| |
Contributions from
the Column
Monitor
Africa policy: Europe on the wrong track
World Investment Report 2005
Aid pledges for Africa to be monitored
Information summit to discuss control of internet
UN convention against corruption
Disappointing OECD guidelines
Bertelsmann Foundation rates progress
A new definition for the wealth of nations
Trade: disruptive chicken wings
IMF and World Bank endorse debt relief
Development and security: more cooperation needed
11/2005
|
|
[ Foreign direct investments ]
A concerned look at Africa
Last year, for the first time in three years, foreign direct investments (FDI) increased slightly worldwide – by almost two and a half percent against 2003, to 648 billion US dollars. According to the 2005 World Investment Report by the UN Conference on Trade and Development (UNCTAD), the growth can be fully attributed to developing countries. There, investments from abroad increased by 40 percent, while they shrunk by 14 percent in advanced nations. The developing countries therefore significantly increased their share of global direct investments to 36 percent compared with the previous years – a ratio they had already achieved in the 1990s.
However, the investment flows into the developing countries continue to be distributed extremely unevenly. Asia received almost two thirds of the total amount, a quarter flowed into the People’s Republic of China alone. The whole of Africa did not even receive eight percent. Asia and Latin America increased their inflows by more than 40 percent each in the last year, whereas the figures for Africa remained unchanged. According to UNCTAD, FDI growth in the developing countries is attributed mainly to investments in new production facilities (greenfield investments), not to mergers and acquisitions. But even here, the inflows are concentrated in a few countries. In 2004, China and India alone received half of all greenfield investments in developing countries.
UNCTAD expresses worries about Africa. In recent years, many countries there have relaxed the investment rules and created political and fiscal incentives for investors. However, UN experts maintain the success of the approach is doubtful: the annual inflows have certainly increased significantly since the 1990s, but most investments continue to be concentrated in the areas of mining and oil production. Hardly any capital flows into the manufacturing sector.
In another publication, this year’s report on economic development in Africa, UNCTAD is highly critical of the structural adjustment programmes prescribed by the World Bank and the International Monetary Fund (IMF) over the past twenty years. “Most of these programmes have failed singularly to re-establish a pro-investment and pro-employment economic climate.” Where the manufacturing sector is concerned, UNCTAD even considers them to be “regressive”. With international support, Africa must try much harder than it has to date to attract investments that serve to create added value. African governments have to pay closer attention to what kind of investments serves their countries. For the time being, capital outflows from profit remittances or import invoices for primary products are higher than the investments in many cases.
In terms of content, the 2005 World Investment Report focuses on the trend of transnational corporations outsourcing not only manufacturing to developing countries but increasingly research and development too. In 1993 Motorola was the first foreign company to open a research laboratory China; today that country boasts more than 700 such labs. The number of microprocessors developed in South-East and East Asia increased from zero in the mid-1990s to almost 30 percent in 2002. UNCTAD considers this “a logical next step in the globalisation of TNC production networks.” So far, however, only a handful of more advanced developing countries are benefiting, most of them located in Asia. (ell)
On the internet:
World Investment Report 2005:
http://www.unctad.org/en/docs/wir2005_en.pdf
Economic Development in Africa 2005:
http://www.unctad.org/en/docs/gdsafrica20051_en.pdf
|
