Transcript Assessing the nature, extent and impact of FDI in Senegal

SENEGAL
“Assessing the nature, extent
and impact of FDI in
Senegal’s agriculture”
Based on “Trends And Impacts Of Foreign Investment In Developing Country
Agriculture” by the Food and Agriculture Organization of the UN
Harminder Singh Sangha*Sonia Heinebal * Andrea Sicuro
Pauline Fidélius * Ariana Alva Ferrari
* Numerous
attempts made since the early 1960s to design the right set of
agricultural development policies that could successfully set Senegal on a higher
paced economic growth path.
* However, results are not yet visible to the naked eye.
1.
2.
3.
Almost 50 percent of the population remains officially unemployed,
more than half the country lives in poverty with GNP growth for 2009 expected to
reach just 1.5 percent.
the country relies on imports for 70 percent of its food needs – a rate higher than most
countries in sub-Saharan Africa.
* Senegal
authorities faced during the 2008 global food crisis when the prices of
many food items skyrocketed in international markets as a result of cutbacks on
food supplies from its key Asian food exporters (Thailand, Pakistan, etc.).
* To
overcome these weaknesses Senegal must swiftly reform key sectors of its
economy starting with its agriculture, in order to achieve the highest economic
growth rates possible – in the order of 7 percent or more per annum.
* This
chapter reviews selected initiatives including various efforts made in the
country recently to attract more FDI to help reduce the impacts of these
weaknesses drawing as much as possible from foreign resources.
* Agricultural lending in Senegal currently accounts for less than 5 percent of the
total portfolio of the financial sector. There are almost no loans for capital
investment. the agriculture sector is desperately in need of credit: thus, foreign
investments are vital.
* Senegal’s
leaders are well aware of the country’s persistent vulnerabilities to
poverty, food insecurity and lack of general economic competitiveness. In the
wake of the 2008 food crisis, the government responded with the OANA
programme.
* For
the period of October 2008 to 2010 for example, the GOANA set goals for
itself to produce 2 000 000 tonnes of maize, 3 000 000 tonnes of cassava, 500 000
tonnes of paddy rice and 2 000 000 tonnes of other cereals (millet, sorghum and
fonio), 400 000 000 litres of milk and 600 000 tonnes of meat.
* Weakness in attracting FDI and building FDI stock
* Major providers: Arab States – Malaysia – China – Some African countries France
*High illiteracy rate
*Poor infrastructures
*Unreliable power supply
*Unfriendly tax system
* No agriculture scheme
* No war no peace environment
* Land insecurity
* Inflexible labour code
* Corruption
* Ambiguous competition policies
KEY INSTITUTIONS:
Great Agriculture Offensive
for Food and Abundance
OFFICE OF THE
ACCELERATED GROWTH
STRATEGY (AGS)
Agency for the promotion of
investments and major
projects
SENEGAL INVESTMENT CODE
* Specifies tax and customs exemptions according to the size of
investment, classification of investor and location.
* Examples:
 Customs exemptions (3 years)
 VAT Suspension (3 years)
 Tax credits: 40% eligible investment, 5 years and 50% taxable profit
 Year extensions if investment is in the area outside Dakar to encourage
inland investments
 Unlimited recruitment of expatriate workers
 Duty free importation of capital goods and more…
* Steps taken in improving Senegal’s Free Zone Programme


Put into action the “One Stop Shop”

Signed investment treaties with the United States, France, Switzerland, Denmark,
Finland, Spain, Italy, Netherlands and Japan which resulted the free transfer of capital
and profits thus protecting capital investments and intellectual property rights

Became a member of Agencies such as the World Trade Organization
Replaced its Free Trade Zone with Enterprise Zone Franche d’ Exportaition to reduce
Taxes and offer duty free imports
* National land classified as national patrimony is called Domaine National (DN) and
it is the more complex area to discuss in the context of Senegal.
* AGENCIES
1.
Cadaster: it surveys and maps land to determine property boundaries as well as
subdivision of lands
2.
Conservation Foncier: registers land, and authorizes land dividing operations before
the Cadaster surveys them.
3.
Bureau Des Domaines: responsible for land zoning and direct administration of state
lands. Investors who want a zoning change apply here
• Senegal’s court system
receives around 20% land
disputes in Dakar and 50% in
Kaolack every year.
• Courts are reported to be
inconsistent & unreliable to
allow access to its services,
specially to the poor, who
cannot afford its high fees,
costs and physical distances.
• Most agencies mentioned are
underfunded, understaffed
and underequipped.
“Everybody owns everything then no one owns anything” The government of
Senegal and its system of land ownership & control is universally recognized as a
constraint to agricultural modernization
Past 10 years :
 Structural deterioration of the trade balance => have underscored
the export earnings opportunities
 But upward trend performance in Direct investment from 2001,
with significant increase in export of non-traditional products
Current Situation :

Large number of FDI related companies
actively involved with the Senegal Food
Industry

FDI inflowing essentially directed toward
the modern sector (agro-industry)

But limited impacts in strategic areas like
technology transfer and R&D =>
agricultural development through
innovation is vital for reducing rural
poverty
* The Senegalese Tomato Industry
• Stand out from the rest of the country’s agricultural
•
•
•
landscape
Contract farming agreement
Social and economic improvement
Tomato production accounted for 6% of cultivated land areas
* GDS
• Vertiacl integration of production stage
• Model more viewed as powerty-perpetuating than powertyeradicating
* Increased risks for small farmers and future Fdi : landscarcity
•
•
•
Diminishing natural resources
Growing land demand pressure
Access to land = obstacle that investors face in Senegal
Large-scale land acquisition
Over the last four years many analysts, development agencies, NGOs and the
media have focused on one specific category of primary agricultural
investment, namely acquisition of agricultural land on a large scale.
NEGATIVE EFFECTS
• lands acquired by foreign investors
tend to be among the best ones
• displacement of smallholder farmers
• loss of grazing land for pastoralists
• social fragmentation
>
POSTIVE EFFECTS
• generation of employment
• transfer of technology
Further research on the impacts of agricultural
investment
The case study approach
has inherent limitations
and cannot fully capture
the wide variety of
situations
“It is recommended that the
organizations working in this
area develop a
common analytical
framework that would be
applied to all studies.”
It should examine the structural
changes induced by the
investment project over the
short, medium and long term,
at both macro and
microeconomic levels
Policies for promoting
investment for sustainable
agricultural development
Increasing the
effectiveness of support
A more proactive role for
civil society organisation.