PRESS BRIEFING BY UNCTAD LAUNCHING 'WORLD INVESTMENT DIRECTORY ON AFRICA'
Press Briefing
PRESS BRIEFING BY UNCTAD LAUNCHING 'WORLD INVESTMENT DIRECTORY ON AFRICA'
19970506
FOR INFORMATION OF UNITED NATIONS SECRETARIAT ONLY
Greater investment opportunities now existed in Africa and it would be a grave mistake for investors to discount them because of the generalized negative perception of the region as a whole, Georg Kell, Officer-in-Charge of the New York Office of the United Nations Conference on Trade and Development (UNCTAD) told a press briefing this morning, as he launched at Headquarters a new UNCTAD report, the World Investment Directory on Africa.
Mr. Kell said UNCTAD believed that generalized negative perception to be unjustified in terms of the investment opportunities that actually existed. Efforts should be made to look in more detail at country situations, he stressed. With him at the briefing was Abraham Joseph of the Office of the Special Coordinator for Africa and Least Developed Countries of the Department for Policy Coordination and Sustainable Development.
The Directory was the fifth in a six-part series being published by UNCTAD, the principal organ dealing with investment questions in the United Nations, Mr. Kell said, adding that the Conference was doing a great deal on investment promotion and trend analysis. It also published the well-known annual World Investment Report, he noted.
Mr. Kell said the Directory was the most comprehensive information on investment in the continent at the country level and contained detailed information on investment flows, stocks, aggregates and disaggregates per sector as well as information on legal framework for investments. It was meant to be a tool for potential investors and also facilitate the investment process. It would be useful to policy makers, he added.
The first 40-pages of the Directory contained a brief analysis of current trends, the most important being the new signs of vitality in foreign direct investment (FDI), Mr. Kell continued. Providing reasons for that, he said growth prospects for the region as a whole had improved -- five per cent last year and again five per cent for this year. "This is the first time in two decades that Africa has shown robust signs of growth overall." As regards FDI, he said that contrary to common perception, that was very important to a number of African countries, big or small.
Another good news was that foreign direct investment flows were no longer confined exclusively to the primary sector -- agriculture, mining and petroleum, he continued. Increasingly, other industries such as finance, insurance and manufacturing were important targets for FDI. New investors were emerging, especially from South-East Asia he said, adding that in 1996 a Malaysian company, Petronas, had acquired a controlling stake in a South
African oil refinery. Other South-East Asian investors were looking at opportunities in neighbouring countries. There were also some renewed interest by Arab countries in the Persian Gulf in investing primarily in North Africa. New players were emerging, which was also a sign of vitality and attractiveness of the investment climate in Africa. Some African firms, especially from South Africa, were themselves emerging as investors in other African countries such as Botswana, Mozambique, United Republic of Tanzania and Zambia, in a host of industries including manufacturing, banking, textiles and brewing.
Mr. Kell said that a number of African countries had investment potential which was under-exploited. Other good news was that the return on investment in Africa was far higher than in other regions, particularly for affiliates of United States companies. He noted the favourable reception of the African Growth and Opportunity Act, which was introduced in the United States House of Representatives last week. The Act contained a number of initiatives which would support the overall positive investment climate in Africa. He also noted that Africa would be high on the agenda of the forthcoming meeting of the "Group of Seven" most industrialized countries in Denver, Colorado. He hoped some tangible measures to improve the investment climate in Africa would also emerge from that meeting, scheduled for June.
The UNCTAD official observed that it was true that the African region as a whole continued to be marginalized in the globalization of the economy. Much of the 1990s boom in FDI had largely by-passed the region. Its share of FDI decreased from about 10 per cent during the 1980s to about 5 per cent in the 1990s. Many African countries still relied on loans and grants for their development. One of the reasons investment flows had been weak in Africa was that the region contained the largest number of countries -- 48 -- classified by the United Nations as least developed. Much of the foreign investment which went to the region was concentrated in oil-exporting countries. Two countries -- Egypt and Nigeria -- attracted more than 50 per cent of total foreign direct investment to Africa. There had, however, been a significant decrease of such investment, falling from 90 per cent in the 1980s to 70 per cent by the mid-1990s. At the same time, investment flows into oil-exporting countries were moving increasingly into non-oil industries.
Principal investors in Africa were from France and the United Kingdom, accounting for more than 80 per cent of total foreign direct investment, he said. The main determinants for that still seemed to be post-colonial structures and geographical proximity. The United States and Japan, the two most important players in the globalization process elsewhere, had so far shown a lukewarm interest. United States investment had somewhat resumed after the abolition of apartheid in South Africa, but was still at relatively low levels and still concentrated in only a small number of industries. Japanese transnational corporations had also shown very little interest in investing in Africa so far, he said, adding that less than 1 per cent of their
UNCTAD Briefing - 3 - 6 May 1997
total investment went to Africa with the lion's share -- 85 per cent -- going to Liberia for what was called "flag-of-convenience" reasons.
As regards the regulatory framework for investment, Mr. Kell said the Directory gave a very detailed description of what had changed in Africa in terms of creating an enabling environment providing a favourable climate for investment. African countries had made a huge effort to liberalize their economies, simplifying rules and procedures and making it easier for transnationals to invest. In many countries, whatever was necessary to attract investments had been done, he said, adding that countries which used to be very restrictive had liberalized their economies. A number of bilateral investment treaties had been signed by African countries. By June 1996, 260 such treaties had been signed, all containing very favourable provisions for investment.
Reiterating the basic message of the Directory, Mr. Kell said the trends overall were a reminder that it would be wrong not to invest in Africa, and huge investment opportunities that existed would be discovered when specific country profiles were looked into. He invited United States and Japanese corporations to take a closer look. He hoped the Directory would facilitate that process and help promote foreign direct investment in Africa.
A correspondent asked what had been said in the report about the effect of conflict situations -- such as the one in Zaire -- on investment in Africa. Noting that it was a relevant question, Mr. Kell said no account had been taken of war or civil unrest situations or the extent to which they might influence perceptions and actual behaviour of corporations. It was, however, reflected in the data on individual countries because where such situations existed there was a tremendous decline in economic activity overall. That also was fully reflected in the foreign direct investment figures. The majority of African countries were peaceful and had made a lot of progress. A majority of the governments had made tremendous improvements in institutions and the regulatory framework for investment and that was the message UNCTAD wanted to convey, he stressed.
Mr. Joseph said that only a few of the 53 African countries faced conflict situations. More than 37 of them were seriously undertaking political and economic reforms. A report of the International Monetary Fund (IMF) published last week estimated that African countries were expected to sustain the 5 per cent growth rate achieved last year. There were a lot of opportunities for multinationals to move from South-East Asia to Africa where labour was cheap, he added.
A correspondent asked why foreign direct investment flows were a mere trickle even though many African countries had liberalized their economies and removed the regulatory frameworks governing foreign investment. How could that be rectified? he further asked. Mr. Kell said there were a lot of variations in the foreign direct investments going into Africa, although the
UNCTAD Briefing - 4 - 6 May 1997
figure still remained low. There was need for urgent action by the international community to deal with the external indebtedness of African countries which was a major constrain for improving the investment climate. In terms of foreign exchange balances, he said their external debt situation also created uncertainties and made it very difficult for host governments to give assurances about profit remittances, which were key to successful investment promotion. It also deprived countries from making investments in infrastructure, which were necessary complements to foreign direct investments. New initiatives were expected in forthcoming meetings, such as fiscal incentives for investment and investment guarantees. There was a lot more the international community could do but there was no doubt, he added, that governments had a major responsibility to continue the path of stability and good governance.
Asked who owned African multinationals, he said that in most cases they were African, although there were some foreign interests as well. Much of the African interests were motivated by regional integration with positive implications for economic growth. Much of the African multinationals were from South Africa and their activities were reflected in all major economic sectors. African business had a better understanding of the situation and therefore also had a qualitative edge over foreign investors.
Responding to other questions, he said UNCTAD's efforts were to show the diversity of the countries and the opportunities that existed. In most instances, the investments were the traditional type of long-term activity, setting up capacities to extract natural resources and processing them. There was also manufacturing.
What assistance was the United Nations and the United Nations Development Programme (UNDP) providing Africa to make investments much easier for major companies? a correspondent asked. Mr. Kell said overall the United Nations was a facilitator, but could also play a useful role by creating awareness. At the field level, there were a host of activities going on, including the Global Trade Point Network established by a number of African countries to stimulate and improve infrastructure for trade which complemented foreign investment activities. What was really required was to get corporations to do business in Africa with a long-term perspective and positive spill-overs, complemented by efforts of host countries to build-up skills and improve infrastructures.
Asked whether the report looked at problems of corruption, arbitrary regulations, insider dealings and privatization, he said those issues were not covered and that the aim of the publication was to provide data and statistics to help potential investors.
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