The importance of foreign investment in a country
Global leaders and governments often talk about the need to increase foreign investment and the many benefits it would have on that particular country’s people. This is true all over the world, as foreign investment can lead to an increase in the country’s income and overall economy, more employment opportunities, and the growth of the country’s businesses, amongst other things. Moreover, an improvement in the economy suggest stability within that country, which ultimately strengthens its currency and allows it to perform better on the financial markets. This is particularly of interest for those who trade global forex currencies, as the strength of one currency over the other can make or break your investment and portfolio, depending on which currency you are invested in
Overview of foreign investment in Malawi
When it comes to Malawi, unfortunately foreign investment has been fluctuating in recent years. This was expected in 2020 because of the global conditions, however, the rate at which investment declined shocked many. Compared to the estimated $822 million foreign investment income that was recorded in 2019, the measly $98 million that was reported in 2020 was proof of the economic crisis that the country faced, much like other parts of the world. Boasting close agricultural ties with South Africa, Germany and the United States, Malawi’s foreign investment income is mostly derived from trade within this particular sector. Additionally, the mining sector seems to be somewhat promising as well, as the exploration of rare earth elements near Lake Malawi has provided a glimpse of hope, despite the reported temporary collapse of raw materials prices. Writings on the matter suggest that countries such as Australia, South Africa, the UAE and the UK are amongst those that may possibly see merit in injecting additional investment resources in Malawi’s agro-processing, manufacturing and tourism sector, despite the travel restrictions that have heavily impacted many countries.
While there are reportedly no government policies to screen foreign investment in Malawi, any such investment must be registered with the Malawi Investment and Trade Centre.
One of the factors that plays a major role in investors deciding whether or not to invest in a particular country is political and economic stability. Fortunately for Malawi, countries view its political risk as relatively manageable. This is in light of the fact that since gaining independence in 1964, Malawi has done a good job as remaining free of violence. As such, the country is actively pursuing foreign investment opportunities. In early September 2021, the Malawian government clarified its intentions by reiterating that it has embarked on serious policy reforms and infrastructure development to attract investment in the agricultural sector. As it stands, the sector currently accounts for approximately 25% of the country’s GDP and approximately 80% of exports. Although Malawi is not immune to some of the regular challenges that are faced by developing countries, it has showcased resilience and persistence in adverse situations, such as the recent floods and Cyclone Idai, which undoubtedly had a dire impact on its leading sector, agriculture, as well as the unprecedented conditions of 2020. To attract foreign investment, Malawi give investors access to its neutral legal system and there is a mediation process that is in place to resolve any possible disputes that may arise; these are just some of the efforts that Malawi is making to encourage foreign investment.