Improving Business Environment Key to Attracting FDI
African countries should continue focusing on improving business climate to attract Foreign Direct Investment (FDI), according to views expressed by experts at the Sixth African Economic Conference held from 25-28 October 2011 in Addis Ababa.
The experts said that while the presence of natural resources remains a key FDI driver to Africa, investment climate variables such as economic, political and policy options matter as well in attracting investment.
The conference was jointly organized by the African Development Bank, the UN Economic commission for Africa and the UN Development Programme.
“Business rules and regulations matter; countries in Africa that are not endowed with abundant natural resources can still attract FDI if they institute reforms to improve business environment,” said Angelica Njuguna of UNECA while presenting a paper on “Investment Climate and Foreign Direct Investment in Africa” which she co-authored with Emmanuel Nnadozie, also of UNECA.
She added: “For African countries that are not rich in natural resources, a friendly business environment may provide opportunity to attract FDI in manufacturing, telecommunications and services sectors.”
According to Ms Njuguna, African countries that are rich in natural resources and have a business friendly environment can diversify FDI in other sectors to reduce dependence on oil and mineral exports.
She emphasized that reforms should be focused on making doing business easier by creating an efficient, better legal environment, incentives and creating a sound and stable macroeconomic environment.
“Strong institutions including judiciary to enforce contracts and resolve commercial disputes should also be established,” she said.
During the session, the experts underscored that African countries should continue to reform business environment to promote better investment climate.
“The results may lead to better adoption of technology, greater link to the world market, more employment and more resources for financing development and economic transformation in Africa,” Ms Njuguna said.
Currently, South Africa, Namibia, Tunisia, Zambia and Ghana are among top 100 countries that continue to attract FDI.
For his part, Gamal Ibrahim of UNECA urged African countries to undertake policies to expand local markets through regional integration.
He said this while making a presentation on “Revisiting the Determinants of Foreign Direct Investment in Africa: The Role of Institutions and Policy Reforms.”
“There is need for credible institutional policy reforms that will improve economic governance and political stability, particularly by enhancing the quality of civil services, and combating corruption and religious tensions.”
Hundreds of economists, academics, researchers, government and civil society representatives and media from Africa and other continents attended the four-day event, organized annually to discuss African development and related issues.