The efficacy of the Zambian Investment act (No. 5 of 1986) in the attraction of Private Foreign Investment for development
Mwenda, Winnie Sitole
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The Zambian economy, like many others in the so called less developed or developing world, is experiencing a severe depression characterised by high balance of payments deficits, a very high inflation rate, high debt burden, a manufacturing sector highly dependent on imported raw materials with very little foreign exchange earning capacity and high unemployment levels, among other things. These economic indicators of depression have been alluded to, among others, in the business, labour academic and political circles in the land. Indeed, the Head of State, President Kenneth David Kaunda, has himself time and again acknowledged the existence of the state of depression and has called for a radical restructuring of the economy in order to make it more competitive and able to meet the needs of primarily the domestic but also the international economy. In order for Zambia to restructure her economy, however, she needs a large volume of investment. It is this need for a large volume of investment which of necessity brings in the question of how to make the investment climate in the country more attractive to the much sought after private foreign investors since local investment has proved insufficient to meet the developmental aspirations of the country and foreign aid, which has to be shared among a host of other needy countries, is inadequate. With the heavy debt burden the country is faced with and the problems it has with debt servicing due to limited foreign earnings, more loans would be disastrous to the economy. In the circumstances more private foreign capital is the answer to the economic problems afflicting the nation. Attracting private foreign investors is not, however, by any means an easy task since their capital is in great demand in both developed and developing countries and as such investors can afford to be highly selective, opting for countries where the investment climates are most favourable. This is understandable in view of the risks involved in investing in foreign countries. Realising the competitive nature of private foreign capital, the Zambian Government has expressed its desire for private foreign investment through policy statements and stances. The investment Act, No. 5 of 1986 is a culmination of the Government's efforts to attract more private foreign investment into the country by providing incentives to foreign investors. This paper critically analyses the Investment Act to gauge its efficacy in attracting private foreign investors and also examines the effect of other factors such as expropriations of private property and the rising crime rate on private foreign investment flows into the country.
- Law