• Thursday, December 07, 2023
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BusinessDay

Lessons from Poland

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  Nigeria can learn from Poland as Foreign Direct Investment (FDI) from BRICS (Brazil, Russia, India, China and South Africa) increases. The Central European country lured businesses with its location, economic fundamentals, labour force and investment incentives. 

Companies with operations in Poland can access a market of 250 million and 550 million people within a radius of 1,000 km and 2,000 km, respectively. It has a young labour force – though economics and management are more popular, an increasing number of graduates have studied engineering, e.g., mechanics and machine design, and mechatronics. The best among these young educated graduates are likely to get jobs in services and manufacturing hubs in Poland’s 14 Special Economic Zones (SEZs).

Polish policies were conducive to inclusive and sustainable development. As a result, they favoured greater FDI inflows from the EU, attracted investments into infrastructure, manufacturing and services, and encouraged small to medium enterprises (SMEs) that built capacity and increased productivity.

According to United Nations Conference on Trade and Development (UNCTAD), investments by BRICS in Africa are on the rise. FDI stock and flows increased to $10 billion and $24 billion, respectively, in 2010. Growth in GDP has been fast and rising. Though this growth has not been broad based, a report by UNCTAD notes, “The rise of FDI in manufacturing, which has positive consequences for job creation and industrial growth, is becoming an important facet of South-South economic cooperation.”

That Greenfield investment in manufacturing and services is the main form of investment is a huge positive – this type of investment has increased from 9 percent in 2003 to over 25 percent in 2012.

Apart from relatively cheaper labour, Chinese and Indian companies are granted incentives for products manufactured in Africa. Such incentives include the African Growth and Opportunity Act (AGOA) and Everything But Arms (EBA). Investors like Sona Group are launching new FCMG products, e.g., drinks and biscuits. They are also setting up packaging plants for plastic bottles and aluminium cans. With embedded power generation plants, they generate their own power and sell to others and are located in cities that are a drive away from neighbouring West African countries.

Lately, Tata, an Indian conglomerate, launched a strategy to increase its investments in Africa; according to UNCTAD, 80 percent of Indian investments in eight East African countries are in services and manufacturing sectors. Tata is seeking a 30-percent yearly growth in its current investment of $2.3 billion in hotels, cars and agricultural equipment. Bharti Airtel, an Indian telecoms company, has increased its stake in Airtel Nigeria to 79.06 percent from 65.73 percent.

In Nigeria, beyond the central bank, policymakers need to start thinking of how to manage all forms of capital inflows and their risks. In the case of Poland, incentives were not enough. Economics mattered too. Poland deftly managed the inflow of FDI by competent management of its macro economy; its GDP grew on average at 4 percent for 20 consecutive years.