The foreign-owned breweries, battery makers, cement producers, and refiners spread across Africa illustrate this type of investor. Obviously, these investors are interested in the size of the local market. Especially attractive to governments is the foreign investor who will manufacture for export markets. Due to global competition, however, export manufacturing industries can be especially difficult to attract to a country that does not have a reputation for such industries. The experiences of Asian and some Latin American countries in attracting foreign investment offer some important lessons to African countries about which strategies to avoid.
Tax Incentives Are Usually Ineffective.
Several studies have shown that tax incentives are almost totally ineffective in attracting investment for the domestic market and have only a small impact on export manufacturers. Reduced rates of taxation may be necessary if a country's corporate tax rate is excessively high, but it is better to reduce the general rate than to introduce a system of incentives. Creating Ineffective One-Stop Shops. Despite governments' good intentions, in the vast majority of cases the agencies have quickly become just another barrier to foreign investment. Without the solid backing of the country's top leaders, one-stop shops quickly lose their ability to issue permits that will be honored by the implementing agencies, and investors find it better to negotiate directly with the responsible agencies.