Although the Gambian banking sector has so far escaped unhurt and has registered growth in investment and performance, investments in other sectors have been hard hit by the world economic downturn, as foreign direct investment (FDI) dropped significantly. Business Digest's Mariam Saine reports the findings on the Gambian investment climate.
Foreign direct investment into The Gambia has reduced by 60 per cent lower than forecast in 2008, even though it remains the most important form of investment in the country.
According to a recent report of a survey by the joint effort of the Gambia government, the Development Finance International (DFI) and the West African Institute for Financial and Economic Management, investment in real estate and tourism and exports of goods and services also took a nosedive, save for the banking sector which remains unhurt and has recorded "significant investment and growth" because banks in the country have not relied on borrowing from their European and United States counterparts to fund growth, but have raised capital domestically.
This drop in foreign direct investment is widely linked to the global economic crisis, which caused the country's growth to decelerate to 6 per cent in 2008.
For instance, international tourism declined by eight per cent in the first quarter of this year, prompting the United Nations World Tourism Organisation (UNWTO) to revise its forecast for the full year 2009, which now stands between -6 per cent and -4 per cent in 2009, as the pace of decline is expected to ease during the remainder of 2009. Real estate is also said to have suffered badly at the hands of the credit crunch and economic recession.
Trade sector, in particular, contracted by 12.9 per cent reflecting primarily the decline in re-exports and retail trade," said Gambia Central Bank Deputy Governor Basirou Njie, who delivered a speech by Governor Momodou Bamba Saho at the seminar, held recently at the Paradise Suites Hotel, at which the report on the findings on investment climate in The Gambia was disseminated and discussed.
Despite the rebound in agricultural output, growth in real GDP is projected at 3.6 per cent in 2009 reflecting reduced foreign direct investment, tourism and remittance flows.
In 2001, the Government of The Gambia with the support of the Development Finance International (FDI) and the West African Institute for Financial and Economic Management decided to conduct a census on foreign private capital and investor perception with the objectives of obtaining accurate data for the formulation of appropriate macroeconomic policies; improving the balance of payments (BOP) statistics as well as providing International Investment Position data ( that is, the stock of external assets and liabilities); using the information generated to promote and facilitate investment as well as assets investor confidence; and strengthening public/private sector dialogue on the investment climate in The Gambia.
Since then, two surveys have been conducted and seminars organised to share the findings with the government, the private sector and other key stakeholders. The current report draws its facts from the third and final phase of the project, whose findings state that "foreign direct investment into The Gambia was 60.0 per cent lower than forecast in 2008", and that "investment in real estate and tourism and exports of goods and services also fell".
"A fundamental business truth is that capital is a coward and shuns high-risk countries," Mr Njie said, adding that where the business environment is favourable, entrepreneurship flourishes, and overseas companies thrive, strengthening the local economic fabric, and spurring growth and economic development.
He said: "Although sound, coherent and consistent policies are needed to create the favourable conditions for investment, there is a recognition that policymaking is more effective if done in consultation with business. I, therefore, wish to use this opportunity to encourage a more robust public/private dialogue bearing in mind that what is good for business is good for the country."
The deputy bank governor commended the Department for International Development (DFID) of the United Kingdom for adequately funding the project and DFI and WAIFEM for their technical support. "We are also grateful to all those who participated in the survey," he noted.