What attracts foreign investors to the republic of Congo
Tonine Maverick Arthur Massamba,
аспирант, Ростовский государственный экономический университет «РИНХ» (344002, Россия, Ростовская область, г. Ростов-на-Дону, ул. Большая Садовая, д. 69; e-mail: toninemaverick@mail.ru)
Аннотация. Статья посвящена ретроспективному анализу прямых иностранных инвестиций в Республику Конго, которые с 2000 г. продолжают расти, и страна квалифицировалась в 2010 г., как один из лидеров по привлечению ПИИ среди стран Центральной Африки. Изучая отчёт о мировых инвестициях за 2013, а также отчёт МВФ об инвестиционном привлекательности стран для бизнеса за 2014 г, отчёт государственного департамента Соединённых Штатов об инвестиционном климате в странах мира, и данных Африканского банка развития, автор рассматривает различные усилия со стороны административных органов Республики Конго в области привлечения инвестиций в различные отрасли экономики. На базе уже действующих реформ, проведённых административным аппаратом и существующем потенциале страны, автор попытался сформулировать новые рекомендации, способные оптимизировать деятельность мировых транснациональных корпораций в области привлечения ПИИ в экономику Конго.
Abstract. The article is devoted to the retrospective analysis of Foreign Direct Investment stocks in the Congo Republic, which since 2000 have continued to grow in the country and have ranked the country from 2010 among leading nations in Central Africa. Focusing on WIR 2013, doing business 2014, US report on economic environment 2013 and African bank data, the author examines efforts conjugated by the government in different economics' areas. As well in terms of reforms undertaken by the administrative apparatus, I have tried to reformulate new recommendations according to the Congo's colossal potential that can optimize activities of transnational corporation from different regions the world.
Ключевые слова: прямые иностранные инвестиций, реформы, африканский банк развития, кластер, ЮНКТАД, ресурсы, иностранные инвестор, ТНК.
Keywords: foreign direct investment, reforms, African Bank of development, Cluster, UNCTAD, resources, foreign investor, TNCs.
On a decreasing background occasioned by the global crisis of total cross-border investmentsat the end of 2000, Congo Brazzaville couldkept upward trend of FDI stocks in the national economy.
In 1995-2004 the average amount of investment per year amounted to a total of $ 1.750 million, in 2005-2007 amounted to $ 6.441 million, and in 2008 - $ 11.126 million. Even in conditions of crisis in 2009 it reached $ 12.987 million, while in 2010 - $ 15.198 million [1, 1]. In 2000, Congo's share of FDI in Africa was 1.22%, in 2010 however came to 2.3%, in 2011- 3.1%, and in 2012 reached3.3%.
In virtue of competent economic reforms initiated by the government, the Congolese economy confidently demonstrates adequately increase of its GDP rate amounting 6.6% in 2013 even during the recession in 2008/09. Thus, according to UNCTAD's report (the United Nation Conference on Trade and Development) world investment report 2012, the Republic of Congo is included in the list of leading countries in foreign capitals in the middle Africa in particular and in Africa in general, occupything in 2005 the 11th position in Africa, in 2009- 10 position, in 2010- 9th position an in 2012- 8th position.
Table 1
Regions an countries 1995-2004 Average/year 2005-2009 Average/year 2010 2011 2012
$ million % $ million % $ million % $ million % $ million %
Africa 146,128 100 372,655 100 566,660 100 582,004 100 629,632 100
Middle Africa 14,688 10 36,258 9,7 52,187 9,2 56,022 9,6 55,610 8,8
Congo 1,749 1,1 8,687 2.3 15,198 2.6 18,254 3,1 21,012 3,3
Angola 7,804 5,3 12,679 3,4 11,859 2,0 8,835 1,5 1,937 0,3
Cameroon 1,722 1,1 3,258 0,8 4,488 0,7 4,731 0,8 5,238 0.8
Central African Republic 0,109 < 0,1 0,315 < 0,1 0,511 < 0,1 0,548 < 0,1 0,619 < 0,1
Chad 0,259 0,4 2,885 0,7 3,595 0,6 3,877 0,6 4,200 0,7
Dem. Rep. of Congo 0,689 0,5 1,761 0,5 3,994 0,7 4,528 0,8 4,488 0,7
Equatorial Guinea 1,448 1,0 5,254 1,4 9,413 1,6 11,388 2,0 13,503 2,1
Gabon 0,246 0,2 1,288 0,3 2,871 0,5 3,567 0,6 4,269 0,7
Sao Tome and Principe 0,011 < 0,1 0,127 < 0,1 0, 260 < 0,1 0, 295 < 0,1 0, 344 < 0,1
Source: table by author in reference of [Электронный ресурс] Режим доступа: http://unctadstat.unctad.org/TableViewer/tableView.aspx Дата обращения: 11.12.2013.
According to World investment Report 2012, the cumulative sum of FDI in the Congo Republic between 2012 was 21,012 million.Various factorscould explain such attraction; besides differ-
ent reforms undertaken by the country's authorities, the country owns one of the most attractive natural and resources potential in Central Africa. Congo's substantial natural resources, mainly oil, may be
considered as a solid base for structural reform of the economy. The importance of oil has steadily increased since deposits were discovered and production began in 1957 and world prices began to rise. Output rose to 269 300 barrels a day in 2012 (from 65 000 in 1980) through new investment and full production of initial deposits. Congo is now the fifth largest producer in sub-Saharan Africa and oil is 70% of its nominal GDP and 90% of total exports. The oil ministry predicts output will peak at 140 million barrels in 2012 before declining to 40 million by 2029 unless new deposits are found. Recent estimates say the country has reserves that would last for another 40 years at the present rate of production. Oil revenue (about 80% of government income) funds a great deal of public investment, which was USD 1.2 million between 2009 and 2012. (More than 70% of infrastructure spending is from domestic resources.) Oil income allowed the government to launch a bold program to upgrade energy and transport infrastructure that should help economic diversification. A special "oil reserves fund" has been opened at the BEAC to receive unbudgeted surplus revenue from higher oil prices [1, 3].
The country has other substantial mineral reserves explaining presence of multinational corporations, along with forestry resources, natural gas and good agricultural potential. Gas reserves are estimated at between 1.7 trillion and 2.6 trillion cubic metres (20 years of production at the current rate). Iron reserves are put at more than 2 billion tonnes and Congo has the world's second biggest forestry reserves after the Amazon. The forestry sector is 10% of non-oil GDP and generates XAF 100 billion in exports of wood (the country's second biggest export) and more than XAF 20 billion annually in tax revenue. Sustainable production of wood is estimated at 5 million cubic metres (1 million in 2011). Congo also has 10 million hectares of arable land. The huge mining potential is beginning to be exploited, with four projects underway, including one
expected to start production in late 2013 and another in 2016, as part of the Congo Iron and Mining Project Development However, development of all these resources is hampered by serious structural constraints [1, 4].
The massive inflow of FDI can also be the result of political stability over the last ten years. During three years, civil wars and militia conflicts plagued the Republic of Congo and causing at least 13,929 battle related deaths between 1996 and 1999 [2, 1]. The signing of peace agreement between the different armed groups in 1999 and a firm policy of securing the country have allowed the return of calm and stability in the entire nation [3, 1]. After almost three decades of a centrally-planned economy, Congo entered a period of broad liberalization at the end of the 1980s. With assistance from the IMF and the World Bank, the Congo implemented various structural adjustment programs to create a private sector-based market economy. Since 1992, the ROC has been a representative democracy [4, 1]. This admirable situation is being encouraged by Congolese's international partners and has stimulated to establishing credible public institutions capable to stand for national interests and able to implement competitive strategies of development as well as to attract potential investors.
The African Bank of Development's researches illustrate that the country displays an important economic discipline and the bank's experts remain optimisticabout the Congo's economical progression. The economy should grow a fairly satisfactory 5.1% in 2013 and 5.3% in 2014 (up from 4.9% in 2012) but this should be seen against the worldwide economic outlook [5, 1]. The actual economical conjuncture of Congolese economy predominated by the promotion of raw material materials in the one hand and by the predominance of industrial sector in GDP, quite stable financial and economic system recent years are boosting investment in the country.
Table 2
Macroeconomic indicators (% GDP) Years
2008 2009 2010 2011 2012 2013
GDP rate 5,6 7,5 8,8 5,3 5,7 4,7
Oil rate in GDP 6,1 16,2 13,8 1,0 4,0 2,8
Inflation rate (%) 6,0 4,3 5,0 2,5 4,9 3,1
Overall budget balance 26,1 5,2 16,3 22,0 20,0 18,5
Current account balance 1,1 -9,0 4,7 13,3 14,6 14,5
Foreign debt 59,3 50,2 21,2 19,9 20,5 19,5
Source: Statistics Department of the African Development Bank PEA 2012 [6].
Most of African countries are characterized by a predominance of a high share of agriculture in GDP; this reality on the contrary is not common to
The Congo's GDP structure. The industry remains the motor branch of the national economy and constitutes the pillar of country's budget.
3,3 1,4 3
20,5
58,6
I Industry Services I Construction I Processing industry I Agriculture forestry
Fig. 1. The Congo Republic GDP structure. Source: Diagram by author in reference of tresorpubliquefrancais.org data. [7,1]
By the structure of economy, potential investors are able to forecast investing or not in a country; the structure of GDP helps to orientate business in the country, in the case of Congo for in
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