debt Relief Initiative MIGA: Multilateral Investment Guarantee Agency M & A: Mergers and Acquisitions MMD: Movement for Multi-party Democracy MoFNP: Ministry of Finance and National Planning MTEF: Medium Term Expenditure Framework NAC: National AIDS Council NCC: National Council for Construction NAPSA: National Pension Scheme Authority NEAP: National Environmental Action Plan NEPAD: New Partnership