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President attributes borrowing to falling FDI

2018-10-24  Edgar Brandt

President attributes borrowing to falling FDI

WINDHOEK - Falling Foreign Direct Investment (FDI) is in part why many African governments have resorted to international capital markets for the purpose of financing infrastructure and other development needs, President Hage Geingob said in Geneva yesterday.

Speaking at the United Nations Conference on Trade and Development (UNCTAD) World Investment Forum Global Leaders’ Summit, taking place in Geneva, Switzerland Geingob called on more to be done to enhance debt-capacity building and technical support for debt sustainability. 

UNCTAD is the main UN body dealing with trade, investment and development issues. 
According to Geingob, policy space is critical for the management of developing economies and this, he said, is important for the implementation of the UN’s Sustainable Development Goals (SDGs) as smaller economies strive to cope with globalisation.  

“Similarly, countries such as Namibia and others, which are classified as upper middle-income countries, continue to face challenges in mobilising resources to finance their development goals,” he said, and using the occasion to once again lament Namibia’s classification.

The Namibian government often argue that the current classification was flawed as it did not reflect actual inequalities in the country.

The classification, government often say, has robbed Namibia of certain privileges accorded to countries in lower classification categories, such as accessing finance on preferential conditions. 
Geingob yesterday said: “The World Bank formula takes our GDP and divides it by our small population, thereby deriving a high per capita income.”

“By so doing, the World Bank makes the faulty conclusion that Namibia is an upper middle-income country. This reduces access to more affordable debt financing and grants.”

“However, what this calculation fails to consider is the fact that due to past injustices, Namibia is still faced with a highly skewed income distribution. We must find a formula to provide countries such as ours with assistance commensurate with their needs,” he told the gathering of world leaders at the UN’s European headquarters. 
According to the 2018 World Investment Report, Global FDI fell by 23 percent to US$1.4 trillion in 2017 from US$1.8 trillion the previous year. 

During the same period, FDI flows to Africa, as well as greenfield investments reduced by 21 percent and 14 percent respectively. 

More worrying for developing nations, is the fact that the numbers of greenfield investment projects in manufacturing have been consistently lower during the past five years, when compared to the preceding five years. 
A green field investment is a type of FDI where an international parent company builds its operations in a foreign country from the ground up.

Said Geingob: “FDI is critical and remains the largest external source of finance for developing countries and one of the major sources of financing the Agenda 2030. Therefore, a fall in investment would have a negative impact on the realisation of the Sustainable Development Goals,” Geingob stated. 

He noted that the 2018 World Investment Report, the 2018 Trade and Development Report and the 2018 Global Investment Trends Monitor, all confirm global flows of FDI fell by 23 percent in 2017, with growth being near zero in developing economies. 

“It is of particular concern that in 2017, FDI to Africa was at a 10-year low. Even more worrying is the finding that the sharp decline in investment was driven by inward looking policies rather than by the economic cycle,” Geingob lamented. 
He added that the negative trends in FDI call for viable remedies in the investment policy making area. “The time has come for us to decide; do we abandon multilateralism and turn inward, abandoning decades of progress, or do we decide to hold hands and pull together for the benefit of humanity,” Geingob concluded. 


2018-10-24  Edgar Brandt

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