FDI and Why An Attitude Makeover is the Answer

By Courtney Doll

Foreign direct investment is “an investment made to acquire a lasting interest in an enterprise operating outside the economy of the investor.” In simpler terms, this is when one country invests in another to help it succeed. And this investment can have great benefits for both involved. It can help reduce poverty by creating new jobs, boosting trade opportunities and bringing new forms of technology to developing countries. Moyo notes the importance of FDI and says in order to receive it, countries need to do one main thing: create a positive, encouraging environment with clear communication and outlined expectations.

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A road in South Africa

However, many African countries find it difficult to succeed, even when receiving FDI. Moyo explains that aid is not being used efficiently in Africa for a few reasons. Poor infrastructure makes production costs expensive, corruption is common, and bureaucratic red tape makes it difficult to get work done. For example, Moyo notes it takes over 400 days to get a business license in Cameroon. It has one of the highest rates of corruption in the world, making it difficult for honest business to take place. The country is plagued with poor sanitation and a HIV rate of over 5%, making the workforce inefficient. And illegal practices such as poaching hurt the development of agriculture in the country.

One of the major recent investors in many African countries is China. Moyo retells the story of Lukas Lundin’s trip through Africa, where he described driving down paved roads and seeing signs that said “this road constructed with the grateful assistance of the Government of the People’s Republic of China.” Moyo notes China’s history of civil rights violations. She acknowledges the country does not have the best track record when it comes to human rights. However, she says it is more important to look at China’s record in aiding and assisting poor countries. With large investments, China is able to create mass amounts of infrastructure and jobs in countries that really need the help. 

China’s approach to investment is referred to as “no strings attached” investment. The Chinese invest money with no stipulations or requirements. For example, the World Bank was working on a $5 million deal with Nigeria that would allow private companies to help fix the country’s broken railway system. However, China stepped in and offered $9 billion with no strings attached to rebuild the entire railway system. This was a much more appealing offer and came with no reform required. I think China’s strategy is bold but effective. It knows how to be successful and is creating deals and relationships with countries that need help. Only time will tell if China has an ulterior motive, but for now, its investment strategies seem to be working.

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