FUNDING DEVELOPMENT THROUGH FOREIGN DIRECT INVESTMENT

FUNDING CAMEROONS DEVELOPMENT THROUGH FOREIGN DIRECT INVESTMENTPRESENTED BY SHUDZEKA ERIC TEWIY

Country specificsRegion: Sub-Saharan AfricaIncome category: Lower middle incomePopulation: 21,699,631GNI per capita (US$): 1,170Doing Business 2014 rank: 168Doing Business 2013 rank: 162*Change in rank: -6 surface area: 475650 km2(sources: Doing Business 2014 and NIS 2013)

Target audienceThe general audience is the Cameroonian public

The target audience will include:Policy makersMultinational enterprisesThe scientific communityThe educational communityCameroonian entrepreneurs

Area of focusCameroons greatest challenge is achieving sustainable economic growthThis presentation focuses on how FDI will help achieve such economic growth

Presentation objectivesTo propose an alternative means of financing Cameroons development using foreign direct investmentTo propose holistic measures that could help achieve sustainable economic growth in Cameroon

What is FDI?Foreign Direct Investment occurs when a firm invests directly in facilities in a foreign countryA firm that engages in FDI becomes a multinational enterprise

The ProblemCameroons labor market is characterized by a large share of the labor force occupied in the informal sector with few formal jobs Unemployment is low, at about 31% in 2013 (NIS, 2013), because most Cameroonians cannot afford not to be working. Most of these jobs, however, have extremely low productivity and generate very little money The challenge is thus to enhance the productivity hence the earnings of those already employed, while at the same time creating more formal jobs.

The problem contdAn unfavorable investment climate, particularly inappropriate infrastructure, is also holding the country back

Despite the noted constant economic growth, from 1.9% in 2009 through 3.3 in 2010 to 5.4 in 2014, the country is still groping towards emergence

Problem continuedThe effects of the economic growth is yet to be felt by the common man Much revenue is therefore needed to boost the economyWith its high external debt, which stood at 1179.9 billion FCFA in 2011 (MINFI, 2012), taking external loans will greatly increase the countrys precarious natureLoans are not an option now because much revenue is spent on servicing debts (confer 134 billion FCFA out of a total of 1763 billion on 2013 budget) FDI could therefore be the missing link

My theory of Change

In lieu of taking external loans, the government of Cameroon could engage in the following:Create a favorable climate for multinational firms to invest in CameroonProvide tax rebates for multinational firms who want to invest in CameroonMultinational firms must take obligations that as part of their corporate social responsibility, they will provide social facilities to the local population such as hospitals, schools, roads and electricity employ a given percentage of Cameroonians as part of their skilled and unskilled labour act as internship and mentorship training centres for young Cameroonians collaborate with schools and Cameroonian authorities in designing curriculum such that training will be geared towards industrial needs

Why would the Government be interested?This will reduce its yearly expenditure by close to 134 billion FCFAIt will increase its revenue through the collection of taxes from companies that grow around the multinationals (in their value chains and value networks)It will increase employment opportunities in the countryThis will reduce government expenditure on the provision of social facilities such as roads, hospitals, schools, etcThe release of such funds could then be used to invest in sectors such as energy, port facilities and boosting local entrepreneurship

Government interest contdFDI in this way will help align education to the world of work by multinationals helping schools design their curricula it will also help increase local entrepreneurship by multinationals posing as role models and mentorsIt will lead to the provision of essential goods and services that could not be provided by the government aloneMultinationals will help in the reengineering of Cameroonian organisations by providing newer organizational structures and increase competitionIt will reduce dependence on the export of primary products whose prices fluctuate and could lead the country to an economic crisis

Why would multinational firms be interested?They get a tax rebate that reduces their expenditureThe country is enjoying a constant economic growth of about 5.4% despite the average of about 2% in Sub Saharan AfricaThe country is engaging in many infrastructure investments that would boost the economic climate such as the Lom Pangar energy project, the Kribi deep sea port project, the Wouri bridge project etc (MINFI, 2012)There is a ready supply of labour that could be easily sourced from among the 152 institutions of higher learning in the country (NIS, 2013)There is the presence of extensive raw materials and a ready market for their produce

Why would the private sector be interested?They also benefit from the social facilities provided by the multinationalsThere is a great opportunity for the formation of inter-organisational dyads (alliances and partnerships)They benefit from the knowledge and training that comes through the partnership of multinationals with universities and institutions of learning

ConclusionFor Cameroon to become An Emerging, Democratic and United Country in Diversity (Vision 2035), a holistic approach to development would be required. One of the major approaches would be to reduce loans and increase FDI to finance development.

ReferencesCameroon Vision 20135Doing Business 2014, CameroonIMF (2012). Unlocking the labour force: An Economic Update on CameroonMINFI(2012). Proceedings of the Annual Conference of MINFI Central and Devolved Services, 2012 EditionMINFI (2013). Report on the Financial situation 2012 and prospects for the nation 2013 financial yearNational Institute of Statistics (2013). Annuaire des Statistiques du Cameroon 2013