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22.09.2004 Business & Finance

Government urged to establish objectives for FDI

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Accra, Sept. 22, GNA - Government needs to establish clear objectives involving Foreign Direct Investment (FDI) in the privatisation of services, Dr Joseph Abbey, Executive Director of the Centre for Policy Analysis (CEPA), said on Wednesday.

He said it was important for government to strike a balance between budgetary and other considerations, such as efficient and competitive provision of services at affordable prices for the poor and those living in sparsely populated areas.

"Policy makers need to strike a balance between using the services of International Investment Agreements for attracting foreign direct investment in services and preserving the flexibility necessary for the pursuit of national development objectives related to the service sector."

Dr Abbey, who was reviewing the World Investment Report, prepared by the United Nations Conference on Trade and Development under a theme: "The shift towards services in Foreign Direct Investment," said the absence of appropriate government policies and regulations, the involvement of Trans-National Corporations (TNCs) in utilities and other basic services may lead to a rise in prices and limited access for the poorest segment of society.

"Investment promotion can be particularly successful if the basic requirements are right. For services, skills are vital, as is a reliable state of the art international communications infrastructure, especially if off-shore services are targeted," he added.

Mr Kwame Pianim, Chief Consultant, New World Investments, launched the Report.

Dr Abbey said policies in TNCs should seek to improve local capabilities, skills, institutions and infrastructure in line with changing technological and market realities.

He said investment incentives were intended to induce investors to establish a presence and to expand existing business.

Giving statistics, Dr Abbey said 50 to 80 per cent of foreign direct investment in Africa was in natural resource exploitation. FDI in manufacturing and agriculture lags behind that in services with some exceptions notably in Mozambique.

He said FDI in services is increasing in telecommunications, electricity, management and trade mainly through privatisation. "In telecommunications, it has been mainly in mobile phone services. The number of Africans subscribing to mobile phone services grew from 1.2 million in 1996 to 51 million in 2003 with the spurt starting in 2001."

He said policies were increasingly becoming liberal and African countries continued to liberalise their FDI policies.

Dr Abbey said Ghana was among the seven African countries reportedly having undertaken or in the process of undertaking Investment Policy Reviews with a view to promoting the investment climate. On the African Growth and Opportunity Act (AGOA), he said it had not been a major driving force to attract investors.

He said unless African exporters increased their productivity, they might not survive full global competition in spite of the continuing tariff advantage.

Dr Abbey noted that international hotel chains played an important role in promoting competitiveness in tourism by helping to attract a critical mass of international tourists saying, "tourism is an important forex earner through both equity and non equity investment."

He urged the Ghana Investment Promotion Centre (GIPC) to help by undertaking a competitive selection process and providing a one-stop shop for investors as well as maintaining independence from government and vested interest in state-owned enterprises.

Mrs Ruth Nyakotey, Deputy Chief Executive of GIPC, said in line with the Ghana Poverty Reduction Strategy, the Centre intended to continue with its direct investment promotion activities and would promote specific products and sectors as may be identified under the President's Special Initiative and other economic development programmes.