Chief of Trade and Poverty Branch of the United Nations Conference on Trade and Development (UNCTAD) Dr. Patrick Osakwe has said the country’s search for Foreign Direct Investments (FDIs) must allign with its political realities.
He spoke in an interview with The Nation on the sideline of the 24th Annual Meetings of the African Capacity Building Foundation (ACBF) Board of Governors, which ended in Addis Ababa, Ethiopia at the weekend.
He said despite the craving for FDIs, this must be done to determine the investment that would be good for the economy considering the nation’s political reality.
The UNCTAD official decried the idea of giving concessions to FDIs that were not vital to a nation’s economic growth plan.
His words: “Every country needs to attract Foreign Direct Investments (FDIs). FDI is good. But it is important for each country to know the kind of FDI it wants to promote. Most African country promote FDI without trying to do research to determine what specific aspect of FDI will be the best for their economies. It is not every FDI that comes into a country that is good for an economy.
“You have to do enough research to determine what kind of FDI that will be appropriate for your economy giving the structure you have in place and political reality. This is important because it will enable you to know the kind of leverage you have when you are negotiating with foreign investors.
“Now, if an investor wants to invest in a sector that is so vital to the economy, those are the kind of investors you want to give concessions to because they have those things you don’t have. But if an investor is trying to come into a sector that is not critical in terms of achieving your development objective, those kinds of investors are not the ones you have to give incentives.
“They should come if they want to and provided they follow the right rules or set of rules the country has put in place.”
Osakwe said what he had found in most developing countries was that they failed to do their homework in identifying the kind of FDI they need to grow their economies.
“One thing we don’t know is that trade has the potential to enable a country lift people out of poverty. But to realise this potential, you need to put in place the right policies and develop the productive capacities to take advantage of opportunities in the trading system.
“Unfortunately for most developing countries, especially the poorer ones, it is either they don’t have the right policies in place or they have not made an effort to transform the structures of their economies to be able to take advantage of opportunities in the trade system,” he said.
The UNCTAD official, who stressed the need for diversification, noted that “Nigeria is too dependent on oil.”.
“There has to be a way of diversifying the economy from the oil sector. The good news is that the Federal Government is beginning to pay a lot of attention to this issue of diversification. My hope is that in the next few years, we will start seeing some of the results,” he added.
To maximise Nigeria’s gains in international trade, he called for structural transformation.
UNCTAD’s Chief of Trade and Poverty Branch said: “When Nigeria is thinking of FDI, it should be thinking of what type of FDI that will allow it to transform the economy structurally. We need to ask ourselves that: the investors that are coming, are they going to transform our economy structurally?
“If he is coming with the kind of investment that won’t have significant impacts in terms of structural transformation, those kinds of investments are not the ones you want to give priority. My position is that countries have to do their homework. “
To get the best from global trade, the UNCTAD official called for Nigeria and others to build their capacities to negotiate international trade agreements.
Osakwe noted that the disadvantages of not abiding by the rule show easily when developing countries go for negotiation of foreign agreements, “but not mindful of the fact that there were lots of technical terms they didn’t know of”.
He said: “When they go to negotiate with developed countries, which have experts in these areas, they are at disadvantages. The second point is that, when they do understand issues, their economies have several bottlenecks that make it so difficult for them to be able to explore trading opportunities. So, if they have to benefit from trading opportunities, they have to lift the supply constraints that are making it difficult for their economies to benefit from international trade.”
UNCTAD’s Chief of Trade and Poverty Branch cautioned against transferring the nation’s top trade negotiators from ministry responsible for trade and investment to other terrains of civil service, where they would not be useful to the country.
He urged the government to revisit trade agreements that were not delivering the required benefits to lift the citizens out of poverty.
Osakwe advised the government to see trading as one aspect of the economy that could empower the people.