01 Feb 2016

Small middle-income countries need to raise the bar in putting themselves in a favourable position to attract investors,  says the governor of the Bank of Botswana, Ms Linah Mohohlo.

Giving remarks during a dinner that marked the end of a conference on small middle-income countries  at  the Gaborone International Convention Centre (GICC), Ms Mohohlo said countries need stability in order to attract investment.

“As small open economies we have nowhere to hide.  This behooves us to spare no effort in raising the bar on macro-economic policies in support of the stability that is so crucial for sustained investment, economic growth and development,” she said.

Ms Mohohlo added that small middle-income economies need to utilise their endowments such as physical infrastructure as well as the skills their people have acquired and the strength of their state institutions and policy frameworks.

“Overall, these endowments play a large part in determining what might be feasible to achieve in the medium to long term. In other words, the past is the prologue for the future, and this is what economists refer to as ‘initial conditions’ for growth,” she said.

She noted that foreign investors look at small countries without any sentimental connections that could cloud their judgement. She added that countries need to innovate if they aim to grow and diversify their economies through foreign direct investment (FDI).

“This should take the form of certainty about the policy environment such as macro-economic policy, robustness of the fiscal regime and residency requirements,” she said.

However, Ms Mohohlo warned against “complex, expensive and adhoc incentives such as tax breaks and subsidies,” saying they rarely have the anticipated benefits.

Ms Mohohlo was closing the conference on small, middle-income countries in Sub-Saharan Africa. Ends