Africa: Regional integration can boost FDI
November, 2012– Experts who participated at the African Economic Conference in Kigali , Rwanda, agreed that Africa would need to strengthen regional integration in order to boost increased Foreign Direct Investment (FDI) on the continent, because it creates larger domestic markets and stimulates trade, two elements that can attract FDI.
John Rwangombwa, Rwanda’s Minister of Finance and Economic Planning
“At a time when China, India, Brazil and other large emerging markets are taking on such a prominence in the global economy, we must surely focus the minds of African policymakers, particularly from smaller, landlocked countries, on the importance of pushing forward the regional integration agenda”, said Andrew Mold, a senior Economic Affairs Officer of ECA.
Mold said that attracting FDI in Africa could be facilitated by the adoption of appropriate trade and macroeconomic policy regimes that promote regional integration activities.
By banding together through regional integration arrangements, member countries can enhance their bargaining power in international economic relations. “Such power can be especially beneficial in trade negotiations, particularly for small countries”, he said.
Policy makers at the conference showed a wide consensus that regional integration in Africa is the way to go. John Rwangombwa, Rwanda’s Minister of Finance and Economic Planning said that in the continued uncertainties of the global economy, Africa must present itself as the most profitable and secure destination of investors’ funds that are scared of the problems in the Western markets.
“It is worrying to know that Africa attracts less than nine percent of FDI. We need as much as possible to continue reducing the uncertainties about the evolution of our economies”, said Minister Rwangombwa.
The fifth edition of ECA’s flagship report on Assessing Regional Integration in Africa provides leading insights on the matter. The report states that economies of most African countries are individually too small to provide adequate incentives for large-scale investment.
The report clearly articulates that regional integration is likely to improve efficiency as a result of competitive pressure among rival firms in African economy.