Highlights: The recovery in FDI inflows witnessed in 2010 was dampened by political turmoil in North Africa and 2011 saw a trend towards divestments from this region and hence a drop in overall COMESA inward FDI growth. Globally, the outlook continues to depend on the recovery trajectory of the global economic crisis. The COMESA region’s linkages to the global economy are typified by trade, private capital flows, remittances and aid implies and these remain as potential transmission mechanisms of the effects of this fragile global economy to the region.
The 2012 COMESA Investment Report looks back at twelve years of an FTA and further analyses the links between regional integration and market seeking inward FDI. The report finds four reasons for further potential for inward market seeking FDI in COMESA.
First, scope still exists for COMESA policy makers to fully implement the trade and investment provisions that have been agreed upon.
Secondly, there are possibilities for deepening regional economic integration through the customs union, which was launched in 2009 and the Tripartite Free Trade Area, which is still under negotiation up to June 2014.
The third reason for this conclusion that potentially more market seeking inward FDI can still be tapped is existing room for improvement in the domestic business environment of Member states which would send a positive signal to potential investors.
Lastly the report analyses the phenomenon of the growing middle class in COMESA and suggests possibilities for further market seeking investment especially given that this emerging middle class has a high consumption profile that is important in stimulating demand in the region.
On the international investment policy front and its implications for the region, the report notes that the Doha Mandate is able to provide guidance for work at the regional level in promoting sustainable development and friendly investment that also ensures policy coherence at international, regional and bilateral levels. This will ensure that COMESA Member States’ investment policies play the role of serving their sustainable development objectives through both attracting FDI and also deriving benefits from it.
- The following trends are captured in the 2012 COMESA Investment Report
- COMESA inward FDI decreased by 49% in 2011 compared to its 2010 levels.
- Countries that experienced the most noteworthy growth in FDI in 2011 were Rwanda (151%), Zimbabwe (133%), Ethiopia (117%), and Kenya (79%).
- In terms of total COMESA FDI inflows, Sudan, Zambia and Congo DR accounted for the highest shares of 29%, 21% and 18% respectively in 2011
- The report captures intra COMESA FDI inflows from most recent national FDI surveys for the years 2007-2011. Egypt’s average FDI inflows for the period 2007-2011 from the COMESA region amounted to US$51.77 million. The majority of the FDI received by Egypt was contributed by Libya, especially prior to 2011. Results from the Kenya 2010 Foreign Investment Survey point toward the fact that Mauritius and Uganda were the major COMESA investors in Kenya. Average COMESA originating inflows into Uganda amounted to US$70.94 million between 2007 and 2009. Zambia’s FDI inflows from COMESA amounted to US$68.52 million between 2007 and 2010 mostly from Libya followed by Mauritius. Average FDI inflows into Madagascar amounted to US$49.86 million between 2007 and 2010, mainly from Mauritius. FDI inflows into Malawi from COMESA were worth US$19.7 million in 2010. COMESA accounted for US$ 76.43 million FDI inflows into Rwanda for the period 2010.
- Major outward investors in COMESA are Libya, Egypt, Mauritius and Kenya. Significant declines in FDI outflows were recorded in 2011 especially for North African COMESA Member countries.
- Inward FDI Stocks increased by 5% in 2011. The rate of return on COMESA region FDI stocks fell to 6% in 2011 from a return of 9% in 2010. Countries with the highest return in 2011 were Swaziland (32%), Burundi (24%) and Zambia (14%). For Swaziland, despite being the highest rate in the region, this represented a decline from the 2010 situation. Libya’s 2011 performance had an impact on the COMESA region rate of return for 2011.