Direct Foreign Investment key to economic development

Direct Foreign Investment key to economic development
Published: 06 December 2017 (559 Views)
In its efforts to revitalize the economy, Government should consider prioritizing Foreign Direct Investment as the basis of restoring the ailing economy in the best possible shortest period of time.

Foreign Direct Investment (FDI) can be viewed as the growth rate in capital inflows that add over time to fixed capital stock of the home country. This capital formation is expected to boost production and output of the wider economy of a nation.

FDI has the potential to deal with the economic obstacles such as shortages in financial resources, technology and skills. In most developing countries, FDI has been the center of attention in any country that is reviving its economy.

Government's priority sectors for foreign investment include manufacturing, mining and infrastructure development.

There are a number of potential profitable opportunities in Zimbabwe's manufacturing sector for investors.  To start with, there is need to retool and rehabilitate plants and equipment or even installing new machineries to improve production. The industrial sector is involved in the value addition of primary products to produce capital goods.

It is a Government policy that foreign investors wishing to participate in the agricultural and transport sectors may only do so through joint venture arrangements with local partners.

Speaking during the swearing in ceremony of new Cabinet Ministers, President Emmerson Mnangagwa emphasised that one of the key things to consider when recovering the economy will include attracting foreign direct investment to address high levels of unemployment, while transforming the economy towards the tertiary. The President also stressed that many skilled Zimbabweans who have left the country for various reasons must now come into the broad economic new chapter designed for the country's recovery and take-off.

It is a fact that Zimbabwe is one of the best destinations for investment. Firstly, the country has vast natural resources that it can rely on to revitalize its economy. Its topography, soils and climate are conducive to producing a very wide range of agricultural commodities. Similarly, a large variety of commercially exploitable mineral deposits exist in the country.

Both foreign and local investors willing to promote investment in Zimbabwe can also do business in that sector to stimulate production.

Secondly, Zimbabwe's geographical location is pleasant in terms of trade. It is well positioned to serve regional markets for countries that are members of the Southern African Development Community (SADC).

Thus, the country is centrally and strategically located in the Southern African Region. It is also a regional entry and forms part of the North -South Corridor linking South Africa with countries to the north of Zimbabwe such as Zambia, Democratic Republic of Congo and Malawi.

In order to repair bridges with the international community, Government must modify some of the investment policies to make them more investor friendly.

In 2014, Minister of Finance and Economic Planning, Patrick Chinamasa once said that Zimbabwe was open to foreign direct investment from all countries and that business partnership should be without preconditions. Relaxing some of the investment policies is a better way of promoting easy of doing business and can entice more investors.

FDI must also assist in stimulating economic growth of any nation by attracting other investments through the transfer of technology, knowledge and skills to domestic companies.

Most local companies had been lying idle without any production taking place. Now that there is need for an economic transformation, industrialization is necessary and it has to be done using modern technologies.

In addition, FDI has a potential to spur competition, innovation and improvements to a country's export performance, a situation that is equally desirable for a healthy economic growth.

Lastly, Government through the Ministry of Industry and Commerce should be encouraged to heed President Mnangagwa's call of luring foreign investors as a top factor in restoring the economy.


- Chido Chikuni

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