INVESTMENT CLIMATE IN AFRICAN COUNTRIES IS REVIEWED AT ECONOMIC AND SOCIAL COUNCIL ROUND TABLE

INVESTMENT CLIMATE IN AFRICAN COUNTRIES IS REVIEWED

AT ECONOMIC AND SOCIAL COUNCIL ROUND TABLE

GENEVA, 16 July (UN Information Service) -- The Economic and Social Council continued its high-level segment this afternoon with a round table debate on the investment climate in African countries, with participants contending that such difficulties as corruption and African capital flight had to be rectified, educational programmes strengthened and local entrepreneurs empowered, as a way of encouraging foreign private capital to come to the continent.

Taking part were Karl Sauvant, Director of the Division on Investment Technology and Enterprise Development of the United Nations Conference on Trade and Development (UNCTAD), who also served as moderator; A. Bio Tchane, Minister of Finance of Benin; Abdoulie Janneh, Assistant Administrator and Regional Director for Africa of the United Nations Development Programme (UNDP); Kenneth Kwaku, Manager of the Promote Africa Initiative and Programme Manager of the Multilateral Investment Guarantee Agency; and James Onobiono, President of the Compagnie Financiere Internationale of Cameroon.

The Chairman of the meeting, Carlos Magarinos, Director-General of the United Nations Industrial Development Organization (UNIDO), said that an attractive investment climate was vital for economic development in Africa, yet no other region of the world remained so dependent on foreign capital while being so excluded from globalized trade and investment.

He said that only last week UNCTAD had released data that showed that foreign investment in Africa had declined in 2000 from the previous year, and flows of official development assistance (ODA) had been declining as well, although there was also some good news -- indications of increasing private sector interest, and the fact that virtually all countries had improved their climates and regulatory frameworks to better attract business.

Mr. Tchane, the Finance Minister of Benin, said labour legislation, business regulations and legislation, both domestic and international, various administrative reforms -- relating to accountancy, for example -- and regional approaches were among the important issues that had to be addressed to improve the African investment climate.

Mr. Janneh of UNDP said the image of Africa needed to be improved.  Risks tended to be exaggerated, as Africa was seen as a place of wars and coups, and perhaps the harmonization of subregional business frameworks and practices could be extended to the portrayal of accurate images of the successful and stable regions of Africa.

Mr. Kwaku of the Promote Africa Initiative remarked that building a good climate for business in Africa began with African entrepreneurs.  It was necessary to increase the competence of those entrepreneurs and to expand their capabilities.  It was also important to establish rule-based societies, including through legal reforms that supported business.

Mr. Onobiono of Compagnie Financiere Internationale of Cameroon said domestic investment was a telling factor.  After independence there had been a great deal of such investment, but it had gone into the wrong sector.  Now Africans needed to bring back their capital, as so much of it was invested outside.

Those contributing to the discussion from the floor contended, among other things, that a framework for sustainability of the private sector should be pursued by African Governments; that even foreign direct investment should meet certain criteria and standards and that investment that crowded out domestic investment or unfairly exploited the continent's natural resources, was of little long-term use to Africa.  It was said that investment should go towards business undertakings that treated African employees well and paid them decently, and that many potential investors simply did not know what the climate in Africa was like and did not know that many successful investments had been made there.

Statements

CARLOS MAGARINOS, Director-General of UNIDO, Chairman of the round table, said it was understood that an attractive investment climate was vital for economic development in Africa.  No other region remained so dependent on foreign capital or was so excluded from globalized trade and investment.  Currently Africa managed to attract only 1.2 per cent of international foreign investment.  Obviously that had to change.

KARL SAUVANT, Director of the Division on Investment Technology and Enterprise Development of UNCTAD, moderator of the meeting, said that only last week UNCTAD had released data showing that foreign investment in Africa had declined in 2000 from the previous year.  Official development assistance (ODA) flows had been declining as well.  ODA was vital since it funded such things as public sector programmes and infrastructure development.  Private-sector investment could be no substitute for ODA.  There was some good news, there were indications of increasing private sector interest, and virtually all countries had improved their climates and regulatory frameworks for foreign direct investment.  Still more needed to be done. 

A. BIO TCHANE, Minister of Finance, Benin, said he knew only too well that more had to be done to establish a feasible economic policy for attracting investment.  Continuing high public deficits and high balance-of-payments deficits, as had prevailed recently, were not going to do the trick.  The overall economic situation had to be more healthy.  There had to be cooperation with the private sector.  Strategies had to be of the sort where all worked together under an effective and transparent regulatory framework, and where good governance prevailed.  There was corruption, including passive corruption among public officials and among private business officials, and corruption had to be eliminated.

ABDOULIE JANNEH, Assistant Administrator and Regional Director, UNDP, said that if he were from the private sector he would see no reason why he should not invest in Africa.  African countries were making great efforts to create attractive environments for investments.  Obviously there were problems.  Capital flows continued to be much less than desired; official development assistance (ODA) continued to be insufficient; African countries had no direct access to international capital markets; and they suffered tremendously from debt, and debt payments were clouding Government investments in infrastructure and social spheres that would make countries more attractive to private capital.  It was important to improve the image of Africa.  Risks tended to be exaggerated, as Africa was seen as a place of wars and coups.  Perhaps harmonization of subregional business frameworks and practices could be extended to the portrayal of the correct image for the successful and stable regions of Africa.  Finally, HIV/AIDS had to be dealt with.  It was wiping out development gains of the past 20 years.  It was having a tremendous cost.  It had to be addressed and the private sector should be involved in doing so.

KENNETH KWAKU, Manager of the Promote Africa Initiative and Programme Manager of the Multilateral Investment Guarantee Agency, said Africa was a vast region with many possibilities, and despite various problems, including HIV/AIDS, much progress was being made in governance and democracy.  It remains a matter of concern that Africa was a great source of capital flight.  African holdings outside Africa exceeded official development assistance that came to the continent from outside.  Africa should be conducive to African investment.  Things should be arranged so that Africans themselves were willing to bring their money back.

Building a good climate for business in Africa began with African entrepreneurs.  It was necessary to increase their competence.  It also was important to establish rule-based societies, including legal reforms that supported businesses, generally recognized accounting standards, and transparent government operations. 

JAMES ONOBIONO, President of the Compagnie Financiere Internationale of Cameroon, said an investor such as an African like himself, who had investments in various countries, could find the conditions he needed to invest in Africa.  In many African countries sufficient legal systems and regulatory systems were in place.  Yet great investment did not come.  As, for example, it did to China.  The

Chinese legal system, it was worth pointing out, was not the most secure or admirable in the world -- yet there was massive investment in China. 

Domestic investment was a telling factor.  After independence there had been a great deal of such investment, but it had gone into the wrong sectors.  Now Africans needed to bring back their capital, as so much of it was invested outside.  Politicians and government officials had to bring back capital from overseas and invest it locally in sectors of the economy that would supply value added.  Then foreign direct investment would follow.  Political will was one of the most determinant factors for attracting this kind of growth.

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