Africa’s share of foreign direct investment (FDI) has lagged behind other regions in the world, despite a sharp increase in FDI inflows to the region in 2001. Factors contributing to this circumstance include perceptions of high corruption, weak governance and poor infrastructure. The motivation of this paper is to investigate the impact of openness to trade on the FDI inflow to Africa. In addition to economy-wide trade openness, we also analyse the impact on FDI of openness in manufactured goods, primary commodities and services. The empirical work uses cross-country data from selected African countries observed over four periods: 1980-1985, 1985-1990, 1990- 1995 and 1995-2001. We find that the FDI to GDP ratio responds well to increased openness in the whole economy and in the services sector in particular.
Abstract:The central argument of this paper is that African countries stand to benefit more from the goodwill currently being shown by industrialized countries who have committed themselves to further opening up of their markets for commodities from the region. However, more needs to be done by African governments and the international community if these benefits are to trickle down to the African farmers and result in attaining the goal of poverty reduction. This paper identifies the issues that need to be addressed by all parties involved. At the macro level, our results find that the distortion in the macro environment is a major factor hindering African exports. At the micro level, our results show that for farmers to benefit from the opening up of the international market, they would need more access to market information, easier road access to the markets for both their output and inputs, improve their farming techniques by utilizing modern scientific farming methods and inputs, and to increase their productivity. At the international level, our study finds strong results indicating that foreign tariff rate, price support (PNAC) and standards act as a market barrier to African agricultural exports.Resume: L'argument principal de cet article est que les pays africains entendent tirer davantage parti de la bonne volonte actuellement affichee par les pays industrialises, qui se sont engages a ouvrir davantage leurs marches aux produits originaires de l'Afrique. Cependant, beaucoup reste a faire de la part des pays africains et de la communaute internationale, si Ton veut que ces avantages parviennent aux exploitants agricoles africains et contribuent a la realisation de l'objectif de reduction de la pauvrete. L'article identifie les questions que toutes les parties prenantes sont appelees a resoudre. A l'echelon macroeconomique, il ressort de nos resultats que la distorsion de l'environnement macroeconomique constitue une des entraves aux * The findings, interpretations, and conclusions expressed in this paper are those of the authors and do not necessarily represent the views and policies of the World Bank or its Board of Directors or the countries they represent. o op pe en nU UP P expectations africaines. A l'echelon microeconomique, nos resultats montrent que, pour tirer parti de l'ouverture du marche international, les exploitants agricoles doivent avoir un meilleur acces aux informations sur les marches, ainsi que des routes d'acces plus facile aux marches pour les intrants et la production, ameliorer leurs techniques culturales grace a des methodes et intrants scientifiques modernes, et accroitre leur productivite. A l'echelon international, il ressort de notre analyse que les tarifs etrangers, le soutien des prix (PNAC) et les normes a respecter entravent les exportations agricoles de l'Afrique.
The paper uses a micro-simulation computable general equilibrium (CGE)
This study supports the conventional wisdom that openness to trade is good for investment and economic growth. Whether this conclusion leaves space for institutional quality as a complimentary policy to determine the success of trade liberalization in Africa is the objective of this paper. The theoretical model and empirical analysis show how the behavior of government bureaucrats can be used to explain the impact on investment of the interaction between increased openness to trade and the quality of institutions. Empirical work is conducted using panel data observed over three periods: 1985-1990, 1990-1995, and 1995-2000.
The paper uses a microsimulation computable general equilibrium (CGE) model to study the impact on poverty of a complete removal of tariffs in Zimbabwe. The model incorporates 14,006 households derived from the 1995 Poverty Assessment Study Survey. This paper's novelty is that it is one among a small group of papers that incorporates individual households in the CGE model as opposed to having representative households. Using individual households allows for a comprehensive analysis of poverty. The complete removal of tariffs favours exporting sectors. Poverty falls in the economy while inequality hardly changes. The results differ between rural and urban areas.
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