FDI & Development

Consider the comparison of Asia versus Africa, circa 1970. The impact of foreign direct investment (FDI) can be seen in the remarkable GDP gains of the so-called “Asian Tigers”, charted in aggregate as Korea, Taiwan, Malaysia, Indonesia and Thailand. Contrast this to the African nations of Kenya, Ghana, Mozambique, Congo, and Ivory Coast. The average GDP per capita for each region was separated by only a few hundred dollars in 1970. The disparity is markedly different today.

There are surely at least a dozen different reasons for this, and most of them are completely irrelevant when searching for a solution. What is relevant is the understanding that investment, especially FDI, is essential to the growth of developing economies. Unfortunately, equally well understood is the fact that multinational corporations (MNCs) are not lining up waiting to invest in Africa or the rest of the impoverished world.

We come back to the quandary of FDI and development. Not until those struggling economies show prospects of robust growth will MNCs entertain the notion of meaningful levels of FDI. And a steady diet of official donor assistance (ODA) seems to have no more visible impact than to raise the domestic currency exchange rates. This is not to diminish the importance and absolute necessity of ODA; it simply states that ODA never has been nor ever will be a substitute for FDI.

GLOBAL LADDER respectfully submits to the economic powers that be-- governments, NGOs, and MNCs, too-- that it is time to try a new model. Our suggested model is based on Globally Conscious Sourcing, directing a small portion of MNC material spend to boost SME output and stimulate economic growth. Globally Conscious Sourcing has the potential to channel billions of dollar in material spending to economically distressed nations in Africa and elsewhere. And as jobs are created and incomes rise, which also strengthens the efficacy of ODA, it produces the conditions that lead to FDI. The making of the "perfect storm", as it were.

This is not to suggest there are any simple or quick solutions. Remedial measures would be needed in order to fully realize the promise of Globally Conscious Sourcing. The state of manufacturing in most of sub Saharan Africa, although not quite as bad as most in the developed world imagine it to be, still requires substantial financial assistance to upgrade machinery and technical expertise. GLOBAL LADDER proposes establishing Manufacturing Centers of Excellence (MCE) in various sub Saharan regions as a means of raising the manufacturing capabilities. This is a very mature concept; it has had a number of successes, and, yes, its share of failures, in its many manifestations over the years. However, to our knowledge, nothing along the scale of what we are proposing has ever been attempted in Africa. After several decades and many billions of dollars in approaches that have not produced sustainable solutions we feel the MCE concept is a bold but practical departure that deserves strong consideration.