Foreign Direct Investment

ATPC

Work in Progress

African Trade Policy Centre

No. 21

Economic Commission for Africa

ATPC

September 2005

Foreign Direct Investment in Africa: Performance, Challenges and Responsibilities

Chantal Dupasquier and Patrick N. Osakwe

Abstract

This paper examines the performance, promotion, and prospects for foreign direct investment (FDI) in Africa. Factors such as political and macroeconomic instability, low growth, weak infrastructure, poor governance, inhospitable regulatory environments, and ill-conceived investment promotion strategies, are identified as responsible for the poor FDI record of the region. The paper stresses the need for more trade and investment relations between Africa and Asia. It also argues that countries in the region should pay more attention to the improvement of relations with existing investors and offer them incentives to assist in marketing domestic investment opportunities to potential foreign investors. Finally, the paper argues that the current wave of globalization sweeping through the world has intensified the competition for FDI among developing countries. Consequently, concerted efforts are needed at the national, regional, and international levels in order to attract significant investment flows to Africa and improve the prospects for sustained growth and development.

Keywords: Foreign Direct Investment; Promotion; Africa; Responsibilities JEL Classification: F21; F23; O55

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Corresponding author: Patrick Osakwe. Tel.: +251-1-443409; fax; +251-1-514416. E-mail addresses: posakwe@uneca.org; cdupasquier@ uneca.org. An earlier version of this paper was presented at the “Tokyo International Conference on Investment to Africa” organized by the Ministry of Foreign Affairs, Japan, on the 26th of February 2003. We are grateful to the participants for useful discussions. We also thank two anonymous referees of the Journal of Asian Economics for very insightful comments. As usual, the authors are...