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Afro-pessimism & Foreign Direct Investment

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Presentation in 2010 in advance of publication. Publication can be found here: http://www2.carleton.ca/africanstudies/ccms/wp-content/ccms-files/Nokoko-Fall-2011-2-Schorr.pdf

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Afro-pessimism & Foreign Direct Investment

  1. 1. Economics ofAfro-PessimismAfro-pessimism’s negative impact oninvestment in Africa Presented at the CIC - Africa Study Group (Ottawa) by Victoria Schorr on July 21, 2010
  2. 2. Elements of Afro-Pessimism• Homogeneity• Colonial mythos• Illness and disease• Starvation• Africa as National Geographic• Violent tribal conflict• African Big Man and politicalinstability• Unrelenting poverty
  3. 3. African Big Man & Political Instability• Reno Model• Coups• Mad tyrannical dictator• Corrupt African Big Man• Patrimonial African Big Man
  4. 4. Unrelenting Poverty
  5. 5. Media Reviews• Schraeder, P.J. and Endless, B. ‘The Media and Africa: The Portrayal of Africa in the New York Times (1955- 1995)’, A Journal of Opinion, vol. 26(2), 1998• Domatob, J. ‘Coverage of Africa in American Popular Magazines’, A Journal of Opinion, vol. 22(1), 1994• Stith, C.R. ‘A Survey of American Media Coverage of African Democracies: 1994 – 2004’, Boston University: http://www.bu.edu/aparc/resources/studies/mediacoverage 062805.pdf• Smith, J. et al. ‘Reflecting The Real World?: How British TV Portrayed Developing Countries in 2005’, Commonwealth Broadcasting Association et al., 2005• And more….
  6. 6. Foreign Direct Investment
  7. 7. FDI Inflows by Region 2006 to first quarter of 2009 ($b.)Source: UNCTAD, World Investment Report 2009, p. 41.
  8. 8. Governance& FDI
  9. 9. We have found that Africa’s credit ratings are lowerthan is warranted by the fundamentals … Nonetheless,our analysis has shown that there is considerablepersistence in the ratings so that a country tends toretain its rating over time unless significant adverse orpositive developments occur. Indeed, the combinationof the lagged value of the country’s rating andeconomic fundamentals typically accounts for 80 toover 95 percent of the variation in credit ratings.Haque et al. From Collier, P. and Pattillo, C. (eds.) Investment and Risk inAfrica, St. Martin’s Press, Inc.: USA, 2000, p. 63
  10. 10. Data Available• World Economic Forum, Global Competitiveness Report 2008-2009 and 2009-2010 includes Executive Opinion Survey• UNCTAD, World Investment Report 2009• World Bank, Investment Climate Around the World (2003)
  11. 11. Criteria of GCI Institutional Rankings• Property rights • Efficiency of legal framework in• Intellectual property protection challenging regs.• Diversion of public funds • Efficiency of legal framework in• Public trust of politicians settling disputes• Juridical independence • Ethical behaviour of firms • Organized crime• Violent tribal conflict • Business costs of crime &• Favoritism in decisions of gov. violenceofficials • Reliability of police services• Wastefulness of gov. spending • Strength of auditing & reporting• Burden of gov. regulation standards• Business costs of terrorism • Efficacy of corporate boards• Transparency of gov. • Protection of minoritypolicymaking shareholders’ interests
  12. 12. Selected Net FDI Inflows ($m.) Country GCI 2004 2005 2006 2007 2008 Ranking * Indonesia 54 Inward 1,896 8,337 4,914 6,928 7,919 Outward 3,408 3,065 2,703 4,790 5,900 Malaysia 24 Inward 4,624 3,967 6,048 8,403 8,053 Outward 2,061 2,971 6,041 10,989 14,059 Vietnam 75 Inward 1,610 2,021 2,360 6,739 8,050 Outward - 65 85 150 100 Botswana 66 Inward 392 281 489 495 -4 Outward -39 56 51 51 3 Mauritius 57 Inward 11 42 105 339 383 Outward 32 48 10 58 52 Nigeria 99 Inward 2,127 4,978 13,956 12,454 20,279 Outward 261 200 228 261 299 South Africa 45 Inward 799 6,644 -527 5,692 9,009 Outward 1,352 930 6,725 3,727 -3,533Sources: UNCTAD, World Investment Report 2009, Country Fact Sheets, online.* GCIs From Schwab, K. The Global Competitiveness Report 2009–2010, World Economic Forum:Switzerland, 2009.
  13. 13. Executive Opinion Survey Results (2008)Country GCI GCI Institution Most Problematic Factors for Doing Business Ranking Ranking (%)Indonesia 55 68 1. Inefficient government bureaucracy (19.3) 2. Inadequate supply of infrastructure (16.4) 3. Corruption (10.7)Malaysia 21 30 1. Inefficient government bureaucracy (16.7) 2. Corruption (14.5) 3. Crime and theft (8.3)Vietnam 70 71 1. Inflation (17.9) 2. Inadequate supply of infrastructure (16.5) 3. Inadequately educated workforce (10.6) 4. Corruption (9.0)Botswana 56 36 1. Poor work ethic in national labour force (19.0) 2. Inadequately educated workforce (14.0) 3. Inefficient government bureaucracy (11.1) … 8. Corruption (6.3)Mauritius 57 39 1. Inefficient government bureaucracy (18.6) 2. Inadequate supply of infrastructure (15.2) 3. Inadequately educated workforce (15.2) … 5. Corruption (8.0)Nigeria 94 106 1. Inadequate supply of infrastructure (22.3) 2. Access to financing (19.9) 3. Corruption (14.0)South Africa 45 46 1. Inadequately educated workforce (22.3) 2. Crime and theft (19.8) 3. Inadequate supply of infrastructure (12.9) … 6. Corruption (6.2)
  14. 14. Issues with Investor Studies• Among those already investing• Expectations coming in “miracle” vs. “basket case”… Need to know what potential investors think and what they think their most constraining factor(s) would be
  15. 15. Conclusions
  16. 16. … [that] as development specialists now celebrate thestunning economic achievements of China, Taiwan,South Korea, Singapore, and those following them,they tend to downplay the intellectual despondencythat characterized development studies of Asia in the1950s and through the Vietnam War.Chege, M. ‘What’s Right with Africa?’, Current History, vol. 93(583), 1994

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