Download DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN CÔTE D

DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN CÔTE
D’IVOIRE
by
YACOUBA TRAORE
Student No: 203126182
Submitted in partial fulfilment of the requirements for the degree
MASTER’S DEGREE IN BUSINESS ADMINISTRATION
in the
Business school
Faculty of Management Sciences
TSHWANE UNIVERSITY OF TECHNOLOGY
Supervisor: Professor R. Rugimbana
October 2011
ABSTRACT
The extant literature shows that in this new world economy, which is driven by
globalization, developing countries generally and African countries in particular have
shown less competiveness in their ability to attract Foreign Direct Investment (hereinafter referred to as FDI). Whilst there is some literature on FDI determinants for
developing countries, there is a far greater emphasis on Asian and European
countries. The lack of sufficient scholarly investigation of FDI determinants in
regards to developing countries in Africa provides an important rationale for focusing
on this region.
This study proposed to partially address this lacuna by assessing the case of one
African country namely Côte D’Ivoire. Specifically, the purpose of the study was to
identify the most critical factors that would enhance the capability of Côte D’Ivoire to
attract FDI for its own development. In implementing the study, a positivism
paradigm was utilised which involves the use of reductionist or quantitative methods.
In the process, the study employs a descriptive design in order to better profile the
most important FDI determinants in the case of Côte D’Ivoire. More specifically, a
survey instrument that was developed by Tuselmann (1999) and adapted and
validated by Coskun (2001) and later by Stoian and Filippaios, (2008) was used to
attempt to identify the most important factors that influence FDI into Côte D’Ivoire.
The questionnaire was submitted to some 80 senior government officials in Ministries
and Government departments, which are involved in FDI activities such as
International Trade, Commerce, Foreign relations, the Côte D’Ivoire Chamber of
Commerce as well as International Business Development across Côte D’Ivoire. Of
these 57 were successfully completed and utilized for data analysis purposes.
The main findings were that factors such as (1) the promising performance of Côte
D’Ivoire’s economy; (2) the growth of Côte D’Ivoire’s local market; (3) the
geographical location of Côte D’Ivoire; (4) Côte D’Ivoire legal environment for
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investment and business and (5) investment incentives are the most important
determinants for attracting FDI into Côte D’Ivoire.
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ABBREVIATIONS
CI
Côte D’Ivoire
RCI
The Republic of Côte D’Ivoire
FDI
Foreign Direct Investment
NEPAD
New Partnership for Africa’s Development
ECOWAS
Economic Community of West African States
WTO
World Trade Organization
WAEMU
West African Economic and Monetary Union
TNCs
Transnational Corporations
MIGA
Multilateral Investment Guarantee Agency
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DECLARATION
I, Traore Yacouba, hereby declare that this dissertation submitted in partial fulfilment
of the matters degree in business administration (MBA) at Tshwane University of
Technology, is my own original work and has not been previously submitted to any
other institution of higher education. I further declare that all sources cited or quoted
are indicated and acknowledged by means of a comprehensive bibliography or list of
references.
Signed …………………………………………………….
Yacouba Traore
Date: ……………………………………………………….
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ACKNOWLEDGMENTS
I would like to express my sincere gratitude and appreciation to my family and
friends. In particular, my uncles and friends Boubakar Kone, Seka Obodji, Mbe
Adou, Michel Gbagbo, Diabate Beh, Konate Aboubakar, and Seri Gervais. In the
same breath, I want to express my sincere and heartfelt gratitude to my fiancée Nkosi
Nomsa for her support, patience, and understanding throughout this project. For
academic support, I also extend gratitude to my supervisor Prof. Robert Rugimbana
for his guidance, assistance and support; the Dean of the Faculty Dr. Edgar
Nesamvuni for his valuable assistance; Business School staff such as Richardson
Shambare, Takesure Zhowa, Karen Chiutsi for their support; Nkosinathi Sithole for
technical editing and my colleagues in my MBA group: Neo, Jacqui, Nyandee and
Molefe. To all, I say merci beaucoup.
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TABLE OF CONTENTS
ABSTRACT.................................................................................................................i
ABBREVIATIONS.....................................................................................................iv
DECLARATION......................................................................................................... v
ACKNOWLEDGMENTS ......................................................................................... vi
LIST OF TABLES ..................................................................................................... xi
LIST OF FIGURES ................................................................................................. xiii
CHAPTER 1 INTRODUCTION
1.1
Chapter Overview .......................................................................................... 1
1.2 Introduction and Background to the Study ......................................................... 1
1.3
Conceptual Parameters of the Study .............................................................. 1
1.4
Background to the Research Problem ............................................................ 4
1.4.1
Research Problem and Question ............................................................. 4
1.5
Methodology .................................................................................................. 5
1.6
Research Assumptions and Limitations ......................................................... 7
1.7
Research Scope and Delimitations ................................................................. 8
1.8
Definition of Terms ........................................................................................ 8
1.9
Structure of the Dissertation ........................................................................... 9
1.10
Conclusions .............................................................................................. 10
CHAPTER 2 OVERVIEW OF CÔTE D’IVOIRE
2.1 Introduction ....................................................................................................... 11
2.2 Brief presentation of Côte D’Ivoire .................................................................. 11
2.2.1 Geo-Political Environment ........................................................................ 12
2.2.2 Aftermath of the Political Crisis ................................................................ 13
2.3 Côte D’Ivoire Economy .................................................................................... 13
2.3.2 The period 2000 to 2009 ............................................................................ 14
2.4. Potential for Foreign Direct Investment........................................................... 16
2.5 Conclusion ........................................................................................................ 17
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CHAPTER 3 LITERATURE REVIEW
3.1 Introduction ....................................................................................................... 18
3.2 The Notion of International Trade .................................................................... 18
3.3 Foreign Direct Investment ................................................................................ 25
3.3.1 Selected Conceptualisations of Foreign Direct Investment. ...................... 25
3.3.2 Types of Foreign Direct Investment. ......................................................... 26
3.3.3 Foreign Entry Modes ................................................................................. 27
3.3.4. Influencers of Foreign Direct Investment ................................................. 29
3.3.5
Challenges/Benefits of Foreign Direct Investment ................................. 32
3.4. Africa and Foreign Direct Investment ............................................................. 35
3.4.1 Share of Africa over the World Stock of Foreign Direct Investment ........ 35
3.4.2 Performance of Different Africa Regions for Foreign Direct Investment . 38
3.5 Côte D’Ivoire and Foreign Direct Investment ................................................ 40
3.5.1 Impact of Foreign Direct Investment on Côte D’Ivoire........................... 43
3.6 Research Problem and Question ....................................................................... 55
3.6.1 Research Problem ...................................................................................... 55
3.6.2 Research Question ..................................................................................... 56
3.7 Conclusion ........................................................................................................ 56
CHAPTER 4 RESEARCH METHODOLOGY
4.1 Introduction ....................................................................................................... 57
4.2
Research Approach/Paradigm ...................................................................... 57
4.3
Research Design ........................................................................................... 58
4.3.1 Research Methodology .................................................................................. 58
4.4 Research Methods ............................................................................................. 59
4.4.1 Population .................................................................................................. 59
4.4.2 Sampling Procedure ................................................................................... 60
4.4
Methods of Data Collection ......................................................................... 61
4.5
Validity and Reliability ................................................................................ 62
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4.6 Ethical Considerations ...................................................................................... 63
4.7 Data Analysis .................................................................................................... 64
4.8 Conclusion ........................................................................................................ 64
CHAPTER 5 ANALYSIS OF DATA OR RESULTS
5.1 Introduction ....................................................................................................... 65
5.2 Descriptive Statistical Analysis ........................................................................ 65
5.2.1 Frequency Distribution of the Respondents ............................................... 65
5.2.2 Institution Characteristics Distribution ...................................................... 72
5.2.3 Cross-Tabulation Distribution of Respondents and Institution
Characteristics ............................................................................................ 72
5.2.4 Relative Percentage Frequency Distribution Per Variable ........................ 77
5.2.5 Cross-Tabulation (Characteristics of the Respondents and Variables)...... 79
5.3 Inferential Statistics .......................................................................................... 83
5.3.1 Reliability Test (Cronbach Alpha Test) ..................................................... 83
5.3.2 Chi-Square Tests ........................................................................................ 84
5.4 Correlation ........................................................................................................ 89
5.4.1 Correlation Matrix for Variables ............................................................... 89
5.5. Factor Analysis ................................................................................................ 90
5.5.1 KMO and Bartlett’s Test ............................................................................ 90
5.5.2 Principal Component Analysis .................................................................. 91
5.6
Conclusion .................................................................................................... 94
CHAPTER 6 FINDINGS AND CONCLUSIONS
6.1 Introduction ....................................................................................................... 95
6.2 Findings and Discussions .................................................................................. 95
6.2.1 Respondents and Institution Characteristics Findings and Discussions .... 95
6.2.2 Questionnaire Findings and Discussions ................................................... 96
6.2.3 Principal Component Findings and Discussion ....................................... 107
6.3 Conclusion about the Research Question and Objectives............................... 111
6.3.2 What are the main determinants of FDI attraction? ................................. 112
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6.3.3 What Determinants are applicable to Côte D’Ivoire in terms of
establishing competitive advantage to attract FDI? ................................. 112
6.3.4 Which types of determinants are viewed as the most important by
Investors? ................................................................................................. 113
6.3.5 How can Côte D’Ivoire reshape or reorient its current strategies in
attracting FDI? ......................................................................................... 113
6.4 Theoretical Implications ................................................................................. 114
6.5 Managerial Implications ................................................................................. 115
6.6 Limitations and areas for further research ...................................................... 115
6.7 Recommendations ........................................................................................... 115
6.8 Conclusion ...................................................................................................... 116
7 References .............................................................................................................. 117
Appendix A: Information and Consent Sheet ........................................................... 129
Appendix B: Data Collection Questionnaire ............................................................ 131
Appendix C: Cross Tabulation Qualification and Variables .................................... 135
Appendix D: Cross Tabulation Position and Variables ............................................ 137
Appendix E: Cross Tabulation Type of Company and Variables ............................. 139
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LIST OF TABLES
TABLE 2.1 Summary of the Côte D’Ivoire Balance of payments from 2000-2009
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TABLE 2.2 Summary of the Côte D’Ivoire GDP from 2002-2010
15
TABLE 3.1 International trade theories adapted from Hill (2003;2009)
19
TABLE 3.2 Inward FDI stock for Africa, 2000-2007
36
TABLE 3.3 FDI inflow for different regions of Africa, 2000-2007
38
TABLE 3.4 Côte D’Ivoire, FDI record for declaration and approval schemes from 42
investment records (01-01-1996 to 17-03-2009)
TABLE 3.5 GDP as per economic sector from 2002-2009
46
TABLE 3.6 Côte D’Ivoire’s total FDI as per different Economic activities, for the
47
period 1996-2008
TABLE 3.7 Employment generated by Côte D’Ivoire FDI inflow, 1996-2009
49
TABLE 4.1 Description of questionnaire Survey
61
TABLE 5.1 Respondents position’s distribution
66
TABLE 5.1 Respondents position’s distribution (cont’d)
66
TABLE 5.1a Summary of distribution of position held
67
TABLE 5.2 Qualification distribution of respondents
70
TABLE 5.2a Qualification distribution of grouped respondents
71
TABLE 5.3 Type of institution distribution
72
TABLE 5.4 Qualification and position cross tabulation distribution
73
TABLE 5.5 Qualification and type of institution cross tabulation distribution
75
TABLE 5.6 Position and type of institution cross tabulation distribution
76
TABLE 5.7 Frequency of responses for the questionnaire (Q1-Q16)
77
TABLE 5.8 Cross-tabulation for qualifications and variables (Q1 & Q2)
80
TABLE 5.9 Cross-tabulation of positions and variables (Q1, Q2 & Q7)
81
TABLE 5.10 Cross-tabulation for type of institution and variables (Q1 & Q2)
82
TABLE 5.11 Cronbach’s Alpha for the survey instrument
83
TABLE 5.12 Cronbach’s Alpha for each variable (Q1-Q16)
84
TABLE 5.13 Chi-Square tests for qualifications and positions
84
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TABLE 5.14 Chi-Square tests for qualifications and type of institution
85
TABLE 5.15 Chi-Square tests for respondents’ positions and type of institution
85
TABLE 5.16 Chi-Square tests for positions and variables (Q1-Q16)
86
TABLE 5.17 Chi-Square tests for qualifications and variables (Q1-Q16)
87
TABLE 5.18 Chi-Square tests for type of company and variables (Q1-Q16)
88
TABLE 5.19 Correlation matrix for variables
89
TABLE 5.20 KMO and Bartlett’s Test
90
TABLE 5.21 Principal component analysis of variables
91
TABLE 5.22 Mean ratings for variables (Q1-Q16)
92
TABLE 5.23 Mean ratings for components or factors
93
TABLE 5.23a Summary of the mean ratings for factors
94
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LIST OF FIGURES
FIGURE 2.1 Geographical Situation of the Republic of Côte D’Ivoire
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FIGURE 3.1 Share of Africa Inflow of FDI over the World Inflow of FDI
37
stock from table
FIGURE 3.2 Share of FDI inflow for different African regions from table 3.4
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FIGURE 3.3 Total GDP over the period 2002-2009
44
FIGURE 3.4 Performance as per economic sector, to the total GDP from table 3.5
46
FIGURE 3.5 Employment generated from FDI inflow for the period 1996-2009.
51
FIGURE 5.1 Detailed position distribution held by respondents
69
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CHAPTER 1 INTRODUCTION
1.1 Chapter Overview
The aim of the introductory chapter is to provide an overview of the whole study. The
background and motivation for this study are first provided. Next are the problem
statement, research questions, aims and objectives, and the justification for this study.
Finally, a summary of the research methods and design is provided, definitions
presented, and delimitations expounded upon.
1.2 Introduction and Background to the Study
Since attaining independence in 1960, Côte D’Ivoire (RCI) adopted a free market
economy. Consistent with free market principles and as part of the country’s new
economic policy that came into force in July 1995, among other initiatives, the
Ivorian government encouraged Foreign Direct Investment (FDI) (New investment
code, 1995). By and large, that new investment framework sought to promote and
stimulate FDI by reducing bureaucracy and red tape as well as cutting the cost of
investment in Cote D’Ivoire. The code specifically provided for exemptions on
various taxes and customs duties. Above all, the legislation removed all limitations
that imposed restrictions on foreign ownership of businesses (New investment code,
1995).
As an investment destination, Cote D’Ivoire is endowed with minerals - oil reserves,
gas, gold and diamonds as well as fertile agricultural land. The infrastructure in the
country is also improving. The country is part of the Cotonou Agreement that
continually negotiates the trade partnership agreement between the African,
Caribbean and Pacific countries with the European Union. Côte D’Ivoire is also a
member of the Multilateral Investment Guarantee Agency and the World Trade
Organization (WTO) (U.S Bureau of African Affairs, State Report, 2009).
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This research study has been motivated by the notion that useful investment in a
foreign location will occur only if the latter offers certain location-specific
advantages in terms of resources and facilities that make it possible for investors to
explore their firm-specific ownership advantages (Dunning, 1981: 46).
According to Dunning, Côte D’Ivoire offers vast potential opportunity for FDI
inflow, due to its ideal location and modern infrastructure, both of which offer
important access. In addition, the second main motivation is based on the Republic of
Côte D’Ivoire’s political and geo-economic stance.
1.3 Conceptual Parameters of the Study
The conceptual parameters adopted for this study are based on the idea of what
Foreign Direct Investment entails. According to Hill (2007:5-10), globalization and
international trade refer respectively to “the shift toward a more integrated and
interdependent world economy and includes the globalization of markets and
production and the export of goods or services by a firm to consumers in another
country”. Alan (2001:4) describes globalization as “the activities of multinational
enterprises engaged in FDI and the development of business networks to create value
across national borders”.
Hill (2007:10) has explained how globalization has favoured the decline in barriers to
the free flow of goods, services and capital on the one hand and the technological
change, particularly the dramatic developments in recent years in communication,
information processing and transportation technologies on the other. Those two
macro factors have impacted on FDI in many ways. The first impact observed is an
increase in FDI flow worldwide from $25 billion in 1975 to a record $1.3 trillion in
2000. The shift of FDI from developed countries, such as the United States, to rapidly
developing countries, including China, is also one of the issues addressed by
Mottaleb (2007:6-8). That latter author demonstrates the above by comparing an
uneven FDI inflow amongst developing countries, using per capita GNI as the
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criterion for dividing countries into categories such as lower middle-income countries
and low-income countries. In addition, he argues that: “the socio-economic
development observed in certain developing countries associated with the move
towards a transparent investment environment are all results of the impact of
globalization and international trade on Foreign direct Investment”. The increase of
the world’s production output and the change in the balance of trade which have seen
the United States’ dominance drop from 40% in 1963 to 21% in 2004 is important
(Hill, 2007:10).
According to Hill (2007:10), Foreign Direct Investment occurs when a firm invests
resources in business activities outside its home country. According to Jonathan and
Diane (2004:87), Foreign Direct Investment means investing directly in production in
an overseas market, usually by purchasing or buying a part-share in an existing
business. Establishing a new business is called Greenfield Investment. The United
States is one of the largest foreign direct investors and the majority of its activities
take the form of mergers, as opposed to setting up of new subsidiaries. Asian
countries, like China, Hong Kong and Singapore, are the greatest recipients of FDI
after the United States. Africa, they add, has never been a major recipient of FDI
flows and, as a result, it lags behind other regions of the world.
According to Chantal and Patrick (2005:6), on an annual average basis Africa’s share
of global FDI inflow was 1.8% for the period 1986-90 and 0.8% for the period 19992000, compared to other regions of the world for the same period. For instance, while
the USA inflow was US$314 billion, the EU inflow was US$671 billion. They
indicate a slight improvement in 2001, where inflow to Africa rose from US$9 billion
to US$19 billion in 2001, increasing the region’s share of global FDI to 2.3%. They
state the various versions of FDI, principal among which are: Horizontal Foreign
Direct Investment (which is when a business invests in a similar form of industry to
what it is involved in at home) and Vertical FDI (which is when the investment in an
overseas industry either provides inputs into or sells outputs to the business’s
domestic operations).
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Finally, and according to Kok and Ersoy (2009), the following factors have
characterized FDI over the past two decades or more: First, a rapid increase in the
total volume of FDI. Second, a decline in the importance of the US as a source of
FDI. Third, an increase in FDI into developing nations, which includes Eastern
Europe and Asia. Fourth, the US becoming a recipient of FDI and fifth an increase in
FDI in developing nations.
1.3.1 Influencers of FDI
On the basis of the literature, the following factors have been suggested as being
factors that influence FDI inflow. These are (i) the level of socio-economic
development (ii) the endowment of natural resources, (iii) the functionality of market
institutions and mechanisms, (iv) the character of the host-country economic policy,
(v) the stability of the foreign-exchange market, (vi) the political stability, (vii) and
the legal system and law enforcement as presented by Marios and Spyros (2007:493).
Dunning (1993:56-62) had earlier argued that the influences of FDI are determined
by a multinational enterprise’s strategic objectives.
These objectives are the primary motives for FDI flow and are characterized by the
following factors: (i) the resource seekers, (ii) the market seekers, (iii) the efficiency
seekers, (iv) the strategic asset seekers, (v) and other motives for MNE activity. In
addition, Mottaled (2007) provides the following as FDI influencers: “political risk,
investment environment, infrastructure, regulatory framework, bureaucratic hurdles
and red tape, judicial transparency, and the extent of corruption” in the host country.
It can be seen that the influencers of FDI vary considerably; most are based on the
angle of observation and some are based according to investors’ perceptions in terms
of what critical determinants could affect their investments decisions. For example,
political risk according to Mottaled will have greater importance for the African
continent than the Asiatic continent.
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Dunning (1981) suggests that transnational corporations (TNCs) will invest in a
foreign location only if the latter offers certain location-specific advantages in terms
of resources and facilities that make it possible for the TNCs to explore their firmspecific ownership advantages. Various authors suggest that location decisions are
influenced by a number of factors. Tuselmann, (1999) divides these factors into two
groups: Supply factors (such as labour costs, the skills level of the labour force, and
corporate taxation) and demand factors (such as market size and growth, and
geographical location).
For the purposes of this study the survey instruments developed by Tuselmann (1999)
and adapted and validated by Coskun (2001), and later by Stoian and Filippaios,
(2008) are utilized to answer the present research question.
1.4 Background to the Research Problem
As discussed earlier, many African countries, including Cote D’Ivoire, find it difficult
to attract FDI flows and, as a result, lag behind other regions of the world.
1.4.1 Research Problem and Question
1.4.1.1 Research Problem
The research problem that arises from the above discussion is primarily about trying
to resolve the poor levels of FDI into an African country such as Côte D’Ivoire.
Specifically, it’s about the identification of the most useful mechanism that could be
applied by Côte D’Ivoire’s investment and promotion center (CEPICI). The novelty
of this study is that it focuses on the appropriate framework for attracting FDI to Côte
D’Ivoire thus establishing such a framework for investment purposes.
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1.4.1.2 Research Question
Following on from this problem, the research question posed for this study is as
follows: What are the most critical determinants that should be addressed or
established by Côte D’Ivoire to make the country more competitive in attracting
foreign direct investment?
The research aims for this study are:
To assist the Côte D’Ivoire government authorities to become more aware of
the competitive determinants for Foreign Direct Investment.
To assist the Côte D’Ivoire FDI policy framework developers by identifying
the most important determinants for establishing a viable Foreign Direct
Investment (FDI) infrastructure in Côte D’Ivoire.
The ensuing Investigative Questions are:
What are the main determinants of Foreign Direct Investment attraction?
What determinants are applicable to Côte D’Ivoire in terms of establishing a
competitive advantage to attract Foreign Direct Investment?
Which determinants are viewed as the most important by investors?
How can Côte D’Ivoire shape or reorient its current strategies in attracting
Foreign Direct Investment?
1.5 Methodology
1.5.1 Study design
For the purposes of this study a descriptive research design is utilized. The aim of this
type of design and research process is to describe the characteristics of a phenomenon
(Collis & Hussey, 2009:334). The research is conducted with the view to
understanding and possibly providing the Ivorian official policy makers with the most
important determinants to be considered for the establishment of a viable FDI
infrastructure.
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1.5.2 Survey Instrument Development
In developing the instrument for collecting data, a modified version of the original
Tuselmann (1999) instrument will be utilised. This instrument has been subject to
reliability and validity tests in numerous studies including Coskun (2001) and later by
Stoian and Filippaios (2008). For the purpose of this study, the instrument will
comprise of a total of 16 items measured on a 4 point Likert scale with the following
items:- 1) not important, 2) of little importance, 3) important, and very important.
1.5.3 Population, Sample Selection Criteria, and Data Collection
In this study the population of interest included all developing countries involved in
receiving direct foreign trade in Africa. For the purposes of this study, Côte D’Ivoire
was sampled purposively (conveniently) because as a country it bears important trade
characteristics to other developing countries particularly those in Africa. The sample
units of interest were found 1) in the Côte, D’Ivoire Promotion and Investment
Center’s (CEPICI) repertory agenda for all foreign companies operating within Côte
D’Ivoire, 2) the department of mining, and 3) one of Côte D’Ivoire’s
telecommunication agency’s (ATCI) updated companies’ data list from which eighty
(80) foreign companies were conveniently selected from a total of 400.
The sample elements of this study included senior government officials and CEO’s of
International Businesses operating in Côte D’Ivoire. The senior government officials
participating in the study were selected from ministries and government departments
involved with making policies on international trade, commerce, foreign relations,
and the Côte D’Ivoire Chamber of Commerce. A total of thirty (30) sample elements
were selected. International Businesses chosen for the study were those that
comprised of companies that have operated in Côte D’Ivoire for more than ten years.
On the basis of this process, the selection criteria, first, involved each relevant
department being sampled with regards to its role in Côte D’Ivoire’s foreign trade
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policy and, second, the key decision makers were identified. Twenty (20) of these
were selected on a judgemental basis from a sample frame of thirty (30).
The overall sampling method applied was purposive (judgemental), which is a nonprobability sampling method. The study was conducted over a period of four (4)
months, from the beginning of January 2010 to the end of April 2010. A total of one
hundred (100) questionnaires was prepared and mailed out. Eighty (80)
questionnaires were received back, but among these twenty three (23) were not fully
completed. A total of fifty seven (57) responses were received, representing a 57%
response rate. This rate of response is in keeping with studies in similar areas
(Coskun, 2001; Stoian & Filipaios, 2008).
In an attempt to identify views for the most important factors that influence FDI
attraction to Côte D’Ivoire, a questionnaire, which was based on a survey developed
by Tuselmann (1999) and adapted and validated by Coskun (2001) and later by
Stoian and Filippaios, (2008) was applied.
The data collected was analyzed using SPSS version 17, whereby descriptive and
inferential statistical tests were performed. A more detailed discussion of the
methodology is provided in Chapter 4.
1.6 Research Assumptions and Limitations
For the purposes of this research study the following assumptions were made:
Foreign Direct Investment inflow to Côte D’Ivoire is determined by the
availability of raw material, economic and social infrastructures, location
specific advantages.
Côte D’Ivoire’s economic stand of ECOWAS is the determinant of Foreign
Direct Investment inflow.
Côte D’Ivoire new code of investment favours Foreign Direct Investment
Côte D’Ivoire infrastructures motivate Foreign Direct Investment inflow.
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Hussy and Hussey (1997:349) define “limitation” as any potential weakness in the
research. In this study limitations include: The companies, government officials and representations sampled (Unit of
study) are those established and operating in Côte D’Ivoire.
The findings from a one country perspective may not be generalized to other
countries.
The size, financial muscle and years of operations of the companies sampled
were not taken into account.
1.7 Research Scope and Delimitations
According to Hussey and Hussey (1997:129), delimitations explain how the scope of
the study was focused on only one particular area or entity, as opposed to say a wider
or more holistic approach. The Scope and delimitation for this study essentially lie in
the fact that it involved one country and the sample was restricted to Ivorian senior
government officials and selected International Businesses operating in Côte D’Ivoire
to provide information on FDI influencers. Therefore findings should be used
cautiously as they may not be generalized to other countries.
1.8 Definition of Terms
Culture: according to Schermerhorn (2002:128), culture refers to a shared set of
beliefs, values, and patterns of behaviour common to a group of people.
Infrastructure: The adequacy of resources and systems to meet the basic needs of
business. (Botha, 2006:164).
Gross Domestic Product: as referred to GDP- it measures the output of goods that a
country produces within its borders and items produced with foreign resources
(Dlabay and Scott, 2006:46).
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Economies of Scale: Refer to the reductions in unit cost achieved by producing a
large volume of a product. Attaining economies of scale lowers a firm’s unit costs
and increases its profitability (Charles, 2009:430).
Profitability: For Charles (2009:420), it is the rate of return that the firm makes on
its invested capital (ROIC), which is calculated by dividing the net profits of the firm
by total invested capital.
Raw Material: Koepke (1796) defined raw material as, crude or processed material
that can be converted by manufacture, processing, or combination into a new and
useful product.
Host-Country Nationals: According to John and Praveen (2005:380), host-country
nationals are local workers who come from the host (receiving) country where the
unit (plant, sales unit) is located.
Home-Country Nationals: This refers to expatriate employees who come from the
parent firm’s home (source) country (John and Praveen, 2005:380).
Ethics: The term ethics refers to rules and principles that define what is considered
to be right and wrong conduct. (Robbins & Coulter, 2005:110).
1.9
Structure of the Dissertation
This dissertation contains six chapters and these will be structured as follows:
Chapter 1: Scope of the study
This chapter described the scope of the study, the background of the research, the
research question, objectives, and sub-questions are explained. The research
methodology is also described.
9
Chapter 2: Brief presentation of Côte D’Ivoire
This chapter will describe the Côte D’Ivoire’s specific setting - its infrastructures and
economy
Chapter 3: Literature Review
This chapter initially presents the literature on Foreign Direct Investment,
International trade and the relationship between them. Secondarily, the chapter
presents the literature on Côte D’Ivoire, Africa and Foreign Direct Investment.
Chapter 4: Research Methodology
This chapter describes the research methodologies used such as sampling, methods of
data collection, validity and reliability, ethical consideration and data analysis
procedures.
Chapter 5: Analysis of Data
Chapter five provides a discussion on the actual results of the empirical study and the
testing of the hypotheses presented for the study.
Chapter 6: Findings, discussion, conclusion and recommendations
This chapter will present and discuss the findings of the study. The conclusion and
recommendations of this research study will be made based on the findings.
1.10 Conclusions
In this first chapter, an overview of the study was presented. In the process an
abbreviated literature review on FDI and globalization was discussed followed by an
outline of the Research Process. The latter included the purpose of the study, the
research problem and research question, as well as investigative questions. In
addition, the assumptions made as well limitations and delimitations were also
presented. Chapter 2 provides an overview of the economic characteristics of Côte
D’Ivoire.
10
CHAPTER 2 OVERVIEW OF CÔTE D’IVOIRE
2.1 Introduction
This chapter provides a brief overview of Côte D’Ivoire, in terms of the Geo-Political
and Economic aspects that may have implications for Foreign Direct Investment.
2.2 Brief presentation of Côte D’Ivoire
The Republic of Côte D’Ivoire(here-in after referred to as the RCI) is a country in
West Africa which shares borders with Ghana to the East, Burkina Faso and Mali to
the North, Liberia and Guinea Conakry to the west.
Figure 2.1 Geographical Situation of The Republic of Cote d’ivoire
Source (Worldatlas.Com)
The Atlantic Ocean, with a coastline spanning about 550 km, forms its Southern
border. According to the latest census (2009), the population of RCI is approximately
20 million (RCI Department of Statistics, State Report: 2009). With a total surface
area of 322 463 square kilometres, the population density is about 62 persons per
11
square kilometre. On average the population grows annually by an estimated 3.3
percent (RCI Department of Statistics, State Report: 2009).
The average temperature is 27˚C and the average rainfall per annum is 1400mm. The
geographical stance of the country with its harbour (which, after the harbour in
Durban, is the second largest in Africa) offers opportunities for countries like Mali
and Burkina Faso to use it as their import/export base (RCI Department of Statistics,
State Report: 2009).
2.2.1 Geo-Political Environment
The Republic of Côte D’Ivoire (herein after referred to as RCI) is a former French
colony that attained independence in 1960 and, as in many francophone countries, the
African Financial Community Currency (herein after referred to as FCFA and 1€
euro=655,957 CFA F fixed parity) is the official currency and French is the official
language. As in South Africa, the RCI has a dual capital city system, a political
capital Yamoussoukro and an economic capital, Abidjan. The main export products
are; coffee, cocoa, timber, rubber, cotton, palm oil, oil products, and several other
manufactured products. The main imports include; machinery, manufactured
products, wheat, and rice. Its main trade partners are; France, Nigeria, USA,
Germany, Italy, Netherlands, and the West Africa Economic and Monetary Union
(WAEMU) (RCI Department of Economy, State Report: 2006).
Côte D’Ivoire plays an important role in the economic activity of the West African
Economic and Monetary Union (WAEMU), where it accounts for a 40% share of this
Union’s reserves (Ken, 2010). Pierre (2009:4-5) pointed out that 13% of Africa’s
GDP is derived from the ECOWAS countries. Nigeria and Côte D’Ivoire, the two
largest economies of the ECOWAS region together account for 62.7% of that
region’s total GDP, the relative share being respectively 47.4% and 15.3%.
12
2.2.2 Aftermath of the Political Crisis
Since 19th September 2002, the country has faced a political crisis with France. The
then president, S. E. M. Laurent Gbagbo worked towards bringing about stability in
the face of that situation through the signing of a new accord. The previous accord of
Ouagadougou (PAO) had delivered some improvements, and was signed in 2007.
Since then of course there have been important changes in the Government following
recent changes that saw President Gbagbo ousted and a new government sworn in, in
2011.
2.3 Côte D’Ivoire Economy
As mentioned earlier, since its attainment of independence in 1960 the country
adopted a free market economy stance. The GDP growth rate, per capita income,
inflation rate, unemployment rate and schooling rate respectively were 1%, US$ 854,
1.4%, 13.1%, 72% (RCI Department of Statistics, State Report, (2004).
In the
following sections the thesis presents developments in the RCI economy. These
developments are discussed over two time periods, 1) the period 1960 to 2000 and 2)
the period 2000 to 2009.
2.3.1 The Period 1960 to 2000
Since the colonial period, RCI’s economy has been based on the production and
export of Agricultural products. Furthermore, since 1960 up to mid-1980 the state of
RCI enjoyed 25 years of sustained economic growth, with per capita GNP growing to
a high of US$ 1,200 in 1999 as opposed to the average of US$ 400 among the
surrounding countries (RCI Department of Economy, state report: 2000). Between
60% and 70% of the Ivorian people are engaged in some form of agricultural activity.
Agriculture, forestry (which reduced from 20 million hectare in 1960 to less than 3
million hectare today), and fisheries account for more than one-third of GDP and
two-thirds of exports. Côte D’Ivoire produces 40% of the world’s cocoa crop and is a
13
major exporter of bananas and coffee. The economy performed less than expected in
the 1980s and until the early 1990s. However, in the same period, mining activities
were very active. Various exploration works undertaken resulted in the discovery of
numerous mineral deposits (gold, iron, copper, nickel, manganese, bauxite) and of
industrial materials (dimension stones, clay for bricks and sand for glass). Petroleum
reserves are estimated at 18, 680 million barrels, while gas reserves are over 21
billion cubic feet, raising hope for the future of the RCI economy (U.S Bureau of
African Affairs, State Report: 2009). Côte D’Ivoire is among the world's largest
producers and exporters of coffee, cocoa beans, and palm oil. Consequently, for those
products the economy is highly sensitive to both fluctuations in international prices
and to changes in weather conditions (U.S Bureau of African Affairs, State Report:
2009). Despite attempts by the Ivorian government to diversify the economy through
the extraction of oil and gas, it is still heavily dependent on agriculture and related
activities (U.S Bureau of African Affairs, State Report, 2009)
GDP per capita was US$ 727 in 1996 but by 2003 had fallen to US$ 669. The 1994
devaluation of the African Financial Community Currency (herein-after as referred as
to FCFA) and accompanying structural adjustment measures increased the
international competitiveness of the agricultural, light industrial, and service sectors.
However, reliance on raw cocoa and coffee exports, which account for 40% of the
total exports, subjects the economy to the effects of the ups and downs of
international price swings. In its effort to reduce that effect, the government
encourages export diversification and intermediate processing of cocoa beans (U.S
Bureau of African Affairs, State Report, 2009).
2.3.2 The period 2000 to 2009
From 2000 when the socialist party, Ivorian Popular Front (FPI), took the reigns of
government, it inherited a difficult economic situation characterised by a
dysfunctional politic climate. Consequently, all foreign assistance was cut off. The
preceding government of President Gbagbo is working at engendering warm relations
14
with international financial institutions. For example, in 2001 the government signed
a staff monitoring programme with the International Monetary Fund (IMF). But plans
for poverty reduction and growth were disrupted by the onset of a new crisis in
September 2002 (U.S Bureau of African Affairs, State Report: 2009). By mid-2002
the signs of economic and business recovery were encouraging but the political and
social crisis that began in September 2002 undermined all efforts to resume
cooperation with international donors. However, since 1999 successive waves of
political crises have resulted in a drop in the GNP from US$ 1,200 in 1999 to US$
382 in 2006 (U.S Bureau of African Affairs, State Report: 2009).
Table 2.1 Summary of the Côte D’Ivoire Balance of payments from 2000 to 2009
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
(E)
Current
-171.6
-44.1
535.2
171.2
127.2
20.9
250.4
-66.6
201.9
791.2
account
(billion of
FCFA)
(Source: Adapted from: Côte D’Ivoire, Department of Economy, State Report: 2009)
The fluctuations in the balance of payments were due to political instability. Also the
GDP increased from -1, 6% in 2002 to 3% and 8% in 2009 and in the first quarter of
2010, with an expected 3%.
Table 2.2 Summary of Côte D’Ivoire GDP in annual percentage from 2002 to 2010
March 2010
2,002
2,003
2,004
2,005
2,006
2,007
2,008
2,009
2,010
Total GDP %
-1.6
-1.7
1.6
1.8
0.7
1.6
2.3
3.8
3.0
(Source: RCI Department of Economy, State Report: 2009)
According to Botha (2006:109), a deficit on the current account of the balance of
payment is not necessarily a negative economic phenomenon, much in the same way
as a bank overdraft is not necessarily a negative business phenomenon. In fact, a
surplus on the balance of payments may constitute a problem for a developing
15
country that has employment and output growth as key objectives of Macroeconomic
policy. Under such circumstances, the reason is simply that a surplus could be an
indication of low growth (as reflected in low imports), and could also lead to a
strengthening of the domestic currency (which is good for price stability but erodes
export earnings). Related to Botha’s analyses, Côte D’Ivoire’s balance of payments
deficit cannot be interpreted as a negative economic phenomenon; it only shows that
the current import of goods and services exceed the export of goods and services in
the country’s current account.
The negative GDP rate in 2002 and 2003 appears to have been a direct result of the
political crisis of 2002. During that period most French owned companies and their
citizens were recalled by the French government. As a result some of those
companies were relocated to other countries in the region. However, after 2003, they
started to find their way back to Côte D’Ivoire.
2.4. Potential for Foreign Direct Investment
The RCI offers enormous potential for FDI. The Government of Côte D’Ivoire
encourages Foreign Direct Investment, as part of that country’s new investment code
which was adopted by its National Assembly on July 1995 (New Investment Code,
1995). That new policy seeks to promote and stimulate FDI through bureaucracy
elimination, reduction of cost of investment and the establishment of efficient official
procedures. It provides exemptions from tax and customs duties and guarantees to the
investor. There are no significant limits on foreign investment in terms of levels of
foreign ownership or sector of investment (New Investment Code, 1995).
The new code introduced two incentive schemes:
(a) The declaration scheme, which enables any investment regardless of the cost
to be eligible, within a maximum of 48 hours and in almost an automatic
manner, to the benefits contained in the code on the basis of a simple
declaration of the investor testified by the Investment Promotion Centre in
16
Côte D’Ivoire (Cepici). This scheme is applicable to all sectors of activities
other than transport, trade, construction and public works, and finances. It
only covers the investments relating to the starting of new activities, (New
Investment Code, 1995).
(b) The approval scheme covers investments where costs are over 500 million
FCFAs. It also concerns all sectors of activities excluding finances,
construction and public works. It takes into account all investments,
regardless of their nature and in setting up or development of activity (New
Investment Code, 1995).
To illustrate, certain economic activity sectors such as the telecommunications and
food processing industry accounted for 942,887,896,036 CFA and 468,328,871,251
CFA of total FDI inflows respectively during the period 1996-2008 (RCI Investment
and promotion Center, State Report: 2009). More detail is provided in the next
chapter.
2.5 Conclusion
This chapter presented a general overview of Côte D’Ivoire and highlighted its
economic performance from 1960 to the present. The Chapter sets the scene for
understanding the extent to which the environment for business in Côte D’Ivoire is
conducive for FDI. In Chapter 3 the appropriate and relevant literature on FDI is
reviewed.
17
CHAPTER 3 LITERATURE REVIEW
3.1 Introduction
Chapter three (3) presents a review of the literature that is currently available to the
author on the subject of Foreign Direct Investment (FDI). The review starts with an
interrogation of the relationship between International Trade and Foreign Direct
Investment, it then, assesses the impacts of international trade on FDIs, its various
forms, most important influencers, and typical advantages and challenges. Finally, for
the purpose of this study, an FDI conceptual framework is then presented.
3.2 The Notion of International Trade
According to Hill, (2003:8) International trade occurs when a firm exports goods or
services to consumers in another country. This latter author emphasises that, many of
the barriers to international trade prior to World War II mainly involved exorbitant
import tariffs on manufactured goods. In this regard the aim was typically to protect
domestic industries. As mentioned in the previous chapter, the Republic of Côte
D’Ivoire (herein-after referred to as RCI) has been involved in the International trade.
Its main export products are; coffee, cocoa, timber, rubber, cotton, palm oil, oil
products, and several other manufactured products. Its main imports include;
machinery, manufactured products, wheat, and rice. Its main trade partners are;
France, Nigeria, USA, Germany, Italy, Netherlands, and the West Africa Economic
and Monetary Union (WAEMU) as shown in the (Republic of Côte D’Ivoire
Department of Economy, State Report: 2006).
3.2.1 International Trade Theories
Several different theories and attendant models have been proposed for the purposes
of predicting patterns of trade. The following as presented in table 3.1 represent some
of the more prominent.
18
Table 3.1 International trade theories
Mercantilism
Adam Smith
Ricardo’s Theory
Theory
Theory of
of Comparative
Absolute Advantage
Advantage
The main tenet of
According to
Hill,
Ricardo showed in his book
According to Hill,
mercantilism
(2009:171)
Smith
called Principles of political
(2003:152)
is
Heckscher-Ohin Theory
that, it is in a
emphasizes that: a
economy (1817) that it is
Eli Heckscher (in 1919) and
country’s best
country should
beneficial for a country to
Bertil Ohlin (in 1933) predicted
interests to
specialize
specialize in the production
that countries should export
maintain a trade
production of goods
of
it
goods that make intensive use
surplus, to
for which they have
produces most efficiently and
of factors that are locally
export more
an absolute
to buy the goods that it
abundant
than
advantage and
produces less efficiently from
(cheaper), while
then trade these for
others countries, even if this
importing goods that
goods
means buying goods from
make intensive use of
produced by
other countries that it could
factors that are locally
other countries.
produce
scarce (expensive)
(Hill,
it
imports,
2009:168-
171)
in
the
those
goods
that
more
efficiently
itself (Hill, 2003:145)
Leontief Paradox
Raymond Vernon
New Trade Theory
Product Life Cycle
Theory-Cycle Theory
In 1953, Leontief, on the publication of his
According to Hill, (2009:183-
Emerging in the 1970s when
study, raised questions about the validity of
184), proposed in the mid-
economist ‘s studies pointed
Heckscher-Ohlin theory. He then postulated
1960s, Vernon’s product life-
out a firm’s ability to attain
that the United States should be an exporter
cycle theory is based on new
economies
of capital intensive goods and importer of
product
might
labor intensive goods since the U.S has
production
abundance in capital and less in labor
product will start in home
international trade. Economies
compared to other nations, which he found
country where it has been
of scale
that wasn’t always true, thereafter known as
developed
are
Leontief paradox (Hill, 2003:152-153).
shifted
to
countries.
At
stages.
Thus
of
the
then
the
new
will
be
developed
the
mature
phase, the production will
then moved to developing
countries due to cost savings.
(Source; Hill 2003; 2009)
19
of
scale
have
which
important
implications for
unit
cost
reductions
associated with a large scale of
output (Hill,2009:186).
Since the colonial period, the Republic of Côte D’Ivoire’s economy has been based
on the production and export of Agricultural products. As mentioned earlier, since its
attainment of independence in 1960 the country adopted a free market economy
stance as espoused by Adam Smith’s theory of Absolute Advantage, specifically, by
specialising in the production of agricultural products such as cocoa, coffee, timber,
rubber, cotton, palm oil, due the country’s climate absolute advantage for those
agricultural activities.
3.2.2 International Trade and Foreign Direct Investment
Recep and Bernur (2009) point out that, trade has traditionally been the principal
mechanism by which economies are linked in order to create an “international
economy”. However the latter authors also point out that FDI is also capable of
linking national economies. It follows therefore that Trade and FDI as Economic
mechanisms do reinforce one another. The trade effects of FDI depend on the
following; 1) whether it is undertaken to gain access to natural resources, or
consumer markets or 3) whether the FDI is aimed at exploiting local comparative
advantage or 4) whether other strategic assets such as research and development
capabilities exist.
The World Trade Organisation (WTO) (1996:7-8) report makes the point that
member countries agree in regards to their assessment of the positive contributions of
FDI towards Economic Development and growth in Trade. Many developing
countries recognize the positive contributions of FDI in terms of its growing
importance within host economies and as a vehicle for the transfer of tangible assets.
These observations add force to the argument that a consensus is emerging in regards
to the complementary relationship between Trade and FDI. Fontagne (1999:10)
points out that, the expansion of FDI directly affects the control and characteristics of
economic activities. In fact, and according to the latter author, international
production is to a large extent becoming internal to transnational corporations
(TNCs). Fontagne (1999:10) also adds, that the potential effects of FDI on national
20
economies has both financial and productivity implications. Whereas, the impact of
financial flows on trade is rather indirect, the impact on productivity is of a more
direct nature.
Despite the observations made above in regards to the possible relationship between
Trade and FDI, the debate on the relationship between these two economic
mechanisms has been quite unequivocal. Whereas, Bayoumi and Lipworth (1997),
Ma et al., (2000), and Helpman et al., (2003) found that a substitute relationship
exists between the two, in contrast, Brainard (1997) and Clausing (2000) found
evidence of a complementary relationship existing between FDI and international
trade. Adding to this divergence of opinions, Head and Ries (2001) and Swenson
(2004) found substantial evidence for the presence of both substitute and
complementary relationships between FDI and International Trade. The latter view
finds support from writers such as Zarotiadis (2005:2) who argue that “the world
pattern of FDI is remarkably similar to the world trade pattern. Yet the mainstay
theory of FDI posits FDI as an explicit alternative to trade.”
3.2.3 The Impact of International Trade and Globalisation on Economic Growth
Questions about the relationship between International Trade and economic growth
have assumed a great deal of importance, particularly with the introduction of trade
liberalization policies in many developing nations. However, important differences
of opinion also exist when it comes to assessing the kinds of impact that International
trade has on Economic growth. On one hand are those who view globalization and
international trade as having a positive impact on the economy of developing
countries. On the other hand, are those who believe that globalisation and
international trade have a negative effect on developing countries (Economy watch,
2009: Online).
21
3.2.3.1 The Positive Perspectives View
The literature suggests that the positive effects of international trade on economic
growth were first pointed out by Adam Smith in 1776. Those ideas prevailed until
World War II. However from the 1960s many studies which were based on the
neoclassical theories of economic growth and International trade argued that
International trade was in fact economic growth’s main driving force (Oscar, 2001:3).
Accordingly, Economy Watch (2009: Online), proposes that economists who support
globalization and International trade, have a brighter view of International trade and
its impact on the Economic growth of developing nations.
According to them,
developing countries which have followed trade liberalization policies have
experienced all the favourable effects of globalization and International trade. In this
case they regard China and India as the trend-setters. There is no denying that
International trade is beneficial for the countries involved in such trade, if it is
practiced properly. International trade opens up the opportunities of the global market
to the entrepreneurs of the developing nations. International trade also makes the
latest technology readily available to the businesses operating in those countries. It
results in increased competition both on the domestic and global fronts. They add that
domestic entrepreneurs need to work more efficiently and ensure efficient utilization
of available resources in order to compete with their global counterparts, on the one
hand, and countries that allow for open trade policies will benefit from opportunities
that are available from being involved in International trade.
Since 1995, the
Republic of Côte D’Ivoire has introduced a new code of investment that bears two
incentives schemes. The amount of inflowing FDI has risen from 1,152,651,559
billion FCFA in 1995 to 4,145,352,597 billion FCFA in 2002. This positive variation
of the inflow FDI during that period has impacted positively on the country’s GDP
and moved it from a negative of 1.6 in 2002 to a positive of 1.8 in 2005.
Dunning (1994:8-11) argues that, “inter-country competition to attract share FDI is
becoming increasingly intense, as host country governments seek to exploit to the full
the potential advantages of increased linkages with the globalizing economy of the
22
late 1990s. Consequently, an increasing number of governments have adopted a
welcoming stance towards FDI, and are increasingly viewing it as a means of
improving the competitiveness of their indigenous resources and capabilities. These
governments also appear to be reviewing and reshaping their Economic strategies in
order to attract FDI, In the process they are abandoning many restrictions on FDI
inflows and introducing more sound Macroeconomic policies, such as the
privatization of state-owned industries, deregulation, liberalization as well as antimonopoly policies as a means to this end”. In order to become more competitive in
FDI attractiveness, the Republic of Côte D’Ivoire through its National Assembly,
adopted a new investment code in July 1995 (New Investment Code, 1995). That new
policy seeks to promote and stimulate FDI through the elimination of bureaucracy,
reduction of cost of investment and the establishment of efficient official procedures.
It provides exemption from tax and customs duties and guarantees for investors.
There are no significant limits on foreign investment in terms of levels of foreign
ownership or sector of investment in the New Investment Code (1995).
The new code introduced two incentive schemes:
(c) The declaration scheme, which enables any investment regardless of the level
of the investment to be eligible, to the benefits contained in the code on the
basis of a simple declaration of the investor testified by the Investment
Promotion Centre in Côte D’Ivoire (CEPICI), within a maximum of 48 hours
and in almost an automatic manner. This scheme is applicable to all sectors of
activities other than transport, trade, construction and public works, and
finances. However, it only covers the investments relating to the starting of
new activities.
(d) The approval scheme on the other hand covers investments where costs are
over 500 million FCFAs. It also covers all sectors of activities excluding
finances, construction and public works. It takes into account all investments,
regardless of their nature (setting up or development of activity.
23
Dunning adds that by the same token, “direct intervention in markets has also been
reduced, leading to the removal of subsidies, tariffs and non-tariff barriers to trade
and control prices. Legal, financial and commercial infrastructures have also been
reformed and modernized”. He then advises that, “countries” may be more successful
in attracting FDI than others, due to “historical” and “geographical” circumstances.
Their ability to attract FDI, together with the types of FDI attracted and the net
Economic benefits which flow from it, can be expected to vary according to national
political, Economic and legal cultures, traditions and infrastructures, together with the
Economic objectives and policies pursued by host governments”.
Romer (1986) and Lucas (1988) in their findings support the view that International
trade plays a decisive role in countries’ rate of Economic growth. Similarly, Oscar
(2001:3) states that; “as a result of this finding, many countries have reduced
commercial barriers and other controls on Economic activity and obtained a
significant (and lasting) increase in the rate on Economic growth”. This suggests
that extroversion has a dynamic effect on the economy, helping to speed up the rate
of Economic growth.
3.2.3.2. The Negatives perspectives
According to Economy Watch (2009: Online), there is another group of economists
who view International trade as an unfavourable change in a developing countries’
economy. According to these scholars, the gains from trade have gone mostly to the
developed nations of the world. Liberalization of trade policies, reduction of tariffs
and globalization have adversely affected the industrial setups of the less developed
and developing economies. It’s argued that as a consequence of liberalization, the
majority of infant industries in these nations have closed their operations. Many other
industries that used to operate under government protection have found it very
difficult to compete with their global counterparts. However, they concluded, that,
even if the positive impacts of International trade are taken into consideration, it is
important to note that International trade alone cannot bring about Economic growth
and prosperity in any country.
24
To these Economists, other factors, such as flexible trade policies, favourable
Macroeconomic scenarios and political stability, need to be present to complement
the gains from trade. One example that is used and which is critical for this study is
the Economic stagnation in the then Ivory Coast (now known as the Republic of Cote
D’Ivoire) during the periods of 1980s and 1990s.
According to this group of
economists, the stagnation was mainly due to the absence of commensurate
Macroeconomic stability which, in turn, prevented the positive effects of
International trade from trickling down to the different layers of the then Ivory Coast
society. The main argument here is about how International trade can lead to
Economic growth, provided the policy measures and Economic infrastructure is
accommodative enough to cope with the resulting changes in the social and financial
scenarios.
3.3 Foreign Direct Investment
3.3.1 Selected Conceptualisations of Foreign Direct Investment.
Several definitions or conceptualisations of FDI have been presented at different
times and in differing contexts by writers. The following represent some of the more
prominent conceptualisations and classifications. One prominent conceptualisation of
Foreign Direct Investment (FDI) focuses on corporate activities, such as building
plants or subsidiaries in foreign countries and buying controlling stakes or shares in
foreign companies. It doesn’t include short term capital flows, such as the portfolio
investments of “emerging market” mutual funds (Robert and Randolph, 2002).
A second conceptualisation and as espoused by Anthony and Kwame, (2008), refers
to FDI as an investment that involves a long-term relationship between a foreign
investor or parent enterprise and an affiliate enterprise or foreign affiliate. A third set
of conceptualisations and as presented by Hill (2007:10), refers to the purchase of
land, equipment or buildings, or the construction of new equipment or buildings by a
25
foreign company as representing FDI. They argue that FDI occurs when a firm
invests resources in business activities outside its home country.
All these conceptualisations point out the fact FDI is any investment, except short
term capital, made by parent companies or investors in foreign countries. It’s
important to note that this investment can also be achieved through share acquisition
or through starting up a new company. Hill (2007), in his definitions, sees the
purchase of land, equipment or buildings as an investment; while Anthony and
Kwame (2008) stress a long term of the investment which builds a relationship
between an investor and it foreign affiliate.
In summary, and in the light of the above definitions, it appears that FDI tends to
occur when a firm invests resources (buying land, issuing of shares, construction of
buildings, or buying of equipment, all of which involve long term relationships) into
business activities outside its home country. This in fact represents the features of
FDI as applies to Côte D’Ivoire currently.
3.3.2 Types of Foreign Direct Investment.
The following are some of the types of Foreign Direct Investment that have been
found to exist:
3.3.2.1 Inward FDI
According to Hill (2003:685), inward FDI refers to flow of foreign direct investment
into a country.
3.3.2.2 Outward FDI
This form of Foreign Direct Investment is subject to tax incentives as well as
disincentives of various forms. Risk coverage provided to the domestic industries and
subsidies granted to the local firms stand in the way of outward FDI, which are also
known as “direct investments abroad” (Economy Watch, 2009: Online).
26
3.3.2.3 Horizontal FDI
According to Hill (2005:241), Horizontal Foreign Direct Investment occurs when a
business invests in a similar form of industry to what it is involved in at home.
3.3.2.4 Vertical FDI
Vertical Foreign Direct Investment takes place when a multinational corporation
owns some shares of a foreign enterprise, which supplies input for it or uses the
output produced by the MNC (Economy Watch, 2009: Online).
All the FDI types mentioned above have been practiced in the Republic of Côte
D’Ivoire, since the introduction of a new investment code which has in turn eased the
country’s trade environment. These forms of FDI are expressed in various foreign
country entry modes.
3.3.3 Foreign Entry Modes
According to Hill (2009:493-501), the following are foreign firm entry modes into
countries:
Exporting: is a process of manufacturing the product in a centralized location
(home or abroad) and exporting it to other national markets.
Turnkey projects: when the contractor agrees to handle every detail of the
project for a foreign client, including the training of operating personnel. At
completion of the contract, the foreign client is handed the “key” to a plant
that is ready for full operation. This is a means of exporting process
technology to other countries. Turnkey projects are most common in the
chemical, pharmaceutical, petroleum refining and metal refining industries, all
of which use complex, expensive production technologies.
Licensing: a ‘licensing agreement’ is an arrangement whereby a licensor
grants the rights to intangible property to another entity (the licensee) for a
specified period and, in turn, the licensor receives a royalty fee from the
27
licensee. The term ‘intangible property’ includes: patents, inventions,
formulas, processes, designs, copyrights, and trademarks.
Franchising: franchising is similar to licensing, although franchising tends to
involve longer-term commitments than licensing. Franchising is basically a
specialized form of licensing in which the franchiser not only sells intangible
property (normally a trademark) to the franchisee but also insists that the
franchisee agree to abide by strict rules as to how it shall do business. The
franchiser also often assists the franchisee to run his/her franchised outlet on
an ongoing basis.
Joint-ventures: entail establishing a firm that is jointly owned by two or more
otherwise independent firms. Establishing a joint venture with a foreign firm
has long been a popular mode for entering a new market. The most typical
joint venture is a 50/50 venture in which there are two parties, each of which
holds a 50 percent stake and contributes to the team of managers to share
operating control. Junjie (2008), says that this type of entry mode was the
dominant one in China because, before 1999, nearly 40% of foreign
investments were joint-ventures.
Wholly owned subsidiaries: in this entry mode, the firm owns 100 percent of
the stock. Establishing a wholly owned subsidiary in a foreign market can be
done in two ways. The firm either can set up a new operation in that country,
often referred to as a Greenfield venture, or it can acquire an established firm
in that host nation and use that firm to promote its products. Juinjie (2008)
argues that since 2000, in China, this entry mode has steadily increased and
from 1997 to 2005 it rose from 35.8% to 71.2% to become the new dominant
entry mode.
In the case of the Republic of Côte D’Ivoire, the following entry modes are most
commonly used. This involves, exporting, turnkey projects joint-ventures and wholly
owned subsidiaries.
28
3.3.4. Influencers of Foreign Direct Investment
Influencers or factors of Foreign Direct Investment (FDI) may not have the same
impact in investors’ decisions to invest in a particular foreign market. It follows
therefore that every investor will seek to work with an influencer that has specific
impacts on their investment decision. The implications are that an influencer may be
deemed necessary for FDI inflow in one location but not necessarily in another. This
reality presents a level of difficulty in ascertaining accurately just which factors
represent the most important determinants of FDI.
The following discussion focuses on the nature of the influencers of Foreign Direct
Investment (FDI).
3.3.4.1. Policy Framework
According to World Investment Report (1998), ‘policy framework’ refers to
Economic, political and social stability; rules regulating entry and operations (of
FDIs); standard of treatment of foreign affiliates; policies on functioning and
structure of the markets; International agreements on FDI; privatization policy; trade
policy (tariffs and non-tariff barriers and coherence of FDI) and tax policy. Dunning
(1993; 1994), Audrey et al. (2003), and Mottaled (2007) support the view that policy
framework is an important FDI influencer.
3.3.4.2 The Economy
Marios and Spyros (2007:493) argue that the level of socio-Economic development,
functionality of market institutions and their mechanisms, stability of the foreignexchange market are important Economic influencers of FDI inflows. Audrey et al.
(2003) Also note that knowledge and experience of the foreign market, size and
growth of the foreign market, costs of transport, materials and labour, are important
Economical influencers of FDI. Finally, Saudagaran and Diga, (1997, cited by Orhan
and Ray, 2009:8) argue that: “besides Macroeconomic stability, the performance of
29
emerging market economies in attracting foreign investments is closely associated
with the quality of financial reporting”.
3.3.4.3 Infrastructure
Dunning (1993; 1994), Audrey et al. (2003) and Mottaled (2007) have all presented
the importance of infrastructure as Foreign Direct Investment influencers. As an
example, Audrey et al. (2003, quoted in Christodoulou, 1996) mention that
infrastructure in the context of FDI incorporates such factors as expenditure on roads,
transport and hospitals. She also explains that it is related to the factor of “quality of
life,” which is regarded as an increasingly important incentive in attracting foreign
investors, by encouraging senior personnel to locate to a region.
3.3.4.4 Natural Resources
According to Dunning (1988) and Marios and Spyros (2007:493), endowment with
natural resources, particularly labour and raw materials, are widely acknowledged as
influencing a firm’s FDI decision making processes.
3.3.4.5 Location Specific Advantages
The geographical location of a country is considered to be one of the key advantages
of FDI attraction to that country (Coskun,2001: 222). Côte D’Ivoire is very well
situated geographical as discussed in chapter 2 and hence plays an important role in
the Economic activity of the West African Economic and Monetary Union
(WAEMU), where it accounts for a 40% share of this Union’s reserves (Ken, 2010).
The location specific advantages have also been discussed in studies such as by
Dunning (1981), in which this author suggests that TNCs will invest in a foreign
location only if the latter offers certain location-specific advantages in terms of
resources and facilities that make it possible for the TNCs to explore their firmspecific ownership advantages.
30
The government of the Republic of Côte D’Ivoire has always regarded its 1)
economic stance, 2) natural resources, 3) location-specific advantages and 4)
infrastructure as the country’s main influencers of foreign direct investment. It is only
in more recent times that the government FDI policy framework has been expanded
to include other factors that have made it more attractive.
In addition to the above influencers, according to Dunning (1993:56-62), the
influences of FDI is determined by the multinational enterprise’s strategic objectives
as FDI influencer and it is characterized by the following factors: (i) the resource
seekers, (ii) the market seekers, (iii) the efficiency seekers, (iv) the strategic asset
seekers, (v) and other motives for MNE activity.
It has been observed in recent years that a few countries have altered their stance visa-vis overseas investment. They have reset their Economic policies in order to suit the
interests of the overseas investors. Those countries have increased the transparency of
their existing legal frameworks. That was done so the overseas companies can
understand the implications of their investment in a particular country and take the
appropriate decisions. This is supported by Wells and Wint (1990), who conducted
studies on 18 developed and 32 developing countries. Their study indicated that
promotion had a statistically significant positive impact on investment flows to the
full sample of countries and to developed and developing countries, which were
tested separately. Their research suggests that promotion can help influence inflows
of FDI, which has been particularly encouraging to developing countries eager to
attract such investment. Many such countries have developed special programs
geared toward that. Since then, according to Alvin and Densil (2002), most
developing countries have shifted toward more liberal attitudes toward FDI.
The eclectic paradigm of Dunning, also known as the OLI paradigm, proposes that
the undertaking of FDI is determined by the realization of three groups of advantages:
(1) Ownership advantages, specific to the company and are related to the
accumulation of intangible assets, technological capacities or product innovations. (2)
31
Internalization advantages, which stem from the capacity of the firm to manage and
coordinate activities internally in the value added chain. They are related to the
integration of transactions into multinational hierarchies through FDI. (3) Location
advantages, which refer to the institutional and productive factors which are present
in a particular geographic area. They arise when it is better to combine products
manufactured in the home country with irremovable factors and intermediate
products of another location (Jose, and Javier, 2001:271).
3.3.5
Challenges/Benefits of Foreign Direct Investment
3.3.5.1. Challenges of Foreign Direct Investment
The following are challenges of FDI: culture, ethnics and entry mode to the new
market, environmental aspects and consideration, and implementation of change
regarding home management or marketing practices. All those aspects are challenges
associated with FDI and, if not managed carefully, will result in loss for the home
country and lack of development for host country (Hill, 2007:268-276).
According to Anthony and Kwame (2008), “FDI has proved to be resilient during
financial crises; for example, it was critical in East Asian countries during the global
financial crisis between 1997 and 1998. The resilience of FDI during financial crises
was also evident during the Mexican crisis of 1994 to 1995 and the Latin American
debt crisis of the 1980s”. In addition, he also argues that in any FDI undertaking there
are some risks that should be considered and, among them, is exchange rate volatility.
Exchange rate volatility is the most basic risk measure that may confront investors
and it refers to the short-term deviations of the exchange rate around its long-term
trend. Fluctuations, whether positive or negative, are undesirable as they have the
tendency of increasing risk and uncertainty in International transactions, thereby
discouraging trade and investment flows.
32
Environmental pollution, inter-regional Economic disparities as a result of the uneven
distribution of FDI, were also presented as challenges by Sun (1998:17) in China,
while Ronald (2007) found a negative effect of FDI on child labour.
By the same token, Recep and Bernur (referred to in the study by Papanek (1973),
and Baharumshah and Thanoon (2006)) argue that foreign aid, private investment and
other capital crowded out national savings, therefore, reduction in domestic savings
could lead to a further increase on the dependency on foreign capital. It’s also
recognised now that an important challenge to FDI inflow that faces the Republic of
Côte D’Ivoire includes political instability due to undemocratic practices and the
resultant civil wars. This is also true of other sub-Saharan countries.
3.3.5.2. Benefits of Foreign Direct Investment
Among the enormous benefits that host and home country can gain are the following:
3.3.5.2.1 Host Country
Beside the two benefits listed below, FDI can play an important role in the Economic
growth of the recipient country.
3.3.5.2.1.1 Employment
There is ample evidence in the available literature that employment is potentially a
major FDI benefit for a host country (West Africa Review, 2001; UNCTAD, 2006,
and Hill, 2007:268-276). For example Jayaraman (2007:16) found that FDI had a
positive and statistically significant impact on Fiji’s employment rate.
3.3.5.2.1.2 Resources Transfer
Resources transfer, such as capital, technology and management (knowhow)
transfers, are FDI benefits for the host country (Hill, 2007:268-276). In addition to
capital gains, Bala (2005:6) identified the following benefits from FDI for the
developing countries: management know-how, new technology and the foundations
for research and development (R&D). He argues that as the result of the interaction
33
between foreign and domestic firms technology is transferred, thus allowing local
firms to build their own competencies. An important result of the transfer and
learning of such competencies is an increase in productivity. The above mentioned
benefits from FDI are also related to the Republic of Côte D’Ivoire. As an example,
54698 new job opportunities were created since 1996 up to 2009 corresponding to the
inflow FDI for that period (see Table 3.7). Among the new job opportunities created,
50011 were Ivorian and the remaining 4687 were taken up by expatriates.
3.3.5.2.2 Home Country
3.3.5.2.2.1 Increased Profitability
According to Hill (2007:268-276), market expansion, first mover advantages, and
economies of scale are among the investing or home country benefits of FDI. In
addition to these benefits, the latter authour adds that the balance of payment of the
home country, will show up positively from the year of return on investment.
Dunning (1994) provides a range of specific advantages accrued by home economies,
also the result of TNCs:
-
Tend to be more dynamic than local state and private enterprises
-
Can restructure enterprises more quickly
-
Operate more capital intensively
-
Provide more training
-
Operate with higher labour productivity
Its’ important to note that in addition to the specific advantages that FDI investors can
gain, the Republic of Côte D’Ivoire now provides a more skilled labour for the TNCs
to assist in increasing its productivity. In addition, the new investment code can assist
the enterprises to invest and become involved in the country’s economy more
quickly.
34
3.3.5.2.2.2 Competitive Advantages
First mover advantages and learning of valuable skills were presented by Hill
(2007:268-276) as an FDI benefit for the home country, while Dunning (2001:184)
states that “MNEs from all countries are increasingly reaching beyond their national
borders to create or gain access to resources and capabilities which complement their
existing core competencies”. It is the researcher’s view that those two benefits can
contribute to the TNCs competitive advantages in a host country the Republic of Côte
D’Ivoire.
In addition to the above, the West Africa Review (2001) argues that FDI can (1)
create employment in host economies; (2) be vehicles of transfer of technology; (3)
provide superior skills and management techniques to host economies; (4) help in the
capital formation process; (5) facilitate local firms’ access to International markets;
(6) use local resources more efficiently and productively; (7) increase product
diversity; (8) use environmentally clean technology; (9) observe human and labour
rights and; (10) create a lot of linkage-effects in the economy, for both host and home
countries alike. Therefore, they concluded by saying, FDI can be an engine of
Economic growth in a host economy. Such investments can sustain and improve
Economic development in a country or, for that matter, even a global region. Given
the Economic conditions in Africa and its level of development the need for FDI in
the region cannot be overemphasized. That continent needs to increase its share of
global FDI inflows as one of the most likely ways to increase the needed external
capital for its development.
3.4. Africa and Foreign Direct Investment
3.4.1 Share of Africa over the World Stock of Foreign Direct Investment
As mentioned earlier, many African countries, including the Republic of Côte
D’Ivoire, have historically found it difficult to attract FDI flows and, as a result, lag
behind other regions of the world.
35
Table 3.2 Inward FDI stock for Africa, 2000 to 2007
2 000
2 001
2 002
2 003
2 004
2 005
2 006
2 007
15
5
World
786
700
6
6 164 222
759
522
8
170
827
9
587
059
10
180
063
12
470
085
210
560
393
Africa
152 614
149 561
164 652
202 233
240 887
270 984
335 435
429
3%
2%
2%
2%
3%
3%
3%
3%
Share
of
Africa
(Adapted from UNCTAD FDI stock by host region & economy, 1980-2007, reflected in millions
of US$.)
Table 3.2 reflects the inflows of FDI in Africa for the period 2000 to 2007. By the
year 2001, there was an inflow drop from US$152614 million in 2000 to US$149561
million. The remainder of the proceeding years show an increase in terms of dollar
amounts. As an example, from US$164652 million in 2002, to US$393429 million in
2007, Africa observed an increased FDI inflow during six consecutive years, despite
the share in 2002 and 2003 (2%) remaining the same in 2001. Further information is
that, an important increase of the world’s Inward FDI from US$5 786 700 million in
2000 to US$15 210 560 million in 2007 can be observed, which reflects the original
figure tripled; while, for the same period, Africa’s Inward FDI doubled from
US$152614 million to US$393429 million. According to Jacob and Simon (2006)
“the growing investment gap and the declining foreign aid in recent years has
compelled many African countries to turn to FDI as a means to avoid development
financing constraints”. This could explain African’s Inward FDI increase for that
period. Figure 3.3 illustrates this.
36
Figure 3.1 Share of Africa Inflow of FDI over the World Inflow of FDI stock
Source: Adapted from UNCTAD 2007
Figure 3.2 clearly shows a general trend in regards to the non performance of Africa
as a continent vis-a-vis World Inward FDI stock. From 2000 up to 2007, the share of
Africa in the world FDI stock was a mere 3%., Elizabeth (2001) uses this example to
explain that during the periods 1980-1984 and 1994-1997, the annual average of FDI
to developing countries increased by 1630%, while the annual average of FDI to
Africa increased by 496%. As a result, Africa’s share in total FDI flows has dropped
significantly, from 36% in 1970-1974 to 10%in 1980-1984 and to 3% in 1995-1999.
Africa’s non performance is also explained by Jacob and Simon (2006), the
“investment rate (share of investment in GDP) in Africa has on average, declined
from 28.5% during 1974-1980 to 20.2% during 1991-1996”. As a conclusion they
said that: “in the past Africa attracted FDI as a result of her abundant natural
resources and size of domestic markets”; which, according to the researcher, could be
one more reason that explains Africa’s poor performance in attracting FDI inflows.
37
3.4.2 Performance of Different Africa Regions for Foreign Direct Investment
Table 3.3 FDI inflow for different regions of Africa
2000
2001
2002
2003
2004
2005
2006
2007
116
141
North Africa
45 688
50 637
56 029
65 736
75 035
84 700
293
460
West Africa
33 403
34 572
37 947
41 991
46 035
50 584
66 986
83 171
Central Africa
5 805
7 353
9 495
12 741
15 422
18 882
22 125
26 209
East Africa
7 132
7 922
8 895
10 719
12 298
12 800
15 894
19 489
104
114
123
Southern
Africa
Total
60 586
49 077
52 286
71 047
92 096
019
138
100
152
149
164
202
240
270
335
393
614
561
652
233
887
984
435
429
(adapted from UNCTAD 2008 Inward FDI stock, by host region and economy, 1980 to 2007and
reflected in millions of US$.)
Table 3.3 helps to show how region’s in Africa have observed a consecutive increase
of FDI inflow for the period 2002 to 2007, except Southern Africa which has
observed a decrease in FDI inflow for two consecutive years, 2001 to 2002. North
Africa and Southern Africa shared the leading position.
In 2000, the Southern Africa region (with US$60 586 million) registered the largest
amount of FDI inflow, followed by the North Africa region (with US$45 688
million), while during 2001 to 2002, the North Africa region was at the first position
with US$50 637 and US$56 029 million respectively, against US$49077 and US$52
286 million for Southern Africa region for the same period.
From 2003 up to 2005 the Southern Africa region recorded the highest performance,
while in 2006 to 2007 the North Africa region with US$116 293 and US$141 460
million respectively was the first recipient of Africa FDI inflow.
38
Figure 3.2 Share of FDI inflow for different African regions
(Adapted from UNCTAD 2008)
The West African region is at the third place in terms of FDI performance, with
US$33 403 million in 2002; the region almost tripled its performance in 2007, with
US$83 171 million, while Central Africa and East Africa sharing respectively the
fourth and fifth positions accounted for US$5 805 and US$7 132 million in 2000, up
to US$26 209 and US$19 489 million respectively in 2007.
It is also important to mention that, while good performances generally were
observed for the West African region, in terms of inflow of FDI, the Republic of Côte
D’Ivoire does not appear to have benefited as much, mainly due to the country’s
political crisis of 2002. The total amount of FDI inflow dropped significantly from
301,717,554,551 billion FCFA in 2001 to 70,698,716,437 in 2002 and then to
46,603,644,430 billion by 2004. Benefits of FDI inflow to this country only started
showing in 2007, corresponding to the implementation of the Ouagadougou peace
agreement. About 63% of the FDI flow to Africa during 1995 to 1999 was
concentrated in only five countries: Angola, Egypt, Morocco, Nigeria and South
Africa (Jacob & Simon, 2006).
39
In conclusion, according to UNCTAD (2007) it is argued that: “As a result of the
commodity price boom, income on inward FDI grew by 31% in 2007, and the rate of
return on investment in Africa was the highest among developing regions in 2006 and
2007. A large proportion of FDI in 2007 concentrated on expanding projects related
to natural-resource exploitation, partly through reinvested earnings. As a result, the
share of reinvested earnings in total FDI inflows increased to 28% and foreignexchange reserves in the region grew also by some 36% in 2007, and by even more in
some major oil-exporting countries such as Nigeria and the Libyan Arab Jamahiriya”.
Despite the higher inflows, Africa’s share of global FDI remained at around the 3%
mark and the prospects for increased FDI inflows in 2008 was promising, they added.
3.5 Côte D’Ivoire and Foreign Direct Investment
The Government of Côte D’Ivoire encourages Foreign Direct Investment, as part of
that country’s new investment code adopted by the National Assembly on July 1995
(New Investment Code, 1995). That new policy seeks to promote and stimulate FDI
through bureaucracy elimination, reduction of cost of investment and the
establishment of efficient official procedures. It provides exemption from tax and
customs duties for and guarantees to the investor. There are no significant limits on
foreign investment in terms of levels of foreign ownership or sector of investment
(New Investment Code, 1995).
The new code introduced two incentive schemes:
(e) The declaration scheme, which enables any investment regardless of the cost
to be eligible, within a maximum of 48 hours and in almost an automatic
manner, to the benefits contained in the code on the basis of a simple
declaration of the investor testified by the Investment Promotion Centre in
Côte D’Ivoire (CEPICI). This scheme is applicable to all sectors of activities
other than transport, trade, construction and public works, and finances. It
40
only covers the investments relating to the starting of new activities, (New
Investment Code, 1995).
(f) The approval scheme covers investments where costs are over 500 million
FCFAs. It also concerns all sectors of activities excluding finances,
construction and public works. It takes into account all investments,
regardless of their nature (setting up or development of activity) (New
Investment Code, 1995).
Foreign Direct Investment plays a key role in the Ivoirian economy, accounting for
between 40% and 45% of total capital in Ivoirian firms. France is overwhelmingly the
most important foreign investor. In recent years French investment has accounted for
about one-quarter of the total capital in Ivoirian enterprises and between 55% and
60% of the total stock of foreign investment capital (U.S Bureau of African Affairs,
State Report: 2007).
As mentioned above, and referred to in Table 3.3, since 1995 the Republic of Côte
D’Ivoire has offered a new code of investment with two incentive schemes. From
that period up to 2002, the declaration scheme registered between 16 and 30
declarations per year, with investment amounting to 1,152,651,559 to 4,145,352,597
billion FCFA per year, whereas the approval scheme observed an increase from 57 to
84 approvals per year amounting to 67 932 006 578 to 299 292 702 351 billion FCFA
per year.
From 2002 up to 2009, with the political crisis (rebellion), an increase in FDI inflow
was observed for the declaration scheme and a decrease for the approval scheme; 10
to 87 declarations were registered per year amounting to 2 835 850 099 to 5 816 938
924 billion FCFA per year and from 44 down to 9 (the first quarter of 2009)
approvals were registered per year, with investment amounting to 14 262 558 695 to
335 213 957 425 billion FCFA per year.
41
The change observed in the number of declaration schemes (increase) and approval
scheme (decrease) was due to the successive political crises that started in 2002 and
got worse in 2004, when the French army destroyed the Republic of Côte D’Ivoire
air fleet and killed more than 100 Ivoirian citizens (State Report: November 2004);
therefore, investors became more cautious about their investment. Most of the
investments made in that period were made under the declaration scheme with less
than 500 million FCFAs, just to wait until the advent of better political conditions.
Table 3.4 C.I FDI Record for Declaration and Approval Schemes from Investment Records
(1996 -2009)
YEAR
INVESTMENTS STANDING
Attested
Declarations
file
Authorized
Approval
file
Total
(declarations
+approval)
1996
24
3,026,816,091
57
126,551,003,314
129,577,819,405
1997
16
1,152,651,559
73
265,042,252,769
266,194,904,328
1998
23
4,145,352,597
84
202,127,400,073
206,272,752,670
1999
30
3,151,630,266
73
195,261,810,159
198,413,440,425
2000
30
2,863,918,885
76
113,665,180,743
116,529,099,628
2001
19
2,424,852,200
46
299,292,702,351
301,717,554,551
2002
23
2,766,649,859
44
67,932,066,578
70,698,716,437
2003
37
2,086,835,903
33
70,840,501,257
72,927,337,160
2004
37
3,533,382,907
16
43,070,261,523
46,603,644,430
2005
67
3,835,483,044
24
118,588,609,940
122,424,092,984
2006
87
3,046,661,611
14
80,210,585,672
83,257,247,283
2007
69
5,816,938,924
29
335,213,957,425
341,030,896,349
2008
49
4,831,158,242
50
226,652,033,708
231,483,191,950
17-Mar-
10
2,835,850,099
9
14,262,558,695
17,098,408,794
521
45,518,182,187
628
2,158,710,924,207
2,204,229,106,394
2009
TOTAL
Source: Centre of Promotion and Investment - CEPI - Republic of Côte D’Ivoire
In summary, from the period of 1996 to the first quarter 2009, 521 declarations were
registered for a total amount of 45 518 182 187 billion FCFA, when 628 approvals
were given for a total investment amounting to 2 158 710 924 207 billion FCFA.
42
2007 was the best year in all with 5 816 938 924 billion FCFA declared and 335 213
957 425 billion FCFA approved in FDI inflow. The total FDI inflow (declaration and
approval) for the same period is 2 204 229 106 394 billion FCFA; again 2007 had the
biggest share, with 341 030 896 349 billion FCFA and this is the result of the
political accord signed between the C.I government and the instigators of the
rebellion. The ‘worse year’ was 2002, recording 70 698 716 437 billion FCFA and 46
603 644 430 billion FCFA.
3.5.1 Impact of Foreign Direct Investment on Côte D’Ivoire
The Republic of Côte D’Ivoire, as the rest of African countries have not gained much
from FDI inflow and the impact of FDI on Republic of Côte D’Ivoire will be
discussed from the following viewpoints: 1. the impact on the economy, and 2. the
impact on employment; these are discussed in more detail in the sections that follow.
3.5.1.1 Impact on the Economy
As discussed earlier in chapter 2, Republic of Côte D’Ivoire has a broad economy. In
the process of opening up economies to participate in some of the positive impacts of
globalization, countries position themselves in respect of attracting foreign direct
investment. In this regard the Ivorian government officials did not want to lag behind;
therefore, they opened up the economy to become more efficient in FDI attraction.
While the government of the Republic of Côte D’Ivoire
encourages foreign
investment, political instability, for example the 2002 conflict, significantly
undermines investor confidence in the country. Political violence and deterioration of
the investment climate have also hampered privatization efforts (U.S Bureau of
African Affairs, State Report: 2009). The 2002 political crisis had a negative impact
on the Republic of Côte D’Ivoire’s FDI. According to MIGA (2010: Online), the
conflict and political instability took a heavy toll on economic growth. During 2000
to 2006, the average Economic growth turned negative (-0.4 percent) and was well
below the average rates in the rest of WAEMU (4.1 percent) and sub-Saharan Africa
43
(4.9 percent). The partition of the country disrupted trade within the country, while
diminishing Republic of Côte D’Ivoire’s role as a regional hub. Export volume
growth fell between 1994 to 1999 (8.7 percent) and 2000 to 2006 (2.3 percent).
Foreign direct investments took a major hit and many foreign businesses closed or
significantly scaled down their operations, awaiting the permanent resolution of the
crisis.
Developments in Côte D’Ivoire have had a negative impact on the WAEMU regional
trade and output. The Ouagadougou Accord gave new impetus to political
normalization and the economy gradually began to respond favourably to this and the
resultant more stable environment (MIGA, 2010). Since 2007 to the present, the Côte
D’Ivoire economy has shown significant improvement when compared to the period
before 2007. As an example, output growth in 2008 was 2.3 percent, driven by a
recovery in oil and gas output. And the value of exports increased by 8.3 percent in
2008, from 5.7 percent the previous year. The current account balances (excluding
official transfers) also have improved as a percentage of GDP (MIGA, 2010).
Figure 3.4 depicts the recovery of the Republic of Côte D’Ivoire’s economy. The
negative total GDP observed for 2002 and 2003 increased to 1.6 and 1.8 in 2004 and
2005 respectively, but dropped to 0.7 in 2006. From 2007 we observe an increase
from 1.6 up to 3.8, in 2009 (Republic of Côte D’Ivoire’s Department of Economy,
State Report: 2009).
44
Figure 3.3: Total GDP over the period 2002 to 2009
(Source: Adapted from Department of Economy, State Report: 2009)
In addition, MIGA (2010) made a projection of GDP growth of 4.2 percent in 2010,
and to surpass 5.0 percent per annum over the period 2011-2013, as productivity and
investment is expected to return to their pre-crisis growth path.
Performance as per Economic sector, reflecting their contribution to the total GDP, is
presented in Figure 3.5.
•
The primary sector contribution was -0.2%, in 2002; which was followed by
the positive increase of 0.9% up to 1.4% during 2003-2006, and by a constant
negative -0.3% for the period 2007-2008. In 2009 the sector had recovered
with a positive contribution to GDP of 1.8%
•
The secondary sector showed a negative contribution of -1.4% down to -2.4%
for the period 2002-2003; which was followed by a slow positive increase of
0.6% up to 1.7% during 2004-2005. In 2006 that positive increase dropped to
-1.9%, followed again by the slow positive increase of 0.4% to 0.8% for the
foregoing two years and down to -0.3% in 2009.
•
The tertiary sector showed a constant negative GDP contribution of -0.6%
down to -1.1% for the period 2002-2005; which was followed by the constant
positive increase of 0.7% up to 1.8% during 2006-2009.
•
The non-trade sector showed a constant positive contribution toward the GDP.
From 0.6% during 2002-2003, it dropped to 0.1% in 2005 and increased again
45
to a constant 0.6 during 2007-2008. In 2009, it showed a loss when it
decreased to 0.1% from the previous year.
Figure 3.4 Performance as per Economic sector, to the total GDP.
(Source: Adapted from Department of Economy, State Report: 2009)
Table 3.5: GDP as per Economic sector
Economic sector's
2002
2003
2004
2005
2006
2007
2008
2009
- primary sector %
-0.2
0.9
1.0
1.1
1.4
-0.3
-0.3
1.8
- Secondary sector %
-1.4
-2.4
0.6
1.7
-1.9
0.4
0.8
-0.3
- Tertiary sector %
-0.6
-0.9
-0.2
-1.1
0.7
0.9
1.2
1.8
- Non trade Sector %
0.6
0.6
0.2
0.1
0.5
0.6
0.6
0.5
- Total GDP %
-1.6
-1.7
1.6
1.8
0.7
1.6
2.3
3.8
(Source: Department of Economy, 2009)
In summary, all the sectors negatively contributed to GDP in 2002 (GDP 2002, 1.6%) but in 2003, with the negative -1.7% GDP, only the primary sector contributed
positively, while the secondary and tertiary sector contributions remained negative.
From 2004 up to 2009, with the positive increase in GDP of 1.6% up to 3.8%, all
sectors managed to contribute positively to the total GDP.
Other impacts of FDI on the Côte D’Ivoire’s economic activities are presented in
Table 3.6 below
46
Table 3.6 Côte D’Ivoire’s total FDI as per different Economic activities for the period 1996 2008.
Percentage
Field
Total FDI inflow 1996-2008
Food processing industry
468,328,871,251
21%
Steel and Engineering Industry
39,349,910,958
2%
Health
44,401,787,027
2%
Tourism & Hotel Business
53,873,292,350
2%
Telecommunications
942,887,896,036
43%
Chemical Industry
47,418,462,203
2%
Wood Industry
44,637,587,437
2%
Packaging Industry
16,164,646,144
1%
Textile Industry
62,166,507,179
3%
Transport
131,871,891,975
6%
Services
104,786,353,505
5%
Gas & Oil Industry
40,541,869,530
2%
Trade
43,735,102,072
2%
Construction Industry
17,492,477,536
1%
Plastics Processing Industry
13,092,221,575
1%
Various Industries
48,121,919,296
2%
Others
32,533,255,906
1%
TOTAL
2,204,229,106,394
100%
Source: Cabinet of Prime Minister, Centre of Promotion and Investment (CEPICI, 2009)
The Côte D’Ivoire economy, like the economy of other countries, is based on the
following three Economic sectors: primary, secondary and tertiary; represented here
respectively as 26%, 21% and 53% of the GDP. (Department of Investment and
Promotion Centre, State Report: 2008).
Table 3.6 describes the total FDI inflows for the period of 1996-2008 as per
economic activities. Seventies (17) Economical industries were among the recipient
of that total inflows FDI. The telecommunication industry accounted for 942 887 896
47
036 billion of FCFA, representing 43% of the total FDI flows for the period. The
agro-industry is a second recipient with 468 328 871 251 billion FCFA, followed by
transport with 131 871 891 975 billion FCFA, and services accounted to 104 786 353
505 billion FCFA represented, respectively, 21.24%, 5.98% and 4.75% of the total
FDI flows for the same period. The leather and I.T industries are at the bottom,
sharing respectively 95 394 400 and 42 955 627 million FCFA. It is important to
notice that the telecommunication and agro-industries together accounted for 64% of
the total inflows FDI during the period under consideration. Most of the 17 Economic
activities or industries have shown increased FDI inflows for the period 1996 to 1998,
followed by the decreased due to the political crisis for the period 1999-2006, and a
considerable increase by 2007; merely due to the Ouagadougou accord signed
between the government and the rebellion. An increase in FDI inflows into the
declaration scheme were observed as investor confidence grew.
From the above discussions, we have explained the impact of FDI on Côte D’Ivoire’s
economy by using select available economic indicators such as the annual GDP data,
annual GDP data per economic sector activity and also data from the highest recipient
industry sector for the period 2000 to 2009. It is important to note that, the Côte
D’Ivoire economy has been impacted upon positively from 2004 up to 2009 via a
positive GDP rate. This can perhaps be explained by the large amount of inflow FDI
registered during 2000 and 2001.
3.5.1.2 Impact on Employment
According to Diby (2007:177), the Ivoirian government was for three decades the
main employer, principally because of the job stability within the administrations but,
due to the strong wages impact on the state budget, International financial institutions
such as the International Monetary Fund (IMF) subjected the country to stringent
structured programs that resulted in employment levels falling quite drastically. For
example, the number of staff in the government workforce which at one point totalled
116 000, decreased to 104 454 individuals by 2005.
48
Under the structured program the government was forced to look for alternative
means of job creation. Since that period the government has placed emphasis on
employment as being an important national priority. The result was that FDI inflows
have generally impacted positively on the Côte D’Ivoire employment rate depending
on government priority. For example, agriculture remains a key sector in the Ivorian
economy, accounting for 26% of GDP and employing the largest part of the
workforce.
It also accounts for around half of the country’s exports. For the industry sector,
manufacturing accounts for 21% of the GDP and employs 13% of the workforce,
while the services represent 53% of GDP and employ 26% of the workforce.
(Department of Economy, State Report: 2008). The effects of the imposed
restructuring and the political instability that followed resulted in important Social
repercussions. One outcome was the increase in poverty, in turn has led to massive
population displacements, rising unemployment, and a worsening composition of
public expenditures (MIGA, 2010).
Table 3.7: Employment generated by Côte D’Ivoire FDI inflow, 1996 to 2009
Year
Number of Employment Generated
Ivoirian
Expatriate
1996
3,073
2,750
323
1997
5,419
4,804
615
1998
6,894
5,227
1,667
1999
4,966
4,796
170
2000
3,456
3,155
301
2001
9,122
8,559
563
2002
4,219
3,736
483
2003
2,077
2,013
64
2004
3,362
3,278
84
2005
4,360
4,241
119
2006
1869
1692
177
2007
2310
2224
86
2008
3155
3122
33
17-March-2009
416
414
2
TOTAL
54698
50011
4,687
49
(Source: Adapted from the Cabinet of the Prime Minister, Centre of Promotion and Investment,
CEPICI, 2009).
Table 3.7 indicates the impact of FDI on the employment for the period 1996 to 2008
for both the declaration and approval scheme. For better discussion, the impact on
employment is presented as follows:
3.5.1.2.1 Before 2002
From 1996 up to 2001, the inflow of FDI generated more than 30 000 jobs were
generated. Year 2001 registered the highest record of employment with 9 122 jobs. It
is important to notice, again, that 2001 was the year when FDI inflows hit a record
high, generating an income of 301 717 554 551 billion FCFA. In 1996, 3 073 jobs
were registered, which figure was increased with each successive year to triple in
2001. Among the 30 000 jobs generated during that period, more than 85% of the
employees are Ivorian and 15% expatriates (See Table 3.7).
3.5.1.2.2 After 2002
From 2002 up to 2008, the employment figures stagnated between 1800-4000 jobs
per year with 85% of Ivorian employees. More than 20,000 new jobs opportunities
were created. The job stagnation was due to the decrease observed by the inflow FDI
for that period due the political crisis of 2002.
In summary, 2001 revealed the best performance. The country registered its highest
employment rate during that year, with 9,122 employees representing 17% of the
population. The year 1998, has shown a second highest employment rate with 13%,
representing 6,894 new jobs over the total jobs created. 1997 and 1999, with 5,419
and 4,966 sharing respectively 10% and 9% of the new employment creation, were
the third and fourth best performing years see (Figure 3.6 refers.)
Figure 3.6 also indicates those years 2002 and 2005, with an average of 4300 new
jobs which represent 8% over the total employment opportunities. Year’s 2000, 2004
50
and 2008, accounted for an 8% share, with an average of 3 400 new jobs created. The
lesser performing years were 2003 and 2006, with a share of 3%, which corresponds
to an average of 2000 new jobs.
Figure 3.5: Employment generated from FDI inflow for the period 1996 to 2009
(Adapted from the Cabinet of the Prime Minister, Investment and Promotion Centre, FDI data
(2009))
In summary, 1149 declarations and approval schemes registered for the period 1996
to 2009 accounted for 2 204 229 106 394 billion FCFA FDI inflows, 54 698 new jobs
were created of which 91.42% (50 011) were Ivorian and the remaining 8.6%
comprised of were expatriates.
In addition, the survey conducted by the Ivorian Agency of Promotion and
Employment (AGEPE) in 2002 shows that the estimated working population was 6
006 190 individuals, less than 5% in 1995 of which 10.1% are government workers,
14% for trade sector and 61.3% for agriculture sector.
3.5.2 Republic of Côte D’Ivoire’s Infrastructure
Since independence Côte D’Ivoire has placed a strong emphasis on growing its
infrastructure network to enable and facilitate the development of industry and flow
of goods around the country; and to also enable the transfer of goods to neighbouring
51
countries. This policy has boosted the Economic competitiveness of the country and
consolidated its competitive advantage within the geographic sub-region (Diby,
2007:128).
3.5.2.1. Economic Infrastructures
To investors Côte D’Ivoire offers a well established Economic infrastructure. The
extent of the country’s roads sealed by bitumen has increased over the years and
were, respectively, 530 km in 1960, 1070 km in 1970, 1740 km in 1975, 5600 km in
1995, and 6500 km during 2000-2005 (Diby, 2007:128). The classified roads network
extends over 70 000 km, of which 6 500 km were under bitumen, which includes 150
km of motorways. This road network makes for easy linkages between the various
large cities of the country as well as the supply of goods and services to the
neighbouring countries (Côte D’Ivoire, Department of Economics, State Report:
2007).
The Republic of Côte D’Ivoire is served by three International airports (Abidjan,
Bouake, Yamoussoukro) and 14 aerodromes that serve individual cities, which
currently receive 24 International airlines offering more than 200 flights a week. Of
the airports, Abidjan International Airport is the busiest. In 2005 Abidjan registered
14 257 commercial flights that handled 745 180 passengers; which figure is down
from that of 2000, when 1 081 496 passengers were handled (Diby, 2007:135).
The railways network is 1260 km long (638 km in Côte D’Ivoire, 622 km in Burkina
Faso), which links Côte D’Ivoire and Burkina Faso. Further, two International sea
ports support Côte D’Ivoire (Abidjan and San-pedro); they are used as transit ports
for its landlocked neighbouring countries to the north. After Durban harbour, Abidjan
sea port is the second busiest port in Africa; with total traffic of 12 million tonnes in
1995, which increased to 14 556 414 million tonnes in 2000, and increased again to
18 661 784 million tonnes in 2005 - an increase of 40% over the period 1995 to 2005.
The International trade with sub-region countries and other African countries was 3
546 847 million tonnes in 2000, which increased to 4 570 198 million tonnes in 2005
52
with Nigeria, from 383 925 million tonnes in 2000 up to 420 634 million tonnes in
2005 with Burkina Faso, from 549 556 million tonnes in 2000 down to 338 400
million tonnes in 2005 with Mali, from 345 951 million tonnes in 2000 up to 399 424
million tonnes in 2005 and from 1 555 196 million tonnes in 2000 up to 2 707 726
million tonnes in 2005 respectively with Senegal and other countries. However, since
the beginning of the political crisis in 2002 the country’s second sea port (San-Pedro
port) has experienced difficulties where the traffic tonnage was 1 353 474 million
tonnes in 2000, which decreased to 1 001 991 in 2005. This reflected a decrease of
26% (Diby, 2007:131-134).
The telecommunications network is dense and reliable. The total number of fixed-line
telephones was 115 214 in 1997, which increased to 1 400 000 in 2004; and over 11
000 000 clients are served by the five mobile phone operators (Diby, 2007:141). The
large cities are equipped with numeric telephone systems, which mainly make use of
optic fibres for inter-city transmissions. The extensive development of the mobile
telecommunications systems helps to cover nearly all the villages within the country
(Department of Telecommunication Agency, State Report: 2007).
The Republic of Côte D’Ivoire can boast of having a dense banking network: there
are 19 financial organizations among which are 17 banks and 2 credit organizations.
The deposit-taking banks have several windows in the interior of the country, foreign
capital commercial banks (French, USA, British, Belgian, and African) and the
representative offices of many foreign banks, among which are BNP Parisbas,
Citibank and Standard Chartered (Diby, 2007:151).
The Citibank and Standard Chartered Bank are more focused on corporate clients and
investors. Three specialized banks were created, including: the Bank for Agriculture
Development (BFA), the Bank for Regional Solidarity (BRS) (which was created by
the Central Bank for West African States, to support SMME investors), and the Bank
for Housing of C.I (BHCI). Recently the Bank of National Investment (BNI) was
created to support different Economic sectors, notably agriculture and public works.
53
The Atlantic Bank of Côte D’Ivoire (BACI) is a privately owned Ivorian bank, with
the corporate objective of supporting and sustaining national and foreign promoters
for the development of Côte D’Ivoire, while ECOBANK has the sub-regional
vocation added to their corporate objective (Diby, 2007:151). Finally, and according
to Diby (2007:151), the country hosts the regional offices of a number of
International financial institutions and the regional stock exchange (BRVM).
In conclusion, the Republic of Côte D’Ivoire, has devoted enormous effort towards
providing a strong economic infrastructure to facilitate trade among national
investors. In addition the country has worked towards establishing useful relations
with other parts of the world with the aim of being efficient with regard to
International trade, in order to become more competitive in regards to FDI attraction.
3.5.2.2 Social Infrastructures
Côte D’Ivoire boasts a relatively strong health system. Abidjan, the economic capital,
hosts three teaching hospitals that maintain International standards. The large cities of
the interior (Bouake, Daloa, Korhogo, Man, Abengourou, to name a few) have well
maintained regional healthcare centres. On the whole, health cover in the Republic of
Côte D’Ivoire is acceptable but investments for rehabilitation are needed (Department
of Planning and Development, State Report: 2007).
Focusing now on the education system and infrastructures, since independence the
Republic of Côte D’Ivoire has placed a high priority on education and consistently
devoted 40% of the national or state budget towards developing that sector.
Consequently, the literacy rate is about 70% of the population (Diby, 2007:167).
Public schools accounted for 88.36% of the total students in 2000 against 87.32% in
2005. It is important to note that the number of primary school students went down
from 1, 943, 101 in 2000 to 1 661 901 in 2005 for both private and public schools.
Complementing that, the medium sized cities have secondary schools. The number of
private secondary schools that service this sector is higher than that of the public
54
schools, with 330 in 2000 which increased to 370 in 2005, against 201 which
decreased to 152 for the same period. The number of secondary school students was
599 075 in 2000, which number increased to 660 152 in 2005 (Diby, 2007:168-169).
There are three universities (Cococdy, Abobo, and Bouake), two university centres in
Daloa and Korhogo, as well as higher schools that teach agriculture and commerce,
most of which are located in Yamoussoukro, the political capital of the country.
These efforts by public authorities are supplemented by the contribution of the private
sector. Thus, within Republic of Côte D’Ivoire
one finds the entire range of
educational facilities from kindergarten to university level (Canadian and American
universities), offering from general to vocational training, and from laic to
confessional teaching (Republic of Côte D’Ivoire, Department of Economics, State
Report: 2007). In addition the schooling rate of women is around 35% of the
enrolment. The total number of university students is around 146 490 (Diby,
2007:171).
It can be concluded that the Republic of Côte D’Ivoire offers sufficiently good social
infrastructures for to serve as a further FDI attraction. Investors can access healthcare
centres throughout the country as well as schooling systems in order to yield a robust
labour force.
3.6 Research Problem and Question
3.6.1 Research Problem
The research problem that arises from the above discussion is primarily about trying
to resolve the poor levels of FDI into an African country such as Côte D’Ivoire.
Specifically, it’s about the identification of the most useful mechanism that could be
applied by Côte D’Ivoire’s investment and promotion center (CEPICI) and also about
proposing and establishing an appropriate framework for attracting FDI to Côte
D’Ivoire.
55
3.6.2 Research Question
Following on from this problem, the research question posed for this study is as
follows:
What are the most critical determinants that should be addressed or established by
the Republic of Côte D’Ivoire to make the country more competitive in attracting
foreign direct investment?
The ensuing Investigative Questions are then as follows:
1. What are the main determinants of Foreign Direct Investment attraction?
2. What determinants are applicable to Côte D’Ivoire in terms of establishing
a competitive advantage to attract Foreign Direct Investment?
3. Which determinants are viewed as the most important by investors?
4. How can Côte D’Ivoire reshape or reorient its current strategies in
attracting Foreign Direct Investment?
3.7 Conclusion
Chapter 3 presented the literature review which provided the theoretical groundwork
to clarify and create an overview of what is currently understood by the concept of
International trade and define Foreign Direct Investment. An overview of the
advantages and disadvantages of FDI was presented. The impact of FDI on the
Republic of Côte D’Ivoire economy generally as well as its indicators eg employment
were also discussed. The Republic of Côte D’Ivoire’s infrastructure was presented.
Africa and different African regions’ attractiveness of FDI inflow were presented and
discussed. International trade and its theories and how it can contribute to a nation’s
economic growth was also discussed and a select example of a successful FDI
recipients briefly presented. Finally a link is drawn between the main literature
propositions and the raison d être of the study. In Chapter 4 the research methodology
applied to the data collected for this study is discussed.
56
CHAPTER 4 RESEARCH METHODOLOGY
4.1 Introduction
Chapter four (4) describes the major methodology used to collect the data which will
be used to answer the research question and investigative questions. The chapter also
addresses specific information on the research approach, research design and
methodology chosen for this study. The sampling and data collection method as well
as the development of the research instrument are also addressed. The administration
of the survey is addressed, along with the limitations of the chosen methodology.
Finally, the chapter concludes by considering the ethical issues concerning this
research.
4.2 Research Approach/Paradigm
A paradigm is a set of link assumptions about the world which is shared by a
community of researchers investigating that world (Kuhn, 1962).
Importantly,
understanding the nature of a paradigm enables researchers to determine what
problems are worthy of exploration and also what methods are available to them
(Deshphande, 1983). In conducting research it is necessary to evaluate the two major
paradigms, positivism and constructivism, before choosing a research methodology
(Veal, 2005).
Positivism is a research approach which treats ‘social facts’ as existing independently
of the activities of both participants and researchers (Silverman, 2006).
In
methodological terms, this paradigm is characterised as using primarily quantitative
methods that are interventionist and deconstructualised (Mertens, 1998). Conversely,
the constructivist paradigm is characterised by using primarily qualitative methods in
a hermeneutical and dialectical manner (Tashakkori and Teddlie, 2003).
Constructivism, or the interpretive approach, takes the view that observations cannot
be pure in the sense of altogether excluding the interests and values of individuals;
57
investigations must employ empathic understanding of those being studied
(Tashakkori and Teddlie, 2003).
The logical positivist view of the world is synonymous with the quantitative
paradigm and descriptive research (Patton, 1980).
This research falls under a
positivistic paradigm with emphasis on a deductive approach because this study uses
a set of pre-tested scales to collect data and create data structures to describe the
perceptions and beliefs of parents. The research is descriptive as the study aims to
provide a detailed and accurate picture of the Influencers of FDI. The study
predominantly relies on quantitative data and the employment of a survey
questionnaire, which is aligned with the characteristics of positivistic research
(Neuman, 2006).
4.3 Research Design
4.3.1 Research Methodology
A research design provides the glue that holds the research project together. A design
is used to structure the research, to show how all of the major parts of the research
project - the samples or groups, measures, treatments or programmes, and methods work together to address the central research question(s) (Coldwell and Herbst,
2004:35-36).
For the purposes of this study a descriptive design was utilized. The aim of that type
of design and research process is to describe the characteristics of phenomena (Collis
and Hussey, 2009:334). This research study was conducted to understand and
possibly provide Ivorian officials with the most important and accurate determinants
which could assist them in the establishment of an FDI infrastructure.
By using a descriptive design, the study utilises quantitative data by way of a
structured questionnaire as well as through the use of secondary data. The
58
questionnaire developed by Tuselmann (1999), adapted and validated by Coskun
(2001) and later again by Stoian and Filippaios (2008), was utilized, as it is based on
the most appropriate FDI conceptual frame. Thus, in terms of measuring the
constructs of FDI, this instrument is deemed most appropriate. To suit the Ivorian
settings, the instrument was adapted accordingly. In the end, the questionnaire
consisted of 16 items measured on a 4 point Likert scale (1 = not important; 2= of
little importance; 3= important; and 4 = very important). Details of the questionnaire
are presented in appendix B
4.4 Research Methods
4.4.1 Population
According to Jill and Hussey, 2009:62, a population is a precisely defined body of
people or objects under consideration for statistical purposes. Donald and Pamela
(2006: 402), define a population as being the total collection of elements about
which, for the purpose of this study, inference will be made. As an example, all office
workers in the firm compose a population of interest.
In this study the population of interest included all developing countries involved in
receiving direct foreign trade in Africa. For the purposes of this study, Côte D’Ivoire
was sampled purposively (conveniently) because as a country it bears important trade
characteristics to other developing countries particularly those in Africa. The sample
units of interest were found 1) in the Côte, D’Ivoire Promotion and Investment
Center’s (CEPICI) repertory agenda for all foreign companies operating within Côte
D’Ivoire, 2) the department of mining, and 3) one of Côte D’Ivoire’s
telecommunication agency’s (ATCI) updated companies’ data list from which eighty
(80) foreign companies were conveniently selected from a total of 400.
59
4.4.2 Sampling Procedure
According to Donald and Pamela (2006: 402), the basic idea of sampling is that by
selecting some of the elements in a population we may draw conclusions about the
entire population. A population element is the individual participant or object on
which the measurement is taken. It is the unit of the study. While an element may be
a person, it can just as easily be something else.
At this juncture every relevant government department or representative body dealing
with International trade needed to be sampled so that full representativeness could be
achieved. Following this process the selection criteria involved each relevant
department being sampled and the key decision makers identified and selected.
Regarding the foreign companies, the selection criteria was based on the Côte
D’Ivoire Investment and Promotion Center (CEPICI) repertory agenda of all foreign
companies operating in Côte D’Ivoire, in addition to that the Department of Mining
and an Agency for Telecommunications in Côte D’Ivoire (ATCI) updated companies
data list was consulted for establishing the sample unit. The sampling method used
was judgmental, which is a non probability sampling method. Judgemental sampling
is a type of purposive sampling in which the researcher judgementally selects
elements to conform to some criterion (Coldwell and Herbst, 2004:81).
In this study, a total of 80 foreign firms, operating within the dynamic economic
sector for the past 10 years or had in excess of 30 years presence in Côte D’Ivoire
were selected, as well as twenty (20) senior government officials were selected from
a sample frame of 430. The questionnaires were sent to the selected officials and
companies. The survey was conducted over a period of 4 months, from the beginning
of January 2010 to the end of April 2010. A total of hundred (100) questionnaires
were prepared and sent. Twenty (20) participants didn’t respond at all. Eighty (80)
questionnaires were received back, with proof of reception but among which twenty
three (23) were not filled up for different reasons such were: not competent to provide
60
information; need parent company authorization or need permission letter from Côte
D’Ivoire government allowing their participation in this survey. Fifty seven (57) of
the sampled population have effectively responded representing 57%. The researcher
had expected less than 40% of the participants will not respond, meaning he would be
happy to receive sixty (60) responses. In all forty three didn’t respond representing
43% of the sample population.
4.4 Methods of Data Collection
In order to conduct data collection, Coldwell and Herbst (2004:48) have discussed
issues regarding the questionnaires survey, which is summarized in Table 4.1 below.
Table 4.1 Description of questionnaire survey
METHODS
OVERALL PURPOSE
ADVANTAGES
Questionnaires,
When
Can
Survey
quickly and /or easily
anonymously
feedback
get information from
Inexpensive to administer
Wording can bias client’s
people
Easy to compare and analyze
responses
Can be administered to many
Are impersonal
people
In
Can get lots of data
sampling expert
Many sample questionnaires
Does not get full story
you
in
need
a
threatening way
to
non-
be
CHALLENGES
completed
Might
not
surveys,
get
careful
may
already exist
Adapted from methods used by Coldwell and Herbst (2004:48)
In the ambit of this study, the questionnaire based on a survey developed by
Tuselmann (1999), and adapted and validated by Coskun (2001). The instrument was
further validated by Stoian and Filippaios (2008), and was used to identify the views
and arguments for the most important accurate factors influencing FDI attraction to
Côte D’Ivoire. In order to suit the Ivorian setting, the instrument was adapted
accordingly. In the end, the questionnaire had 16 items measured on a 4 point Likert
scale (1 = not important; 2= of little importance; 3= important; and 4 = very
important) from which quantitative data would be obtained.
61
need
Three research assistants were recruited to distribute the questionnaires. The process
lasted for a period of three (3) months due to the geographical location of some of the
companies. Follow up calls were made to arrange a meeting with the Director
General for an interview. The period February to April was used to collect the
questionnaires. In the end, 57 completed questionnaires were received back
representing 57% response rate. In summary, of the 100 questionnaires prepared and
effectively distributed with proof of delivery, 80 were received back but 20 were not
filled up. 57 responses were filled and received back, which represented a 57%
response rate; which is below the expected projection of 60 positive responses.
4.5 Validity and Reliability
Joseph et al. (2003:169-173) states that:
“Accuracy is associated with the term validity while consistency is associated
with the term reliability. Concerning reliability, a survey instrument
(questionnaire) is considered reliable if its repeated application results in
consistent scores. Reliability is concerned with the consistency of the research
findings. If the instrument is a multi-item scale, then for it to be reliable the
scores (ratings) for the individual questions (items) that comprise the scale
should be correlated. The stronger the correlations the higher the reliability of
the scale will be. Similarly, the weaker the correlations the more unreliable the
scale will be”.
Cronbach’s Alpha is used in this study to determine the reliability of the
questionnaire. More information regarding the reliability of the questionnaire is
provided in Chapter 5. According to Joseph et al. (2003:174-175), validity is the
extent to which a construct measures what it is supposed to measure. Content validity
“which involves a systematic but subjective assessment of a scale’s ability to measure
what it is supposed to measure”; construct validity
“which assesses what the
construct (concept) or scale is, in fact, measuring”; and criterion validity “which
62
assesses whether a construct performs as expected relative to other variables
identified as meaningful criteria” are measurement approaches of validity. For the
purpose of this study the SPSS was used to assess both validity and reliability
measurement.
4.6 Ethical Considerations
For Donald and Pamela (2006: 116) ethics are norms or standards of behaviour that
guide moral choices about our behaviour and our relationships with others. The goal
of ethics in research is to ensure that no one is harmed or suffers adverse
consequences from research activities. However, unethical activities are pervasive
and include violating nondisclosure agreements, breaking participant confidentiality,
misrepresenting results, deceiving people, invoicing irregularities, avoiding legal
liability, to mention a few.
Saunders, Lewis and Thornhill, (2000:130), refers to “ethics” as the appropriateness
of the researchers’ behaviour in relation to the rights of those who become the subject
of research, or are affected by it’. Most ethical issues in research fall into one of four
categories namely protection from harm, informed consent, right to privacy, and
honesty with professional colleagues (O’Leary, Z. (2004).
In conducting this research study the following ethical issues or considerations were
observed; participants are informed about the nature of the study to be conducted, and
given the choice or either participating or not participating. Furthermore, they will be
given the right to withdraw from the study at any time, as participation on a study
should be strictly voluntary (Collis & Hussey 2003:38)
63
4.7 Data Analysis
When conducting research there is no substitute for having a clear idea of what is
being looked for. The research question(s); and the need to stay as close as possible to
the raw data as it is provided by the participants, the texts, the documents and so on,
so that you can get a ‘feel’ for what is emerging. Then you stand back, to clarify the
areas of questions, the theories and the conceptual framework and start to put it all
into some kind of order, so that your data can be properly analyzed and findings
drawn from the analysis that relate to your original questions and conceptual
framework (Gina, 2008:313).
Since the questionnaire was to aid in generating quantitative data, the collected data
would be analyzed as follows: On the one hand, a description of respondent
characteristics in terms of frequency would be drawn from the data; and, on the other,
inferential analysis, where factor analysis, reliability tests, KMO and Bartlett’s test,
principal component analysis, variables mean rankings and mean ratings for
components will be conducted on the data. In addition, for this purpose the statistical
package for the social sciences (SPSS) software package at Tshwane University of
Technology (TUT) would be applied.
4.8 Conclusion
In summary, the purpose in Chapter 4 was, firstly, to describe and, secondly, to
justify the following: The research Approach (a positivistic paradigm) and the
research method applied in this study; the data collection method used (a structured
survey questionnaire); the population, sampling method (judgemental, nonprobability type), sample size (100), ethical considerations to be considered and
statistical techniques and tools used to analyze the data. The next chapter focuses on
the results.
64
CHAPTER 5 ANALYSIS OF DATA OR RESULTS
5.1 Introduction
An overview of the results obtained from the statistical analysis is provided in
Chapter 5. The overview is restricted to the analysis of the collected data, without
drawing any general conclusions or comparing results of those discussed in the
literature review (Chapter 2). The research findings are evaluated in relation to the
goals and objectives of the study. Descriptive and inferential statistical techniques are
used to analyze the data and some results are also presented graphically.
5.2 Descriptive Statistical Analysis
5.2.1 Frequency Distribution of the Respondents
A total of 80 questionnaires were distributed and 57 fully completed questionnaires
were returned, which is a response rate of 71.25%, which is acceptable as SPSS has
processed the data for factor analysis which required a minimum of a 60% response
rate. All questionnaires returned were included in the analysis. In the questionnaire
the elements of qualification and position held were the variables used for the
characteristics of the respondents.
Table 5.1 reflects the detailed position held by the respondents. The detailed positions
held by the respondents may be classified according to management level: executive
level, senior management level, middle management level. Following this
classification, all directors, deputy directors and general directors are classified at the
executive level. The president of the Republic of Côte D’Ivoire parliament was
included in this category because, according to the Republic of Côte D’Ivoire
constitution, he is a deputy president of the country.
65
5.2.1.1. Respondents employment position’s distribution
Table 5.1: Respondents position’s distribution
Position
Frequency
Percentage
Administration
1
1.80%
Administration & Amp; Financial Manager
1
1.80%
Administration Director
1
1.80%
Procurement Manager
1
1.80%
Budget Director
2
3.50%
Business Intelligence Manager
1
1.80%
Deputy Director
12
21.10%
Director General
10
17.50%
Director
3
5.30%
Corporate Director
1
1.80%
(Source: Analysis of survey data from SPSS.)
Table 5.1: Respondents positions distribution (cont’d)
Economical Adviser
1
1.80%
Executive Director
1
1.80%
Export Agent
1
1.80%
Financial Manager
6
10.50%
General Manager
2
3.50%
Head-Performance Management
1
1.80%
Human Resource Director
1
1.80%
Invoice Manager
1
1.80%
Managing Director
1
1.80%
Marketing Assistant
1
1.80%
Political Counselor
1
1.80%
President Director General
1
1.80%
President of C.I parliament
1
1.80%
Quality Manager
1
1.80%
Representative
1
1.80%
Sales Manager
1
1.80%
Service Manager
2
3.50%
Total
57
100.00%
(Source: Analysis of survey data from SPSS)
66
All managers, such as service manager, financial manager, sales manager (Economic
adviser and political counselor are included in this category), are classified at the
senior management level. The remaining positions, such as export agent,
administrative are classified at the middle management level. From this classification
(Table 5.1.a refers) sixty percent (60%, n=34) of the respondents are at the executive
level; thirty-two percent (32%, n=18) of the respondents are at the senior
management level and the remaining eight percent (8%, n=5) are at the middle
management level. For the purpose of this study, the questionnaire was sent to
executive management level. The reasons given why the questionnaires were
completed by the executives are that they are the most appropriate person with
adequate knowledge on the most important FDI factors which had influenced their
decisions of choosing Côte D’Ivoire, Sixty percent (60%, n=34) of the questionnaires
were completed by respondents who held an executive position. It can then be
concluded that most of the respondents are at the executive level.
Table 5.1.a: Summary of distribution of position held
Position held
Frequency
Percentage
Executive
34
60
Senior manager
18
32
Middle manager
5
8
Total
57
100
(Source: Adapted from Table 5.1 of analysis of survey data.)
In Figure 5.1 the proportion of the detailed position of the respondents is explained.
The deputy directors, with 21.1% (n=12), are the highest respondents, followed by
the directors general, with 17.5% (n=10). When added together the deputy directors
and directors general alone accounted for 38.6% (n=22) of the overall respondents to
the survey.
67
It is also important to note that deputy director and director general were classified at
the executive level, which can confirm the assertion shown in Table 5.1a of most of
the respondents being on the executive level. The third most respondents are financial
managers, with 10.5% (n=6); the fourth most are directors, with 5.3% (n=3);
followed by budget directors, general and service managers, which each accounted
respectively 3.5% (n=2 for each category). The remaining respondents account for
1.8% (n=1).
According to Figure 5.1, deputy directors and directors general, which are at the
executive level, accounted for 38.6% (n=22) the largest portion of the survey
respondents but they are followed by the financial managers which are at the senior
manager level, which accounted for 10.5% (n=6). Which reveals that almost a third of
the respondents are a combination of executive and senior manager levels, with a
total of 49.1% (n=28). The directors with 5.3% (n=3), which are at the executive
level, rank at the fourth position after financial manager.
It can then be concluded that, when classifying the respondents according to
executive, senior and middle management level, most of the respondents which
completed the questionnaire are on the executive level, followed by senior manager;
but when looking at them in detail, most of the respondents who completed the
questionnaire are at the executive and senior manager level.
68
Figure 5.1: Detailed position distribution held by respondents
(Source: Analysis of survey data)
Republic of Côte D’Ivoire
Table 5.2 above illustrates the qualification distribution of the respondents. 31.6%
(n=18) of the respondents were economists, 14% (n=8) were accountants, while 8.8%
(n=5) have an MBA. 3.5% (n=2 for each of them) of the respondents are geologists or
mine and amp: geologist or financial accountant or had a Doctorate in Geology. 1.8%
(n=1 for each) of the remaining have B-tech or human resource or management,
master in GAE or were in management, Economics, communication, is an engineer
or geologist: mine engineer, geologist engineer, geologist environmentalist, or macroeconomist It can be concluded from the above that most of the respondents were
economists. However, 54.4% (n=31) of the respondents which had completed the
questionnaire are economist, accountant and people with an MBA.
69
5.2.1.2 Qualification distribution of the respondents
Table 5.2 Qualification distribution of Respondents
Qualifications
Frequency
Percentage
Accountant
8
14.00%
B-Tech HR
1
1.80%
B-Tech Management
1
1.80%
Diplomat
1
1.80%
Doctor in Geology
2
3.50%
Economist
18
31.60%
Electromechanical Engineering
1
1.80%
Engineer
1
1.80%
Finance
2
3.50%
Financial Accountant
2
3.50%
Geologist
2
3.50%
Geologist & Amp; Mine Engineer
1
1.80%
Geologist Engineer
1
1.80%
Geologist Environmentalist
1
1.80%
Macro-Economist
1
1.80%
Master in Economy
1
1.80%
Master in Communication
1
1.80%
Master in GAE
1
1.80%
Master in Management
1
1.80%
Master in Management & Amp; Sciences
1
1.80%
Master-Sales & Amp; Marketing
1
1.80%
MBA
1
1.80%
Mine & Amp; Geologist Engineer
5
8.80%
Statistical Engineer
2
3.50%
Total
57
100%
(Source: Analysis of survey data)
By grouping the respondents according to their qualifications or according to their
general academic field, 5 classifications were extracted. Therefore, all accountants,
finance, financial accountant, economist, macro-economist and Master in Economics
were grouped under Economist/Finance. All geologists, geologist and amp, geologist
environmentalist, master in geology were under Geologist; while Master in
70
Communication, B-Tech Management, MBA, Master in Management, master-sale
and marketing were grouped under Management. B-Tech, Human Resource, and
diplomat were under Human Resource; while Engineering, and Electromechanical
were grouped under Engineer. Table 5.2.a provides the frequency distribution
according to the above grouping.
Table 5.2.a. Qualification Distribution of Grouped Respondents
Code
Qualification
Frequency
Percentage
1
Geologist
10
17.5
2
HR
2
3.5
3
Management
10
17.5
4
Economist/Finance
33
57.9
5
Engineer
2
3.5
57
100
Total
(Source: Analysis of survey data)
According to table 5.2.a. 17.5% (n=10) of the respondents were geologists, 3.5%
(n=2) have a qualification in HR, 17.5% (n=10) have a qualification in management.
At 57.9% (n=33) most of the respondents have a Economist/Finance qualification,
while engineers accounted for 3.5% (n=2) of the respondents. It is important to notice
that this study is related to the economy of Côte D’Ivoire and a high level of
respondents (57.9%, n=33) which completed the survey had a qualification in
Economics. Therefore, it can be assumed that most of the questionnaires were
completed by respondents who were familiar with the research field. Also this result
confirms the above analysis on the detailed qualification distribution of the
respondents, where 54.4% (n=31) of the respondents are qualified as an economist,
accountant or have an MBA.
71
5.2.2 Institution Characteristics Distribution
5.2.2.1 Type of institution distribution
Table 5.3: Type of institution Distribution
Type of Institution
Frequency
Percentage
Construction
1
1.80%
Government
9
15.80%
Manufacture
14
24.60%
Mining
10
17.50%
Service
23
40.40%
Total
57
100%
(Source: Analysis of survey data)
Of the 100 questionnaires sent out, 57 completed questionnaires were received back.
Out of the completed questionnaires, it was indicated that 40.4% (n=23) of the
respondents were from service companies, 24.6% (n=14) were from manufacturing
companies, 17.5% (n=10) from mining companies, whereas the government
accounted for 15.8% (n=9). The category of construction companies accounted for
1.8% (n=1) of the respondents. Again, it can be noted, most of the respondents of the
survey were from foreign companies with 85.2% (n=48) ,specially from service
companies with 40.4% (2=23).
5.2.3 Cross-Tabulation Distribution of Respondents and Institution Characteristics
The study undertook cross-tabulation distributions to highlight more useful
implications of how respondents responses were related to their positions and
qualifications
72
5.2.3.1 Qualification and Position Distribution
Table 5.4 Qualification and position cross tabulation distribution
Position
Qualification
1
2
3
4
5
Total
1
2
3
Total
Count
9
1
0
10
% within qualification
90.0%
10.0%
.0%
100.0%
% within position
26.5%
5.3%
.0%
17.5%
Count
1
1
0
2
% within qualification
50.0%
50.0%
.0%
100.0%
% within position
2.9%
5.3%
.0%
3.5%
Count
5
3
2
10
% within qualification
50.0%
30.0%
20.0%
100.0%
% within position
14.7%
15.8%
50%
17.5%
Count
18
13
2
33
% within qualification
54.5%
39.4%
6.1%
100.0%
% within position
52.9%
68.4%
50%
57.9%
Count
1
1
0
2
% within qualification
50.0%
50.0%
.0%
100.0%
% within position
2.9%
5.3%
.0%
3.5%
Count
34
19
4
57
% within qualification
59.6%
33.3%
7.0%
100.0%
% within position
100%
100%
100%
100%
(Source: Analysis of survey data)
According to Table 5.4 above:
9 of the respondents are executives and have a qualification as geologist,
which represent respectively 26.5% within the executive and 90% within the
geologist categories.
Of the 2 Human Resource Management respondents, one (1) is an executive
and one (1) at the senior management position, which represents 50% for
each of them; while for the executive and senior management categories they
account respectively for 2.9% and 5.3%.
73
Of the 5 executives accounted for 50% have a qualification in management; 3
fell into the senior management category, which represented 30%, and 2 fell
into the middle management category, which represented 20%. But within
their respective position they represent 14.7%; 15.8% and 50%.
Out of the respondents, 18 are executives and economists; which accounted
respectively 52.9 % and 54.5%; 13 are senior managers and economists,
representing 68.4% and 39.4% respectfully. The last 2 categories are middle
managers and economists, representing 50% and 6.1% respectfully.
One respondent is both an executive and an engineer, which represents 2.9%
among the executive respondents and 50% among engineers. Another
respondent is a senior manager and an engineer, accounting for 5.3% of
senior managers and 50% among engineers.
Interpretation of Table 5.5:
Of the geologist category, 7 respondents are from a mining company and 1
each is from government, manufacture and service, which represent 70%,
10%, 10% and 10% among the geologist and 70%; 11.1%; 7.1% and 4.3%
respectively within the type of company.
From the respondents in human resource management, 1 is from government
and 1 from a service company, which represent 50% for each within their
qualification and 11.1% and 4.3% respectively within their company.
7, 2 and 1 of the respondents are from service, manufacturing and government
respectively and have management qualification, which account for 70%;
20% and 10% respectively among the qualifications and 30.4%; 14.3% and
11.1% respectively within their company.
For respondents that have a qualification as economist, 12 are from service,
11 from manufacture, 6 from government, 3 from mining, and 1 from a
construction company, which represents 36.4%, 33.3%, 18.2%, 9.1% and 3%
respectively among respondents that fell into the economist category and
52.2%, 78.6%, 66.7%, 30% and 100% respectively among their type of
company.
74
2 of the respondents from the engineer category and from the service
company category, which represents 100% and 8.7% respectively.
5.2.3.2 Qualification and Type of Institution Distribution
Table 5.5 Qualification and type of institution cross-tabulation distribution
Type of institution
Government
Manufacture
Mining
Services
0
1
1
7
1
10
0.00%
10.00%
10.00%
70.0%
10.0%
100.%
.0%
11.1%
7.1%
70%
4.3%
17.5%
Count
%
within
qualification
%
within
type
of
company
0
1
0
0
1
2
0.00%
50.00%
0.00%
0.00%
50.0%
100.0%
.0%
11.1%
.0%
.0%
4.3%
3.5%
Count
%
within
qualification
%
within
type
of
company
0
1
2
0
7
10
0.00%
10.00%
20.00%
0.00%
70.0%
100.0%
.0%
11.1%
14.3%
.0%
30.4%
17.5%
Count
1
6
11
3
12
33
3.00%
18.20%
33.30%
9.10%
36.4%
100.0%
100%
66.7%
78.6%
30.%
52.2%
57.9%
Count
%
within
qualification
%
within
type
of
company
0
0
0
0
2
2
0.00%
0.00%
0.00%
0.00%
100.%
100.0%
.0%
.0%
.0%
.0%
8.7%
3.5%
Count
%
within
qualification
1
9
14
10
23
57
1.80%
15.80%
24.60%
17.5%
40.4%
100.0%
100%
100%
100%
100%
100%
Count
Qualification
1
%
within
qualification
% within
type
of
company
2
3
4
%
within
qualification
%
within
type
of
company
5
Total
%
within
type
of
company
100%
(Source: Analysis of survey data)
75
Total
Construction
5.2.3.3 Position and Type of Institution Distribution
Table 5.6 Position and type of institution cross-tabulation distribution
type of institution
Construction
Government
Manufacture
Mining
Services
1
5
7
9
12
34
2.90%
14.70%
20.60%
26.5%
35.3%
100.0%
100%
55.6%
50%
90%
52.2%
59.6%
0
4
6
0
9
19
0.00%
21.10%
31.60%
0.00%
47.4%
100.0%
% within
type of
company
.0%
44.4%
42.9%
.0%
39.1%
33.3%
Count
0
0
1
1
2
4
% within
position
0.00%
0.00%
25.00%
25.0%
50.0%
100.0%
Count
Position
1
% within
position
% within
type of
company
2
3
Total
Total
Count
% within
position
% within
type of
company
.0%
.0%
7.1%
10%
8.7%
7%
Count
1
9
14
10
23
57
% within
position
1.80%
15.80%
24.60%
17.5%
40.4%
100.0%
100%
100%
100%
100%
100%
% within
type of
company 100%
(Source: Analysis of survey data)
Interpretation of Table 5.6:
From the respondents in an executive position 12 were from service, 9 from
mining, 7 from manufacture, 5 from government and 1 from construction,
representing 35.3%, 26.5%, 20.6%, 14.7%, and 2.9% respectfully; while
within the type of company category they represent 52.2%; 90%; 50%; 55%
and 100% respectively.
9 of the respondents were at the senior management position and were from a
service company, representing 47.4% and 39.1% respectively. 6 of the
respondents were in the senior manager and manufacture categories, which
76
corresponded to 31.6% and 42.6% respectively, while the rest of the
respondents 4 are from government, which represented 44.4% within their
company, and 21.1% within the senior manager category.
Out of the 4 respondents from the middle manager category, 2 were from
service, 1 from manufacture and 1 from mining, accounting for 50%, 25%,
and 25% respectively within middle manager category and 8.7%, 7.1%, and
10% respectively among the type of company category
5.2.4 Relative Percentage Frequency Distribution Per Variable
Table 5.7 Frequency of responses for the questionnaire (Q1-Q16)
No Questions
1=
2= of little
1
promising performance of the C.I
3=
4=
very
Total
unimportant
importance
important
important
-
1.8
52.6
45.6
100
8.8
49.1
42.1
100
economy
2
Growing local market
3
Cheaper input
5.3
24.6
50.9
19.3
100
4
Cheaper labour
1.8
22.8
57.9
17.5
100
5
Co-operation
1.8
22.8
43.9
31.6
100
behaviour
of
locally
owned firms
6
Geographical location of C.I
5.3
17.5
22.8
54.4
100
7
Physical infrastructure
-
10.5
59.6
29.8
100
8
Peaceful industrial relations
3.5
15.8
52.6
28.1
100
9
Investment incentives
-
17.5
42.1
40.4
100
10
Educational standards
7.0
35.1
28.1
29.8
100
11
Financial infrastructure
3.5
21.1
47.4
28.1
100
12
Legal environment for investment and
1.8
15.8
36.8
45.6
100
5.3
15.8
50.9
28.1
100
business
13
Equal treatment with locally owned
firms
14
Tariffs and quotas
7.0
28.1
45.6
19.3
100
15
Using C.I as an export base
3.5
15.8
45.6
35.1
100
16
High
1.8
17.5
49.1
31.6
100
expected rate of return in
supplying primarily in C.I
(Source: Analysis of the survey data)
77
The interpretation of Table 5.7 is as follows:
Q1 “promising performance of the Côte D’Ivoire economy”, was expressed
by 98.2% (n=56) of the respondents as important and very important
determinant for their investment decision, while 1.8% (n=1) as regarded that
as of little importance.
Q2 “growing local market”, 91.2% (n=52) of the respondents considered it
important and very important in their decision making, while 8.8% (n=5)
considered it of little importance.
Q3 “cheaper input” is important and very important for 70.2% (n=40) of the
respondents. 29.8% (n=17) of the respondents perceived it as unimportant and
of little importance.
Q4 and Q5 respectively “cheaper labour” and “co-operation behavior of
locally owned firms”, 75.4% (n=43) of the respondents had weighted them as
important and very important, while 34.6% (n=14) weighted them as
unimportant and of little importance.
Q6 “geographical location of Côte D’Ivoire, 54.4% (n=31) of the respondents
see it as very important in their decision making. For 22.8% (n=13) of the
respondents it is unimportant and of little importance, while for 77.2% (n=44)
it is important and very important.
Q7 “physical infrastructure”, for 89.5% (n=51) of the respondents it is
important and very important, whereas for 10.5% (n=6) it is of little
importance.
Q8 “peaceful industrial relations”, 80.7% (n=46) of the respondents perceive
it as important and very important, while 29.3% (n=11) perceive that as
unimportant and of little importance.
For Q9 “investment incentives”, 82.5% (n=47) of the respondents weighted it
as important and very important, only 17.5% (n=10) weighted that of little
importance.
Q10 “educational standards”, is of little importance for 35.1% (n=20) of the
respondents, but important and very important for 57.9% (n=33). Only 42.1%
(n=24) see it as of little importance and unimportant.
78
Q11 “financial infrastructure”, 75.5% (n=43) of the respondents perceive that
as important and very important, only 24.5% (n=14) perceive that as of little
importance and 3.5% (n=2) see it as unimportant.
Q12 “legal environment for investment and business”, 72.4% (n=47) of the
respondents weighted it as important and very important, while 27.6% (n=10)
weighted it as being of little importance and unimportant.
Q13 “equal treatment with locally owned firms”, 80% (n=45) of the
respondents consider it as important and very important, only 20% (n=12)
consider it as of little important and unimportant.
Q14 “tariffs and quotas”, for 64.9% (n=37) it is important and very important,
whereas for 35.1% (n=20) it is of little importance and unimportant.
For Q15 and Q16 respectively “using Côte D’Ivoire as an export base and
“high expected rate of return in supplying primarily in Côte D’Ivoire, 80.7%
(n=46) of the respondents considered them as important and very important,
while 19.3% of the respondents had considered them as of little importance
and unimportant.
In summary, questions: Q1 (98.2%, n=56), Q2 (91.2%, n=52), Q7 (89.5%, n=51), Q9
(82.5%, n=47), [Q8, Q15 and Q16 (80.7%, n=46)], and Q13 (80%, n=45) were
considered important and very important by most respondents. Therefore, it can be
assumed that those variables play a major role and can be viewed as the most
important factors affecting respondents’ investment decisions.
5.2.5 Cross-Tabulation (Characteristics of the Respondents and Variables)
5.2.5.1. Qualification and Variables
The frequency distribution of the respondents’ qualification analysis shows that
57.9% (n=33) of the respondents had an Economical academic background. The
variable that they considered most important as an investment influencers will be
focused on next. From the analysis (Table 5.8 refers), Q1, Q7, and Q2 are indicated
as being the three most important aspects, with 56.2% (n=32), 52.6% (n=30), and
79
50.9% (n=29) respectively. In addition, out of the 33 economist respondents 32
(which represented 56.2% of the respondents) answered Q1 as important and very
important. 30 of them had answered Q2 and 29 for Q3 which represent 52.6% and
50.9% respectively. Q6 and Q8 were answered with the same proportion as important
and very important by economists (representing 49.1%, n=28). 27 (representing
47.4%) answered Q15 and Q16 as important and very important.
Table 5.8 Cross tabulation for qualification and variables (Q1 and Q2)
Q1
Qualification
1
2
3
4
0
7
3
Total
0.00%
12.30%
Count
0
Total
Count
4
10
1
4
5
10
5.30%
17.50%
1.80%
7.00%
8.80%
17.50%
2
0
2
0
2
0
2
0.00%
3.50%
0.00%
3.50%
0.00%
3.50%
0.00%
3.50%
0
4
6
10
0
5
5
10
Total
0.00%
7.00%
10.50%
17.50%
0.00%
8.80%
8.80%
17.50%
Count
1
16
16
33
4
16
13
33
Total
1.80%
28.10%
28.10%
57.90%
7.00%
28.10%
22.80%
57.90%
Count
0
1
1
2
0
1
1
2
Total
0.00%
1.80%
1.80%
3.50%
0.00%
1.80%
1.80%
3.50%
Count
1
30
26
57
5
28
24
57
1.80%
52.60%
45.60%
100.00%
8.80%
49.10%
42.10%
100.00%
Count
%
4
%
5
%
Total
%
of
of
of
of
of
of
Total
(Source: Analysis of survey data)
80
Total
3
%
3
Q2
2
%
2
Total
5.2.5.2 Position and Variables
59.6% (n=34) of the respondents were from the executive category. Analyzing their
responses revealed the following: Of the 34 executives, all of them answered Q1 as
important and very important, which indicated a 59.6% response. 32 executives
answered Q2 and Q7 as important and very important, which represented a 56.1%
response. 29 executives answered Q9, Q11, Q12, Q15 and Q16 as important and very
important, corresponding to a response of 50.9%. (Table 5.9 refers).
Table 5.9 Cross tabulation of positions and variables (Q1, Q2 & Q7)
Q1
Position
1
2
3
4
0
21
13
Total
0.00%
36.80%
Count
1
Total
Count
4
34
2
17
15
34
22.80%
59.60%
3.50%
29.80%
26.30%
59.60%
8
10
19
2
9
8
19
1.80%
14.00%
17.50%
33.30%
3.50%
15.80%
14.00%
33.30%
0
1
3
4
1
2
1
4
Total
0.00%
1.80%
5.30%
7.00%
1.80%
3.50%
1.80%
7.00%
Count
1
30
26
57
5
28
24
57
1.80%
52.60%
45.60%
100.00%
8.80%
49.10%
42.10%
100.00%
Count
%
Total
Total
3
%
3
Q2&Q7
2
%
2
Total
%
Total
of
of
of
of
(Source: Analysis of survey data)
5.2.5.3 Type of Institution and Variables
From the frequency distribution of type of company category, 40.4% (n=23) of the
respondents were from service companies. Table 5.10 shows that, of 23 respondents,
22 responses from Q1 were completed by service companies and they all answered
Q1 as important and very important, which represented 38.6% of the response. 21 of
the responses for Q7 were respondents from the service category and all 21 agreed
that Q7 is important and very important, which accounted for 36.9% of the responses.
Q2, Q13, and Q15 each received an answer of important and very important, which
81
accounted for a response rate of 35%; the respondents were from 20 service
companies.
Table 5.10 Cross tabulation for type of institution and variables (Q1and Q2)
Q1
type
institution
2
3
4
0
0
1
0.00
0.00
1.80
%
%
%
0
6
0.00
Q2
Total
2
3
4
0
1
0
0.00
1.80
0.00
1.80%
%
%
%
1.80%
3
9
0
5
4
9
10.50
5.30
15.80
0.00
8.80
7.00
15.80
%
%
%
%
%
%
%
%
0
6
8
14
0
7
7
14
0.00
10.50
14.00
24.60
0.00
12.30
12.30
24.60
%
%
%
%
%
%
%
%
0
7
3
10
2
5
3
10
0.00
12.30
5.30
17.50
3.50
8.80
5.30
17.50
%
%
%
%
%
%
%
%
1
11
11
23
3
10
10
23
1.80
19.30
19.30
40.40
5.30
17.50
17.50
40.40
Total
%
%
%
%
%
%
%
%
Count
1
30
26
57
5
28
24
57
1.80
52.60
45.60
100.00
8.80
49.10
42.10
100.00
%
%
%
%
%
%
%
%
of
1 Count
%
of
Total
2 Count
%
of
Total
3 Count
%
of
Total
4 Count
%
of
Total
5 Count
%
Total
Total
%
Total
of
of
1
1
N.B: 1= unimportant; 2= of little importance; 3=important; 4=very important on Table 5.7.
(Source: Analysis of survey data)
82
5.3 Inferential Statistics
5.3.1 Reliability Test (Cronbach Alpha Test)
According to Andy (2005:673-674), Cronbach (1951) came up with a measure that is
loosely equivalent to splitting data in two in every possible way, to compute the
correlation coefficient for each split. The average of these values is equivalent to
Cronbach’s alpha, α, which is the most common measure of the scale reliability.
Furthermore, he noticed that: “although the generally accepted value of 0.8 is
appropriate for cognitive tests such as intelligence tests, for ability tests a cut-off
point of 0.7 is more suitable”.
Table 5.11 describes Cronbach’s α for the survey instrument.
Table 5.11 Cronbach’s Alpha for the survey instrument.
Cronbach’s Alpha
N of Item
.801
16
(Source: Analysis of survey data)
The Cronbach’s Alpha (α) for the instrument is 0.801. The reliability analysis is
greater than 0.7, which indicates the internal consistency of the instrument.
83
5.3.1.1 Reliability Test for Variables
Table 5.12 Cronbach’s Alpha for each variable (Q1-Q16)
Cronbach's Alpha
Q1
0.801
Q2
0.799
Q3
0.781
Q4
0.778
Q5
0.789
Q6
0.817
Q7
0.794
Q8
0.799
Q9
0.778
Q10
0.8
Q11
0.781
Q12
0.774
Q13
0.782
Q14
0.795
Q15
0.784
Q16
0.798
(Source: Analysis of survey data)
As can be seen from Table 5.12, all the variables have Alpha (α) greater than 0.7;
variables Q1, Q6, and Q10 have Alpha (α) greater than 0.8. The reliability analysis
for each is thus acceptable, therefore, the variables are consistent.
5.3.2 Chi-Square Tests
5.3.2.1 Characteristics of Respondents
5.3.2.1.1 Chi-Square Tests for Qualification and Position
Table 5.13 Chi-square tests for qualifications and positions
Pearson Chi-Square
X2
Df
P
7.698
8
0.464
(Source: Analysis of survey data)
84
As can be seen from Table 5.12, X2 = 7.698, df=8, and P value= 0.464
P= 0.464>0.05 the qualification and position of the respondents of this study are not
related.
5.3.2.1.2 Chi-Square Tests for Qualification and Type of Institution
Table 5.14 Chi-square tests for qualifications and type of institution
Pearson Chi-Square
X2
Df
P
31.92
16
0.01
P = 0.01<0.05; the respondents qualification and type of institution are related.
(Source: Analysis of survey data)
5.3.2.1.3 Chi-Square Tests for Position and Type of Institution
Table 5.15 Chi-square tests for the respondents’ positions and type of institution
Pearson Chi-Square
X2
Df
P
7.811
8
0.452
P = 0.452>0.05. The respondents’ position and type of institution are not related.
(Source: Analysis of survey data)
As can be seen from Table 5.16, for Q1-Q14 and Q16, the P values are > 0.05. The
position of the respondents and variables Q1-Q14 and Q16 are not related.
For variable Q15, P=0.02<0.05, then Q15 “Using Côte D’Ivoire as an export base” is
related to a respondents position.
85
5.3.2.2 Characteristics of Respondents and Variables
5.3.2.2.1 Chi-Square Tests for Respondents’ Position and Variables
Table 5.16 Chi-square tests for positions and variables (Q1-Q16)
POSITION
Questions
Pearson Chi-Square
X2
Df
P
Q1
4.887
4
0.299
Q2
1.92
4
0.751
Q3
7.704
6
0.261
Q4
6.307
6
0.39
Q5
6.937
6
0.327
Q6
7.149
6
0.307
Q7
5.189
4
0.268
Q8
4.001
6
0.677
Q9
7.13
4
0.129
Q10
5.415
6
0.492
Q11
6.696
6
0.35
Q12
6.76
6
0.344
Q13
3.754
6
0.71
Q14
0.77
6
0.993
Q15
15.037
6
0.02
Q16
4.87
(Source: Analysis of survey data)
6
0.561
As can seen from Table 5.17, variables Q1-Q9 and Q11-Q15, all have a P
value>0.05; which indicates the variables and respondents’ qualification are not
related. Q10 and Q16 have P values of 0.048 and 0.000 respectively. The P values for
Q10 and Q16< 0.05; which means Q10 and Q16 are related to the respondents’
qualification.
86
5.3.2.2.2 Chi-Square Tests for Respondents’ Qualification and Variables
Table 5.17 Chi-square tests for qualifications and variables ( Q1-Q16)
QUALIFICATION
Questions
Pearson Chi-Square
X2
Df
P
Q1
4.535
8
0.806
Q2
4.121
8
0.846
Q3
12.764
12
0.386
Q4
12.908
12
0.376
Q5
17.443
12
0.134
Q6
17.777
12
0.123
Q7
11.766
8
0.162
Q8
13.039
12
0.366
Q9
7.266
8
0.508
Q10
21.133
12
0.048
Q11
12.749
12
0.388
Q12
5.326
12
0.946
Q13
9.172
12
0.688
Q14
11.467
12
0.489
Q15
11.333
12
0.501
Q16
38.656
(Source: Analysis of survey data)
12
0.000
87
5.3.2.2.3 Chi-Square Tests for Respondents’ Type of Institution and Variables
Table 5.18 Chi-square tests for type of institution and variables (Q1-Q16)
TYPE OF INSTITUTION
Questions
Pearson Chi-Square
X2
Df
P
Q1
5.183
8
0.738
Q2
5.775
8
0.672
Q3
29.324
12
0.004
Q4
10.102
12
0.607
Q5
7.884
12
0.794
Q6
24.821
12
0.016
Q7
10.233
8
0.249
Q8
13.488
12
0.335
Q9
8.386
8
0.397
Q10
8.439
12
0.75
Q11
9.366
12
0.671
Q12
9.366
12
0.671
Q13
15.873
12
0.197
Q14
9.980
12
0.618
Q15
37.118
12
0.00
Q16
11.111
(Source: Analysis of survey data)
12
0.519
As can be seen from Table 5.18, variables Q1-Q2, Q4-Q5, Q7-Q14, and Q16 all have
a P value >0.05; meaning the type of institution and those variables are not related.
For variables Q3, Q6, and Q15 the P value is 0.004, 0.016, and 0.00 respectively.
With P values for Q3, Q6, and Q15<0.005, then the variables for Q3, Q6, and Q15
are related to the respondents’ type of institution.
88
5.4 Correlation
5.4.1 Correlation Matrix for Variables
Table 5.19 Correlation matrix for variables
Correlation
Q1
Q2
Q3
Q4
0.3
Q5
0.0
98
Q6
0.0
56
Q7
0.0
45
Q1
1
0.35
0.0
4
Q2
0.35
1
Q3
0.04
Q4
0.3
0.09
8
0.05
6
0.04
5
0
0.3
53
0.0
71
0.0
6
0.0
15
0.0
73
0.1
47
0
1
0.5
6
0.4
11
0.2
72
0.1
74
0.2
48
0.35
3
0.5
6
1
0.3
7
0.1
47
0.3
38
0.1
44
0.07
1
0.4
11
0.3
7
1
0.0
53
0.1
64
0.06
0.2
72
0.1
47
0.0
53
1
0.0
35
0.1
73
0.1
69
0.1
74
0.3
38
0.1
64
1
0.2
83
Q9
0.07
3
0.19
6
0.01
5
0.14
7
0.25
6
0.2
48
0.1
85
0.1
44
0.3
59
0.1
73
0.2
57
0.2
83
0.2
99
1
0.3
28
Q10
0.13
4
0.10
8
0.0
53
0.1
64
0.1
33
0.3
72
0.2
83
Q11
0
0.07
0.3
07
0.2
91
0.3
95
Q12
0.39
7
0.3
5
0.5
02
Q13
0.10
5
0.31
9
0.01
2
0.4
45
0.14
4
Q15
0.10
7
0.04
4
Q16
0.32
9
Q5
Q6
Q7
Q8
Q14
89
0.0
35
0.1
69
0.0
41
0.2
62
Q8
0.4
01
0.1
74
0.3
78
0.1
19
0.0
95
0.1
52
0.1
83
0.2
9
0.3
89
0.0
41
0.1
37
0.2
57
0.3
17
0.2
1
0.2
59
0.0
55
0.0
52
0.0
46
0.23
3
0.4
21
0.3
43
0.1
18
0.2
26
0.5
98
0.0
66
0.2
42
0.0
06
0.0
18
0.41
3
0.2
71
0.0
4
0.3
33
Q9
0.
19
6
0.
25
6
0.
18
5
0.
35
9
0.
25
7
0.
04
1
0.
29
9
0.
32
8
1
0.
42
2
0.
39
5
0.
44
9
0.
32
3
0.
17
2
0.
28
5
0.
41
2
Q10
Q11
Q12
Q13
Q14
Q15
Q16
0.13
4
0
0.39
7
0.105
0.10
7
0.044
0.329
0.10
8
0.07
0.31
9
-0.012
0.14
4
0.233
0.413
0.05
3
0.30
7
0.35
0.445
0.31
7
0.421
0.118
0.16
4
0.29
1
0.50
2
0.29
0.21
0.343
0.226
0.13
3
0.26
2
0.39
5
0.37
8
0.389
0.25
9
0.271
-0.04
0.11
9
-0.1
0.041
0.05
5
0.598
0.066
0.37
2
0.40
1
0.15
2
0.137
0.05
2
0.242
0.006
0.28
3
0.42
2
0.17
4
0.39
5
0.18
3
0.44
9
0.018
0.333
0.285
0.412
1
0.30
4
0.30
4
0.323
0.04
6
0.17
2
0.25
8
0.12
0.12
2
0.148
0.154
1
0.59
1
0.411
0.18
4
0.333
0
0.25
8
0.59
1
1
0.576
0.30
5
0.229
0.194
0.12
0.41
1
0.57
6
1
0.31
8
0.325
0.114
0.12
2
0.18
4
0.30
5
0.318
1
0.147
0.18
0.14
8
0.33
3
0.22
9
0.325
0.14
7
1
0.038
0.15
4
0
0.19
4
0.114
0.18
0.038
1
0.257
As can be seen from Table 5.20, the variables (Q6 & Q15), ( Q12 & Q11), (Q12 &
Q13), (Q3 & Q4), (Q4 & Q12), (Q9 & Q12), (Q3 & Q13), and (Q2 & Q16)
respectively have the following correlation values 0.598; 0.591; 0.576; 0.56; 0.502;
0.449; 0.445 and 0.413; meaning that there is a strong correlation between them.
5.5. Factor Analysis
5.5.1 KMO and Bartlett’s Test
Table 5.20 KMO and Bartlett’s Test
Kaiser-Meyer-Olkin Measure of .691
Sampling Adequacy.
Bartlett's Test of Sphericity
Approx. Chi-Square (X2)
306.703
Df
120
P value
.000
For the KMO test, a KMO minimum or acceptable value is 0.5. If KMO is less than
0.5 (KMO<0.5) then the correlation is meaningless but if KMO>0.5 then it’s
acceptable.
In this study, KMO = 0.691>0.5 which is greater than 0.5. Therefore, it may be
concluded that there is a strong correlation between the factors and that the factor
analysis is good and valid. For Bartlett’s test, a P value<0.05 is acceptable and a P
value>0.05 is not acceptable. In this study P= 0.000<0.05; therefore, the Bartlett’s
test is acceptable.
90
5.5.2 Principal Component Analysis
Table 5.21 Principal component analysis of variables
Component
1
2
3
Q1
0.725
Q2
0.815
Q3
0.651
Q4
0.463
Q5
0.671
Q6
4
5
0.885
Q7
0.754
Q8
0.804
Q9
0.554
Q10
0.742
Q11
0.597
Q12
0.717
Q13
0.771
Q14
0.554
Q15
Q16
0.791
0.632
(Source: Analysis of survey data)
On the factor analysis result, five (5) components were extracted and can be classified
as follows:
Component 1: Q3 “cheaper input”; Q4 “cheaper labor”; Q5 “level of cooperation
with locally owned firms”; Q12 “legal environment for investment and business”;
Q13 “equal treatment between locally owned firms and foreign companies” and Q14
“tariffs and quotas” are all aspects concerned with legislation; factor 1 measures the
country’s legislation as a determinant of FDI.
Component 2: Q7 “physical infrastructure”; Q9 “investment incentives”; Q10
“educational systems” and Q11 “financial infrastructure” are concerned with
91
infrastructure and education standard; factor 2 measures: infrastructure and human
resource/capital as a determinant of FDI.
Component 3: Q1 “promising performance of Côte D’Ivoire economy” and Q2
“growing local market” are related to the economy; factor 3 measures: the macroEconomic environment/indicator as a determinant of FDI.
Component 4: Q6 “geographical location of Côte D’Ivoire” and Q15 “using Côte
D’Ivoire as an export base” are related to a country’s position/physical location;
factor 4 measures: geographical position as a determinant of FDI.
Component 5: Q8 “peaceful industrial relations” and Q16 “high expected rate of
return in supplying primarily in Côte D’Ivoire
are concerned about labor
environment”; factor 5 measures: labor law as a determinant of FDI.
5.5.2.1 Variables Mean Rankings
Table 5.22 Mean ratings for variables (Q1-Q16)
Mean Ratings For All Items
Q1
Q2
Q6
Q12
Q9
Q7
Q15
Q16
Q5
Q8
Q13
Q11
Q4
Q3
Q10
Q14
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N
3.44
3.33
3.26
3.26
3.23
3.19
3.12
3.11
3.05
3.05
3.02
3
2.91
2.84
2.81
2.77
As can be seen from Table 5.22, the top five (5) variables, such as Q1 “promising
performance of the Côte D’Ivoire
economy”, Q2 “growing local market”, Q6
“geographical location of Côte D’Ivoire”, Q12 “legal environment for investment and
business”, and Q9 “investment incentives” scored the highest means from 3.44, 3.33,
3.26, and 3.23 respectively; whereas the variables Q11 “financial infrastructure”, Q4
“cheaper labor”, Q3 “cheaper input”, Q10 “educational systems”, and Q14 “tariffs
and quotas” scored the lowest from 3, 2.91, 2.84, 2.81, and 2.77 respectively.
5.5.2.2 Mean Ratings for Components
Table 5.23 Mean ratings for components or factors
Factors
Mean Ratings For Components
Mean
1. Country Legislation as a determinant for FDI
Q12
3.26
Q5
3.05
Q13
3.02
Q4
2.91
Q3
2.84
Q14
2.77
Average
2.98
Q9
3.23
Q7
3.19
Q11
3
Q10
2.81
Average
3.06
Q1
3.44
Q2
3.33
Average
3.39
Q6
3.26
Q15
3.12
Average
3.19
Q8
3.05
Q16
3.11
Average
3.11
2. Infrastructures and Human Resource/Capital
3. The Macro Economic Environment/indicator
4.
5.
Geographical position/location
Labor Law
(Source: Analysis of survey data)
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As can be seen from Table 5.23, factor 3 (Macro Economic Environment/Indicator as
determinant of FDI in Côte D’Ivoire) scored the highest average mean of 3.39,
followed by factor 4 (Geographical position/location as determinant of FDI) with a
mean of 3.19, followed by factor 5 (labor law as determinant of FDI), with a mean of
3.11, followed by factor 2 (infrastructure and human resources/ capital as determinant
of FDI), with a mean of 3.06, and finally, factor 1 (country legislation as determinant
of FDI), with a mean of 2.98.Table 5.23 is summarized in Table 5.23a.
Table 5.23a Summary of the mean ratings for the factors
Factor
Mean
The Macro Economic Environment/indicator
3.39
Geographical position/location
3.19
Labor Law
3.11
Infrastructures and Human Resource/Capital
3.06
Country Legislation as a determinant for Foreign Direct Investment
2.98
(Source: Analysis of survey data)
5.6 Conclusion
Chapter 5 focused on the presentation of the survey data resulting in the form of
descriptive and inferential statistical analysis. This chapter, however, has only
provided a contextual description of the results of the analysis. In Chapter 6 the
findings, recommendations and conclusion about the research will then be discussed.
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CHAPTER 6 FINDINGS AND CONCLUSIONS
6.1 Introduction
In this chapter, the findings of the study are presented and discussed in relation to the
findings presented in the literature review (see Chapter 2). Conclusions about answers
to the research questions, problems and objectives are made. Recommendations, the
limitations and implications for further research are also presented.
6.2 Findings and Discussions
The results of the data analysis (see Chapter 5) were based on feedback provided by
57 respondents; great care was taken to ensure that the individual or respondent who
participated in this survey study was a key decision maker within his/her firm. Prior
to presenting the findings and discussions related to each question, an analysis of the
respondents’ and their company characteristics is first presented.
6.2.1 Respondents and Institution Characteristics Findings and Discussions
The findings revealed that 57.9% (n=33) of the respondents of this research survey
were economists or had a financial background, which strengthened this study as they
were individuals who already possessed integral knowledge of the subject
understudy, on the one hand, and, on the other, they were thus able to provide the
right and meaningful information. Among the economists, 54.5% (n=18) were also
executives and 36.4% (n=12) of the economists worked for a service company, which
represent 52.2% (n=12) within that sector. Another finding was that 59.6% (n=34) of
the respondents were on the executive level; meaning that this survey study was
conducted largely using input from individuals on the top management level, where
the key decision makers of each firm can be found. Further, the result of the analysis
also revealed that more than 50% of all qualifications were executive in nature. For
example, 90% (n=9) of the geologists are executives; 50% (n=1,2,5) of the engineers,
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human resource and management are executives. Also, 52.2% (n=12) of the executive
respondents worked for service companies, some as an economist. As already stated,
care was taken to ensure that the respondents of the survey study was a key player (or
at least participated) in each firm’s investment decision making processes. Another
finding was that respondent qualification and type of company they were employed
by were related. For example, 70% (n=7) of the geologists worked for a mining
company; and 100% (n=2) of the engineers worked for a service company. And
finally, the last finding with regard to this part was that 40.4% (n=23) the respondents
were employed within a service company, which is a confirmation of the Côte
D’Ivoire Center and Promotion Data (see Table 2.5) where the service sector
(tourism, telecommunication, to name just two) in general accounted for more than
40% of the total FDI inflows for the period 1996-2008. That reveals the accuracy of
this survey study and the most important investment sector in Côte D’Ivoire
6.2.2 Questionnaire Findings and Discussions
The respondents were requested to indicate the importance of each factor (Q1 up to
Q16) (whether more strongly or less) in their investment decision making processes.
The findings and discussion on each is presented below:
•
For Q1 “promising performance of the Côte D’Ivoire economy” ,
98.2% (n=56) of the respondents considered Q1 as an important determinants in their
investment decision process. In addition, with 3.44 for the mean ratings, the highest
for the top five mean ratings reveal the importance of this determinant for investors.
For this reason, Loree and Guisinger (1995), Audrey et al. (2003:199, cited in
Friedman et al. (1992)), and Billington (1999) state that: “Economic factors, such as
inflation, and particularly tax rates and the tax structure of the host economy, are key
investment considerations”. Added to that, Marios (2001:13-14) found that: “foreign
investors are primarily concerned with a stable Macroeconomic together with
credibility of policy reforms…
the overall growth prospects buttressed with a
liberalized exchange rate and a fully convertible currency, low inflation and stringent
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fiscal management were the most widely perceived strengths of Uganda as an
investment location”. The significance of this determinant for most survey
respondents in this study could be attributed to the fact that Côte D’Ivoire
has for
the last four decades presented a good Economic stability record and, as an Economic
engine for ECOWAS, plays a huge role in the area.
•
Q2 “growing local market”
Here also, 91.2% (n=52) of the respondents stated that the growth within the local
market played an important role as a determinant in their investment decision
processes. Their argument is supported by the mean ratings where this determinant
scored 3.33, after Q1. This is in line with other studies that find a growing local
market (market size) as being a key determinant for investors. For Marios (2001:14),
the market size (in terms of GDP per capita or size of the population or growth rate)
is significant in affecting decisions on location. Thus, larger economies have attracted
the bulk of FDI because of the potential for local sales. In small economies FDI
usually concentrates on production for export. Audrey et al. (2003:198, cited in
Kobrin (1979)), Yamawakai (1993), and Billington (1999) supported the view that
the size of the foreign market and its potential growth are regarded as key factors
influencing investors’ choice of location. Added to that, Ana (1997) states that:
“econometric studies comparing a cross section of countries indicate a wellestablished correlation between FDI and the size of the market in terms of GDP,
average income levels and growth rates”. He also found that over the last 25 years
FDI in low-income countries has been highly concentrated in three countries, China,
Nigeria and India. Large market size, low labor costs and high returns in natural
resources were amongst the major determinants in the decision to invest in those
countries. For Côte D’Ivoire, the fact that the population grew from 16 million in
2000 to 20 million in 2010 and an acceptable GDP growth rate performance from
2000-2010, despite the crisis, and also the account of its market share within the
WAEMU market of 240 million, could explain the importance that investors assign to
Côte D’Ivoire’s growing local market as being a determinant in their investment
decisions.
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•
Q3 “cheaper input”
Kasahara and Lapham, (2008, quoted by Emanuele, 2009) argue that cheaper and
greater varieties of inputs increase productivity of the firms and consequently their
capacity to compete on International markets. Supporting Emanuele, Wilbur
(2001:13) states that: “greater demand for inputs increases incumbent costs.
Incumbents face higher costs, but those are not high enough to warrant them
relocating. In contrast, some multinationals choose less crowded locations with lower
associated costs. While these lower costs do allow them to set lower prices,
incumbents have to meet higher transport costs as these lower cost locations are
likely to be a greater distance from established industry. Turning to the findings of
this study, 70% (n=40) of the respondents saw this determinant as important in their
investment decision processes. Out of those respondents, cheaper input as a
determinant seems to have greater importance for service and manufacturing
companies, which accounted for 50.1%. This can be explained by the fact that they
are using intensive inputs in their production. Therefore, the Emanuele and Wilbur’s
explanation indicated above is consistent with the findings of this study with regard
to this determinant. Added to that, this determinant showed a strong correlation in the
findings of this study with each respondent’s type of company; which strongly
reinforces the explanation that the respondents put great emphasis on this component
during their specific location investment decision process.
•
Q4 “cheaper labor”
The result of empirical studies exploring the impact of cheaper labour as a
determinant for a FDI location decision led to a mixed conclusion. Some, such as
Cushman (1987), Wheeler and Mody (1992), and Marios (2001) found a positive
effect of cheaper labour on FDI location decisions, while Schneider and Frey (1995),
who conducted studies on the Economic and political determinants of FDI, found a
negative effect of cheaper labour. Researchers, such as Loree and Guisinger (1995),
in their study of policy and non-policy determinants of US equity on FDI, found no
significant effect between low labour cost and FDI decision making. In this study
despite 75% (n=43) of the respondents finding it important in their investment
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decision processes, this determinant was part of the five lowest mean ratings with
2.91. This means that investors will welcome a location which offers lower or
cheaper labour but, within the rating of the most important determinant for
investment, this determinant is not really part of their top five in priority. This is
consistent with Marios (2001:19), when he said: “relative costs influence location
decisions, but low direct labor costs are not of as much importance as is commonly
believed. In fact, the importance of low-cost unskilled labor in location decisions has
declined in recent years and greater emphasis is now placed on skills and the
trainability of workers.” The explanation of Chien-Hsun (1996:24, quoted by
Cushman, 1987) provides a motivation for FDI, as the investing companies would
benefit from the lower production costs presented by the host country and the
trainability of the local population.
•
Q5 “level of cooperation with locally owned firms”
75% (n=43) of the respondents would enjoy cooperating with locally owned firms
and have considered this determinant as important in their investment decision
processes. The explanation of this finding can be as follow: (1) Investors may want to
know the business environment in term of culture, inter-industry trade, exchange of
information. (2) Investors may want to know of local opportunities. (3) Investors may
want to gain experience through locally owned firms. (4) Investors may want to
network.
All the above can explain why it is important to cooperate with locally owned firms
but, for the purpose of this study, the researcher was of the view that knowing or
controlling the culture of the host country through cooperation with locally owned
firms may be the chief purpose. For this reason, culture, ethics and entry mode to the
new market, environmental aspects and consideration, implementation of change
regarding home management or marketing practices may all be considered important
to the decision process. All these aspects are challenges associated with FDI and, if
not managed carefully, will result in loss for the home country and lack of
development for host country (Hill, 2007:268-276). Another explanation from
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Krishna and Derrick (1995:4) is that internal uncertainty is perceived by a firm as
lack of market-related knowledge in a particular entry situation. Internal uncertainty
can arise from the firm’s lack of experience in International markets or from cultural
distance between the firm’s home country and host country. For example, he quotes
Anderson and Gatignon, (1986) when he emphasises the importance of the
differences between the countries’ cultures, languages and business practices. For this
study, the above explanations are consistent with why most of the respondents
considered this determinant as being important for their investment decision
processes.
•
Q6 “geographical location of Côte D’Ivoire”
This study found that 77.2% (n=44) of the survey respondents saw Côte D’Ivoire’s
location as very important for them. For most of the respondents, the geographical
location of Côte D’Ivoire was a major determinant in their decision to invest there.
This is supported by another finding; the mean rating of this determinant was 3.26,
the third of the top five mean ratings of the survey instrument. Added to that, was the
finding that the geographical location of Côte D’Ivoire and the type of company the
respondents came from were related. Another reason why this determinant is
regarded by the respondents as the third most important determinant could be the fact
that Côte D’Ivoire serves as an export/import base for the land locked countries, such
as Mali and Burkina Faso. Added to that, as explained in Chapter 2, Côte D’Ivoire is
located in west Africa and shares its border with the republic of Ghana (to the east),
Burkina Faso and Mali (to the north), Liberia and Guinea Conakry (to the west). To
the South the country is bordered by the Atlantic Ocean by 550 km of coast line. This
could also explain why investors assigned importance to this determinant. Another
explanation can be based on the firm’s strategy. If the objective of the firm is to
access a specific region or sub-region market, then the firm has to select the country
which offers the best geographical position to pursue its strategy. This is consistent
with Dunning (1993:56-62) and Kiyoyasu (2009:4), FDIs that are undertaken to
strengthen the existing market structure or explore the opportunities of new markets
can be called “market-seeking FDIs”.
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•
Q7 “physical infrastructure”
Various studies have pointed out the importance of physical infrastructure, called
“quality of life” by Audrey et al. (2003:201) when he was referring to expenditure on
roads, transport and hospitals. According to the findings of Chien-Hsun (1996),
Marios (2001), Elizabeth Aiedu (2002), Audrey et al. (2003), and Junjie (2008),
physical infrastructure plays a major role in FDI attraction. The findings of this study
are consistent with the above research but also with the researcher’s expectation.
80.4% (n=51) of the survey respondents indicated the great importance that physical
infrastructure plays in their investment decision processes; however, this determinant
is still not part of the top five mean ratings. This could be explained by the fact that
Côte D’Ivoire already has the physical infrastructure in place.
•
Q8 “peaceful industrial relations”
70.7% (n=46) of the respondents want a peaceful industrial relations environment for
their investments. The findings of this study conclude that 12 of 14 respondents and
19 of 23 respondents were, respectively, from manufacturing and service companies,
representing 55.1% of the total and most of them considered a peaceful industrial
relations environment as being important in their investment decision processes. The
explanation may be that they want a peaceful business environment for efficient and
effective operations or production, as a non-peaceful industrial relations may have a
negative impact on their production, therefore affecting their profit.
•
Q9 “investment incentives”
The findings of this determinant confirmed the researcher’s prediction. 82.5% (n=47)
of the respondents considered investment incentives as highly important in their
investment decision process. This determinant was found in the top five mean ratings,
with a mean of 3.23. This implies that out of the important factors which can
determine a respondents ability to invest in Côte D’Ivoire, investment incentives is
the fifth one. Many studies, including Miria (2001, Alvin et al. (2002), and Recep
(2009), have found that competition among governments to attract FDI has grown
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significantly. Many countries have not only reduced or eliminated such restrictions
but have also moved toward encouraging FDI, through tax and other incentives.
With regard to this study, Côte D’Ivoire Center of Promotion (CEPICI) - an
investment agency under the supervision of the prime minister - offers investment
incentives under the Côte D’Ivoire investment code. There are a range of incentives
available according to the level of investment, area of investment and investment
sector. Tax reduction or tax-free, repatriation of dividends for a specific period are a
few incentives that investors can get from the investment code. In the new FDI
climate this determinant does have important considerations for investors, since it
allows them to save on the capital invested through a tax allowance from the host
country but also to draw back the capital within a certain period of time. This could
explain why, according to this study, most of the respondents have assigned high
importance to this determinant.
•
Q10 “educational systems”
To avoid confusion it is important to notice that cheaper or low labour is not a same
as educational systems. By educational systems the intention is to focus on the sum
total of all education systems through which highly qualified or skilled workers are
delivered as output. 58% (n=33) of the respondents considered education systems as
important but in terms of mean ratings, with a mean of 2.81, it falls within the bottom
five. This indicates that the educational system is not, when considered by investors
in their decision making processes, that important. Currently Côte D’Ivoire has one of
the better education systems in the Africa sub-region. Investors can have access to
locally qualified and skilled workers, which in terms of productivity and savings is to
their benefit (cost saving for training and expatriation of workers). This research
study found that educational systems and the qualifications of the respondents are
related, which supports this researcher’s opinion.
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•
Q11 “financial infrastructure”
As with educational systems, financial infrastructure is important for 75.5% (n=43) of
the respondents but, unfortunately, with a mean of 3.00, this factor is part of the
bottom five of the mean ratings. Côte D’Ivoire has and offers one of the best financial
infrastructures in the Africa sub-region, as explained in Chapter 2. This may explain
why investors consider investing in Côte D’Ivoire. However this dimension was not
ranked highly.
•
Q12 “legal environment for investment and business”
With a mean rating of 3.26, legal environment for investment and business is one of
the most important determinants, accounting for 82.4% (n=47) of the respondents, it
is also considered by them to be part of the five most important factors. This
determinant represents the security aspect of any investment for many investors. The
findings of this study confirm that of various studies conducted by Dunning (1994),
UNCTAD (1998), Marios and Spyros (2007), and Mottaled (2007), which point to
the importance of the legal environment for investment and business as a major
determinant for FDI. For example, Dunning (1994) discovered that the creation of an
investment climate conducive to FDI depends on a host government’s ability to create
a range of favorable political and Economic conditions and, which include:
• Progressive Economic objectives and policies, including perceived support for
FDI and a privatization regime conducive to FDI
• The ability to exercise corporate governance without arbitrary bureaucratic
interference
• The existence of a transparent and fair taxation system and legal framework,
with mechanisms for enforcing property rights and resolving contractual
disputes
• The minimization of crime and corruption or, at least, their effects on inward
investors
• The adaptation of firms and managers to competitive forms of management
and operation.
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In the ambit of this study, Côte D’Ivoire has made considerable strides in the
implementation of the above mentioned conditions in establishing a favorable legal
environment for investment and business (e.g. establishment of Côte D’Ivoire’s
Investment and Promotion agency (CEPICI); with the objective of establishing a
framework for FDI attraction), that could also be the explanation of importance of
this determinant for the respondents of the study.
• Q13 “equal treatment between locally owned firms and foreign companies”
World Investment Report (1998:Online) study has found that the standard of
treatment of foreign affiliates is an important determinant for FDI under any country
policy framework. This finding is aligned with the findings of this study, in regard to
this determinant. 79% (n=45) of the survey respondents found equal treatment
between locally owned firms and foreign companies as being an important factor in
their decision to invest in Côte D’Ivoire 35.1% (n=20) of the respondents who
supported this finding were from service companies, which indicates that this
determinant is of great importance for that sector in their decision making processes.
The explanation of why equal treatment between locally owned firms and foreign
companies has a great importance for respondents and yet it is not part of the top five
most important determinants of the survey mean rankings is that the Côte D’Ivoire
Investment Promotion Center has it covered. According to C.I new investment code
(1995), local and foreign owned companies are treated in the same manner.
• Q14 “tariffs and quotas”
As with all other determinants, tariffs and quotas was considered by 64.9% (n=37) of
the respondents as an important factor in their investment decision processes. Again,
UNCTAD’s 1998 study of host country determinants of FDI, found that under a
country’s trade policy that tariff and non-tariff barriers, and coherence of FDI and
trade policy and tax policy, are all important determinants for attraction of FDI.
Added to that, Leonard et al. (2005) awarded the same importance with regard to a
government’s policy framework for tariffs and quotas for attraction of FDI. This
study also revealed that, with a mean of 2.77, tariffs and quotas are at the bottom five
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mean ratings. That means although the determinant is important for the survey
respondent, tariffs and quotas are not part of the five most important determinants in
their decision making processes. The reason for that is that Côte D’Ivoire officials
can provide incentives in terms of tariffs and quotas, which is the reason this factor is
regarded as less important in this study.
• Q15 “using Côte D’Ivoire as an export base”
Charles Hill (2009) defined exporting as a process of manufacturing the product in a
centralized location (home or abroad) and exporting it to other national markets.
In this study using Côte D’Ivoire as an export base and respondent type of company
are related. Except for construction companies, all the companies surveyed showed
great interest in this determinant. 8 out of 9, 11 out of 14, 7 out of 10, and 20 out of
23 respectively from government official perception, manufacturing, mining and
service companies. Again, within company type, 35.1% (n=20) of the respondents are
from service companies. The finding of this study is that most of the respondents
from service companies were willing to use Côte D’Ivoire as an export base.
Another finding revealed that respondent position and this determinant are related.
More than 80% within the respondent position are willing to use Côte D’Ivoire as an
export base. Among those respondents, executives accounted for 50.9% (n=29);
which means that most executives who participated in this study saw this determinant
as important in their investment decision processes.
For the purpose of this study, Vernon’s 1971 product’s life cycle theory (where at a
mature phase multinationals tend to shift their production to take advantage from a
specific location endowment and export the product back home or into other markets)
quoted by Anthony and Kwame (2008) could be a theoretical explanation of the
importance of this determinant to respondents.
Côte D’Ivoire port, the biggest one in Africa, after Durban port in South Africa, may
be an explanation of why using Côte D’Ivoire as an export base is important for most
of the respondents. The determinant is noted as ranking among the top five most
105
important determinants because Côte D’Ivoire offered them a quality export
infrastructure.
• Q16 “high expected rate of return in supplying primarily in Côte D’Ivoire”
80.7% (n=46) of the respondents regarded this determinant as important in their
investment decision processes. Another finding is that respondent qualification and
expected high rate of return in supplying primarily in Côte D’Ivoire are related. Also
within the respondent qualification, 47.4% (n=27) of the economists responded to this
determinant as important in their investment decision processes. The finding of this
study on this determinant is confirmed by a study conducted by Recep and Bernur
(2009:106 quoted Christiansen & Ogutcu (2002)). The finding of this study is that, in
general, foreign investors are influenced by three broad groups of factors:
(1) The profitability of the projects
(2) The ease with which subsidiary operations can be integrated into investor’s
global strategies
(3) The overall quality of the host country’s enabling environment
While Dunning (1994) found that TNCs motives for FDI exercised a major influence
on the potential Economic benefits which can accrue to host countries. TNCs
engaging in FDI are seeking specific and identifiable advantages, such as:
•
Access to natural resources: physical and human (resource-seeking FDI)
•
Access to markets: local or adjacent ( market-seeking FDI)
•
Product or process rationalization/specialization: across or along the value
chain (efficiency-seeking FDI)
•
The acquisition or linkage into foreign assets including technology,
organizational efficiency, or markets (strategic asset-seeking FDI)
Most FDI flows in the 1980s and 1990s have taken place within the triad, and have
been of the efficiency or asset-seeking kind. In contrast, the majority of FDI flows
from developed to transitional economies during the same period was motivated by
the search for natural resources or market access.
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6.2.3 Principal Component Findings and Discussion
Here, the following five components were extracted and classified as determinants for
attracting FDI in Côte D’Ivoire from the component analysis:
Component 1: Q3 “cheaper input”; Q4 “cheaper labor”; Q5 “level of cooperation
with locally owned firms”; Q12 “legal environment for investment and business”;
Q13 “equal treatment between locally owned firms and foreign companies” and Q14
“tariffs and quotas” were classified as Factor 1 and measures:
legislation as a
determinant of FDI.
Component 2: Q7 “physical infrastructure”; Q9 “investment incentives”; Q10
“educational systems” and Q11 “financial infrastructure” are classified as Factor 2
and measures: Côte D’Ivoire infrastructure and human resource/capital as
determinant of FDI.
Component 3: Q1 “promising performance of Côte D’Ivoire economy” and Q2
“growing local market” were classified as Factor 3 and measures: Côte D’Ivoire
macro-Economic environment/indicators as determinant of FDI.
Component 4: Q6 “geographical location of Côte D’Ivoire” and Q15 “using Côte
D’Ivoire as an export base” were classified as Factor 4 and measures: Côte D’Ivoire
geographical position as determinant of FDI.
Component 5: Q8 “peaceful industrial relations” and Q16 “high expected rate of
return in supplying primarily in Côte D’Ivoire” were classified as Factor 5 and
measures: Côte D’Ivoire labour law as determinant of FDI.
After the classification of those factors, the variable/question mean ranking was
conducted (see Table 5.22). Thereafter, a mean rating for each component or factor
was conducted and the average mean for each factor classified as a determinant of
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FDI in Côte D’Ivoire was extracted (see Table 5.23). The objective of this further
analysis was to see which of the factors were most important FDI determinants for
Côte D’Ivoire.
The mean ratings for the factors revealed the following:
Factor
3
“Côte D’Ivoire
macro-Economic
environment/indicator
as
determinant of FDI” showed an average mean of 3.39 the highest average
mean among the five factors. This means that Factor 3 was considered by the
respondents to be the most important determinant affecting their investment
decision processes. This finding is confirmed by the findings from
variable/question mean ratings, where Q1 “promising performance of Côte
D’Ivoire economy” and Q2 “growing local market” were respectively ranked
first and second among the top five mean ratings, with 3.44 and 3.33. It may
then be concluded that from this research study Côte D’Ivoire MacroEconomic environment/Indicator as determinant of FDI is considered to be
the most important determinant. The determinant comprised or included
variable Q1 “promising performance of Côte D’Ivoire economy” and Q2
“growing local market,” which were also considered to be the most important
variables for the research respondents.
Factor 4 “Côte D’Ivoire geographical position as determinant of FDI” with
3.19 as an average mean, it was the second highest average mean after Factor
3. This indicates that Côte D’Ivoire’s geographical position as determinant of
FDI is considered by respondents to be the second most important
determinant of FDI within their investment decision processes. This finding is
also confirmed by the variable/question mean ratings, where Q6
“geographical location of Côte D’Ivoire” was at the third position, with a
mean of 3.26, among the top five of the mean ratings and Q15 “using Côte
D’Ivoire as an export base” was at the second position, with a mean of 3.12,
among the bottom five of the mean ratings. It was explained that being among
the bottom five of the mean ratings doesn’t necessarily mean that the variable
isn’t important. The explanation was that Côte D’Ivoire has successfully
108
provided those variables which, therefore, respondents don’t see as most
important in their investment decision making processes. To confirm this,
80.7% (n=46) of the respondents took Q15 into account as an important
variable within their investment decision process. We can then conclude that
most of the research study respondents identified Factor 4 “Côte D’Ivoire
geographical position as determinant of FDI” as the second most important
determinant within their investment decision processes. That determinant
includes Variable Q6 “geographical location of Côte D’Ivoire” and Q15
“using Côte D’Ivoire as an export base,” as confirmed by the variable mean
rating analysis.
Factor 5 “C.I Labor Law as determinant of FDI” had an average mean of 3.11,
the third highest among the five factors. This finding revealed that Factor 5
“C.I labor law as determinant of FDI” was considered by the research
respondents to be the third most important determinant of FDI within their
investment decision processes. This determinant includes variables Q8
“peaceful industrial relations,” which scored 3.05 as a mean rating from the
variable mean ratings analysis, and Q16 “high expected rate of return in
supplying primarily in Côte D’Ivoire,” which scored a mean of 3.11 from the
variable mean ratings analysis. None of those variables were ranked among
the top or bottom five from the mean ratings analysis but somewhere in
between. As can be seen Factor 5, as a third most important determinant in
Côte D’Ivoire for the research respondents, was unpredictable from the
previous analysis. Yet the respondents still did find it to be an important
variable. The explanation could be, even though variables Q8 and Q16 didn’t
predict the outcome of this determinant as a third most important factor, they
scored a mean of 3.05 and 3.11 respectively, which is above 3 and among the
top ten mean ratings analysis. It can, therefore, be concluded that Factor 5
“C.I Labor Law as determinant of FDI” is classified by the research
respondents as a third most important determinant of FDI that they consider
within their investment decision processes. Also we can conclude that
109
variables Q8 “peaceful industrial relations,” which scored 3.05 as a mean
rating, and Q16 “high expected rate of return in supplying primarily in Côte
D’Ivoire” which scored a mean of 3.11, were among the top ten variable mean
ratings analysis but didn’t predict the finding of Factor 5.
Factor 2 “Côte D’Ivoire infrastructure and human resource/capital as
determinant of FDI” with an average mean of 3.06, it is the fourth highest
among the top five factors, which indicates that Factor 2 “C.I infrastructure
and human resource/capital as determinant of FDI” was considered by
respondents to be the fourth most important determinant of FDI within their
decision making processes. This finding is confirmed by the finding of the
variable mean ratings analysis, where variables Q7 “physical infrastructure,”
with a mean of 3.19, ranks among the top ten mean ratings; Q9 “investment
incentives,” with a mean of 3.23, ranks among the top five mean ratings; Q10
“educational systems,” with a mean of 2.81, and Q11 “financial
infrastructure,” with a mean of 3, is a first among a bottom five. It is evident
that variables Q7 and Q9 predicted a finding of Factor 2. It may then be
concluded that Factor 2 “Côte D’Ivoire infrastructure and human
resource/capital as determinant of FDI” was classified by the research
respondents as the fourth most important determinant of FDI within their
decision making processes. This determinant comprises or includes the
following variables: Q7 “physical infrastructure”, Q9 “investment incentives”,
Q10 “educational systems”, and Q11 “financial infrastructure” which
findings, considering from the variable mean ratings analysis, could be
expected.
Factor 1 “The country (Côte D’Ivoire) legislation as determinant of FDI”.
This factor scored an average mean of 2.98, which is ranked at the bottom
among the top five factors. This finding reveals that Factor 1 “The country
(Côte D’Ivoire) legislation as determinant of FDI” is the fifth most important
determinant of FDI in Côte D’Ivoire. This finding is perfectly aligned with the
findings of the variable mean ratings analysis, where most of the following
variables, (Q3 “ cheaper input” with a mean of 2.84 is among a bottom five ;
110
Q4 “ cheaper labor” with a mean of 2.77, also among a bottom five; Q5 “level
of cooperation with locally owned firms”, with a mean ratings of 3.05; Q12
“legal environment for investment and business”, with a mean ratings of 3.26
is among the top five; Q13 “equal treatment between locally owned firms and
foreign companies”, with a mean of 3.02 is among a bottom six, and Q14
“tariffs and quotas”, with a mean ratings of 2.77 is also among a bottom five)
were among the bottom five. As previously explained, being among the
bottom five doesn’t mean that the variable is not important for respondents.
The researcher concludes that Factor 1 “The country (Côte D’Ivoire)
legislation as determinant of FDI” was identified by most research
respondents as the fifth most important determinant of FDI within their
investment decision in Côte D’Ivoire. This determinant includes variables Q3
“cheaper input”; Q4 “cheaper labor”, Q5 “level of cooperation with locally
owned firms”, Q12 “legal environment for investment and business”, Q13
“equal treatment between locally owned firms and foreign companies”, and
Q14 “tariffs and quotas” from which, as a result of this study, this finding was
expected.
6.3 Conclusion about the Research Question and Objectives.
The aim of this study was to broadly find clues to the question of what are the most
critical determinants of FDI that should be addressed or established by Côte D’Ivoire
in order to make the country more competitive in attracting this form of investment?
The result of the research study indicates that the two determinants that were of least
importance to the economy of Côte D’Ivoire were the Infrastructure and Human
Resource/Capital. “Legislation” however, ranked amongst the five most critical
determinants of FDI and Côte D’Ivoire officials or the government may need to
address to make the country more competitive in attracting FDI. Côte D’Ivoire does
offer a sound modern infrastructure but that needs to be further improved because
since 1960 the road infrastructure has remained the same and is not in a good
condition. The only road development since that time registered in the country was in
111
1990. This regional road called “la cotiere” was developed to reduce and facilitate the
transport of goods between the country’s two ports. With regard to the human capital,
since the early 1990s the quality of human capital was negatively impacted by
consecutive crises in the education sector. The level of quality of the human capital is
low; most of the national and foreign firms prefer workers who have completed their
qualifications outside the country. Côte D’Ivoire has good legislation in place but
problems still arise from its application. The level of confidence in the justice system
remains low, which is not good for new investors. The researcher believes that the
country can be more competitive in attracting FDI if officials or the government
would take the necessary action to address these critical determinants of FDI.
6.3.2 What are the main determinants of FDI attraction?
This study revealed that Côte D’Ivoire Macroeconomic environment/indicator,
geographical position/location, labor law, infrastructure and human resource/capital
and legislation were the main determinants of FDI attraction in Côte D’Ivoire. Those
five main determinants are the result of the component analysis which included all
sixteen variables of the survey instrument.
6.3.3 What Determinants are applicable to Côte D’Ivoire
in terms of
establishing competitive advantage to attract FDI?
The result of this research indicated that Côte D’Ivoire
Macroeconomic
environment/indicator and geographical position/location were the first two most
important determinants for attracting FDI into Côte D’Ivoire. The importance of the
role that the economy plays in the African sub-regional body (ECOWAS) was
highlighted in Chapter 2, which states that it accounted for 40% of the reserve of the
body. In addition, the benefit gained by the surrounding neighbouring countries,
including Burkina Faso and Mali from Côte D’Ivoire’s geographical position was
also highlighted. They used Côte D’Ivoire as an export/import base. Those
112
explanations clearly reveal why the above first two most important determinants can
give a competitive advantage in attracting FDI to Côte D’Ivoire
6.3.4 Which types of determinants are viewed as the most important by
Investors?
The findings of this study have demonstrated the importance of all sixteen
determinants by investors, the following five (1) promising performance of Côte
D’Ivoire economy; (2) growing Côte D’Ivoire
local market; (3) geographical
location of Côte D’Ivoire; (4) Côte D’Ivoire legal environment for investment and
business and (5) investment incentives; were viewed by them as the most important
determinants in their investment decision making processes.
6.3.5 How can Côte D’Ivoire reshape or reorient its current strategies in
attracting FDI?
The current strategy applied in attracting FDI to Côte D’Ivoire is based on the
activities of the investment and promotion center (CEPICI), which needs to develop
new and aggressive strategies. Currently the prospective investors find their own way
to an investment opportunity in Côte D’Ivoire and then approach CEPICI. It is the
researcher’s opinion this strategy need to be reshaped into an aggressive strategy,
which will consist of some scheduled promotional activities on the different
continents, to present potential opportunities offered by Côte D’Ivoire in terms of
businesses and tourism, to name but two.
In addition, Côte D’Ivoire officials worked to only promote the traditional FDI
determinants, which were the geographical position of the country and the availability
of raw materials; however, this study has revealed new determinants, including: (1)
the Macroeconomic environment/indicator, (2) labor law, (3) infrastructure and
human resource/capital, and (4) the legislation. The Côte D’Ivoire policy makers
113
need to consider those new determinants and establish a new, more appropriate
framework for attracting FDI to Côte D’Ivoire.
6.4 Theoretical Implications
Dunning’s (1979, 1980) eclectic paradigm (also known as the OLI paradigm), is a
heavily applied paradigm in the FDI sphere. Various studies, including the Alan et al.
(2000) study, “the obstacles to FDI in Russia,” and the Coskun (2001) study,
“determinants of FDI in Turkey,” were based on the Dunning OLI paradigm. Coskun
(2001) found the following to be the most important determinants of FDI in Turkey:
Promising performance of Turkey’s economy and growing the local market. Further,
cheaper inputs; cheaper labour; and co-operative behavior with locally owned firms
were identified as moderate determinants by respondents. This study was also
inspired by a Dunning OLI paradigm and the findings are not much different from
Coskun’s findings. Here too, the promising performance of the Côte D’Ivoire
economy and its growing local market were identified as the two most important
determinants. In addition, the geographical location of Côte D’Ivoire; the Côte
D’Ivoire legal environment for investment; and business and investment incentives
were also viewed as forming part of the five most important determinants for
attracting FDI into Côte D’Ivoire .
This study also found that location advantages from the OLI paradigm is the most
relevant to Côte D’Ivoire because of the promising performance of the C.I economy
and its growing local market, associated with its geographical location, legal
environment for investment, and business and investment incentives are all the
location advantages offered by Côte D’Ivoire
Regarding the ownership and
internalization advantages of the paradigm, the researcher is of the opinion they are
not relevant to Côte D’Ivoire .
114
6.5 Managerial Implications
Historically the geographical position of Côte D’Ivoire, its abundance of raw
materials, and Economical performance were regarded by respondent officials as the
most important determinants of attracting FDI into Côte D’Ivoire. This study has
found that Côte D’Ivoire
Macroeconomic environment/indicator, geographical
position/location, labor law, infrastructure, human resource/capital, and Côte D’Ivoire
legislation system are currently the most important determinants of attracting FDI
into Côte D’Ivoire. Those findings demonstrate that investors’ location decisions can
vary over time, which confirms the findings of Junjie (2008); while, he conducted
research on “world trade organization accession and FDI in China”. In the case of
Côte D’Ivoire, the government or its officials who deal with investment promotion
must consider those new findings in their identification of a useful mechanism for
establishing an appropriate framework for attracting FDI into Côte D’Ivoire
6.6 Limitations and areas for further research
The findings of this study are only applicable to Côte D’Ivoire since the entire study
was restricted to that country and to the investors operating in Côte D’Ivoire. In
addition, the unavailability and difficult cooperation of some respondents made it
impossible to reach a sample of 100. Since this research targeted Côte D’Ivoire, the
next objective would be to conduct further research, to identify the determinants of
FDI attraction in West Africa as a region.
6.7 Recommendations
The findings of the research can be used by Côte D’Ivoire government or officials for
the following:
to provide a framework for establishing or improving FDI infrastructure in
Côte D’Ivoire
115
to provide a frame of reference on how to identify the most important
determinants for FDI attraction in the future.
to contribute ideas towards a generic frame of reference for Côte D’Ivoire as
an example for other countries in Africa.
to contribute in the identification of a useful mechanism for establishing an
appropriate framework for attracting FDI.
6.8 Conclusion
The objective of this study was to assist Côte D’Ivoire government officials to
become more aware of the competitive determinants for FDI attraction. This was
motivated by the fact that Côte D’Ivoire, as is currently the case in all countries in
Africa, lag behind in terms of FDI attraction. since FDI is an important variable in the
development process of any country (especially needed for aid countries like Côte
D’Ivoire), as justified by the experiences of the east Asian tiger economies, the
researcher found it important to undertake this study. This research revealed that
investors investing in Côte D’Ivoire are chiefly motivated by five determinants: (1)
the promising performance of Côte D’Ivoire economy; (2) the growing Côte D’Ivoire
local market; (3) the geographical location of Côte D’Ivoire; (4) the Côte D’Ivoirian
legal environment for investment and business and (5) the investment incentives.
116
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126
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128
APPENDIX A: INFORMATION AND CONSENT SHEET
This questionnaire represents the research component of my study which is in partial
completion of my MBA research project. The aim of the study is to identify the
determinants of foreign direct investment in Côte D’Ivoire. The results of the study
are expected to contribute considerably to a better understanding of determinants of
foreign direct investment in Côte D’Ivoire and other developing countries.
By
participating in this research project, you will be making a valuable contribution in
this regard.
I thank you in advance for your valuable time and input in completing this
questionnaire. If you agree to participate then you will be deemed to have given
consent to the appropriate use of information provided. As a participant, you can be
assured of complete anonymity and that your responses will be collated with others
and treated with the strictest confidentiality. In order to gain maximum benefit from
this research project, it is important that you respond as openly as possible. I also
request that you respond to all the questions.
Again, thank you for your willingness to participate in this research project. Your
time and contribution is greatly appreciated.
For French Speakers
Pour l’achèvement des travaux de recherché de mon MBA, je sollicite votre
contribution pour remplir le questionnaire ci-joint, envue de m’aider dans ma
tentative a identifier les déterminants de l’investissement direct étranger en Côte
D’Ivoire. En participant a ce projet de recherché, votre apport sera de grande valeur
dans l’identification des déterminants du niveau actuel de l’investissement direct
étranger en Côte D’Ivoire.
Merci de prendre sur votre précieux temps pour remplir ce questionnaire. Etant une
personne interrogée, vous pouvez être rassurée de la stricte confidentialité que nous
129
réservons a vos réponses. Dans le but de profiter au maximum de ce projet de
recherché, il est indispensable que vos réponses soient sincères et honnêtes. Aussi, est
il important de vérifier si vous avez répondu a toutes les questions.
Encore merci pour votre volonté de participer a ce projet de recherché. Nous
apprécions en outré votre contribution a sa juste valeur.
Traore yacouba
Cell: +225 03 69 09 93 / +27 72 106 70 17
Email: [email protected]
[email protected]
130
APPENDIX B: DATA COLLECTION QUESTIONNAIRE
DETERMINANTS DE L’INVESTISSEMENT DIRECT ETRANGER EN CÔTE
D’IVOIRE
DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN CÔTE D’IVOIRE
----------------------------------------------------------------------------------------------------------------------------------------CHARACTERISTICS DE LA PERSONNE INTERROGEE
CHARACTERISTICS OF THE RESPONDENT
QUALIFICATION:
POSTE/POSITION:
SOCIETE/ COMPANY or DEPARTEMENT MINISTERIEL/ GOVERNMENT
DEPARTMENT:
CONTACT:
Email:
=============================================================
========================
Utiliser les equivalences suivantes pour remplir le questionnaire/use the following
descriptors to complete the questionnaire:
0 = pas important/unimportant
1 = de moindre importance/ of little importance
2 = important
3 = tres important/ very important
=============================================================
========================
Cochez chaque element d’une croix (X) dans la case correspondente en vous servant
des equivalences ci-dessus/ mark each of the items with an X according to the above
descriptors.
1.Performances prometteuse de l’economie ivoirienne/ promising performance of the
Côte D’Ivoireeconomy.
131
0
1
2
3
2. Croissance du marche local/ growing local market.
0
1
2
3
2
3
2
3
3. Apports bon marche/cheaper input.
0
1
4. Travail bon marche/cheaper labor.
0
1
5. Niveau de cooperation avec the patronat des enterprises ivoirienne/co-operation
behavior of locally owned firms.
0
1
2
3
6.Situation geographique de la Côte D’Ivoire/geographical location of Côte D’Ivoire.
0
1
2
3
7. Infrastructure physique/ physical infrastructure.
0
1
2
3
8. Paisibles relations industrielles/peaceful industrial relations.
0
1
2
3
9. Motivations ou incitations d’investissement/ investment incentives.
0
1
2
10. Systems d’enseignement/educational standards.
132
3
0
1
2
3
11. Infrastructure financiere/financial infrastructure.
0
1
2
3
12. L’environnement legal pour l’investissement et les affaires/legal environment for
investment and business.
0
1
2
3
13. equitabilite dans le traittement entre les enterprises national et etrangeres/equal
treatment with locally owned firms.
0
1
2
3
2
3
14. Droits et quotas/ tarifs and quotas
0
1
15. Utiliser la Côte D’Ivoirecomme une base d’exportion/using Côte D’Ivoireas an
export base.
0
1
2
3
16.Taux de retour sur investissement prevu eleve en Côte D’Ivoire/ high expected
rate of return in supplying primarily in Côte D’Ivoire.
0
1
2
3
Individually, Out of the 16 items, Q3 “cheaper input (meaning raw material and semifinished products)”, Q4 “cheaper labor”, Q5 “level of cooperation with locally owned
firms”, Q12 “legal environment for investment and business”, Q13 “equal treatment
133
between locally owned firms and foreign companies”, and Q14 “tariffs and quotas”
measure the Côte D’Ivoirian legislation as determinants of FDI.
Items Q7 “physical infrastructure”, Q9 “investment incentives”, Q10 “educational
systems” and Q11 “financial infrastructure” measure the Côte D’Ivoirian
infrastructure and human resource/capital as determinants of FDI.
Items Q1 “promising performance of Côte D’Ivoireeconomy” and Q2 “growing local
market” measure the Côte D’Ivoirian macro-Economic environment/indicator as
determinants of FDI.
Items Q6 “geographical location of Côte D’Ivoire” and Q15 “using Côte D’Ivoireas
an export base” measure the Côte D’Ivoirian geographical position as determinants of
FDI.
And Items Q8 “peaceful industrial relations” and Q16 “high expected rate of return in
supplying primarily in Côte D’Ivoire” measure the Côte D’Ivoirian labour law as
determinants of FDI.
Merci d’avoir pris de votre temps pour remplir ce questionnaire et d’avoir ete une
aide appreciable dans l’achevement de mon memoire.
Thank you for taking your time to complete this questionnaire and assisting me to
complete my studies.
Yacouba Traore
Business School
Tshwane University of Technology
134
APPENDIX C: CROSS TABULATION QUALIFICATION AND VARIABLES
Qualification
1
Q1
Q2
Q3
Q4
Q5
Q6
Q7
Q8
Q9
2
Not important
Count
0
Column
N%
.0%
Little important
0
Important
3
Count
0
Column
N%
.0%
.0%
0
7
70.0%
Very Important
3
Not important
4
Count
0
Column
N%
.0%
.0%
0
2
100.0%
30.0%
0
0
.0%
Little important
1
Important
4
Very Important
5
Count
0
Column
N%
.0%
Count
0
Column
N%
.0%
.0%
1
3.0%
0
.0%
4
40.0%
16
48.5%
1
50.0%
.0%
6
60.0%
16
48.5%
1
50.0%
0
.0%
0
.0%
0
.0%
0
.0%
10.0%
0
.0%
0
.0%
4
12.1%
0
.0%
40.0%
2
100.0%
5
50.0%
16
48.5%
1
50.0%
5
50.0%
0
.0%
5
50.0%
13
39.4%
1
50.0%
Not important
1
10.0%
0
.0%
0
.0%
2
6.1%
0
.0%
Little important
1
10.0%
2
100.0%
1
10.0%
10
30.3%
0
.0%
Important
5
50.0%
0
.0%
7
70.0%
15
45.5%
2
100.0%
Very Important
3
30.0%
0
.0%
2
20.0%
6
18.2%
0
.0%
Not important
0
.0%
0
.0%
0
.0%
1
3.0%
0
.0%
Little important
1
10.0%
2
100.0%
1
10.0%
9
27.3%
0
.0%
Important
8
80.0%
0
.0%
6
60.0%
17
51.5%
2
100.0%
Very Important
1
10.0%
0
.0%
3
30.0%
6
18.2%
0
.0%
Not important
1
10.0%
0
.0%
0
.0%
0
.0%
0
.0%
Little important
0
.0%
1
50.0%
2
20.0%
10
30.3%
0
.0%
Important
3
30.0%
1
50.0%
3
30.0%
16
48.5%
2
100.0%
Very Important
6
60.0%
0
.0%
5
50.0%
7
21.2%
0
.0%
Not important
0
.0%
0
.0%
0
.0%
2
6.1%
1
50.0%
Little important
3
30.0%
1
50.0%
2
20.0%
3
9.1%
1
50.0%
Important
2
20.0%
0
.0%
4
40.0%
7
21.2%
0
.0%
Very Important
5
50.0%
1
50.0%
4
40.0%
21
63.6%
0
.0%
Not important
0
.0%
0
.0%
0
.0%
0
.0%
0
.0%
Little important
0
.0%
0
.0%
3
30.0%
3
9.1%
0
.0%
Important
4
40.0%
2
100.0%
5
50.0%
21
63.6%
2
100.0%
Very Important
6
60.0%
0
.0%
2
20.0%
9
27.3%
0
.0%
Not important
0
.0%
0
.0%
0
.0%
2
6.1%
0
.0%
Little important
2
20.0%
1
50.0%
3
30.0%
3
9.1%
0
.0%
Important
3
30.0%
1
50.0%
3
30.0%
21
63.6%
2
100.0%
Very Important
5
50.0%
0
.0%
4
40.0%
7
21.2%
0
.0%
Not important
0
.0%
0
.0%
0
.0%
0
.0%
0
.0%
135
Q10
Q11
Q12
Q13
Q14
Q15
Q16
Little important
1
10.0%
0
.0%
1
10.0%
8
24.2%
0
.0%
Important
3
30.0%
2
100.0%
6
60.0%
12
36.4%
1
50.0%
Very Important
6
60.0%
0
.0%
3
30.0%
13
39.4%
1
50.0%
Not important
1
10.0%
0
.0%
1
10.0%
2
6.1%
0
.0%
Little important
0
.0%
2
100.0%
7
70.0%
11
33.3%
0
.0%
Important
5
50.0%
0
.0%
2
20.0%
9
27.3%
0
.0%
Very Important
4
40.0%
0
.0%
0
.0%
11
33.3%
2
100.0%
Not impotant
0
.0%
0
.0%
1
10.0%
1
3.0%
0
.0%
Little important
1
10.0%
0
.0%
2
20.0%
9
27.3%
0
.0%
Important
4
40.0%
0
.0%
5
50.0%
16
48.5%
2
100.0%
Very Important
5
50.0%
2
100.0%
2
20.0%
7
21.2%
0
.0%
Not impotant
0
.0%
0
.0%
0
.0%
1
3.0%
0
.0%
Little important
1
10.0%
0
.0%
1
10.0%
7
21.2%
0
.0%
Important
4
40.0%
1
50.0%
5
50.0%
11
33.3%
0
.0%
Very Important
5
50.0%
1
50.0%
4
40.0%
14
42.4%
2
100.0%
Not impotant
1
10.0%
0
.0%
0
.0%
2
6.1%
0
.0%
Little important
1
10.0%
1
50.0%
0
.0%
7
21.2%
0
.0%
Important
5
50.0%
0
.0%
6
60.0%
16
48.5%
2
100.0%
Very Important
3
30.0%
1
50.0%
4
40.0%
8
24.2%
0
.0%
Not impotant
1
10.0%
1
50.0%
1
10.0%
1
3.0%
0
.0%
Little important
3
30.0%
0
.0%
2
20.0%
11
33.3%
0
.0%
Important
5
50.0%
1
50.0%
4
40.0%
14
42.4%
2
100.0%
Very Important
1
10.0%
0
.0%
3
30.0%
7
21.2%
0
.0%
Not impotant
0
.0%
0
.0%
0
.0%
2
6.1%
0
.0%
Little important
2
20.0%
1
50.0%
2
20.0%
4
12.1%
0
.0%
Important
4
40.0%
1
50.0%
7
70.0%
12
36.4%
2
100.0%
Very Important
4
40.0%
0
.0%
1
10.0%
15
45.5%
0
.0%
Not impotant
0
.0%
1
50.0%
0
.0%
0
.0%
0
.0%
Little important
3
30.0%
1
50.0%
0
.0%
6
18.2%
0
.0%
Important
2
20.0%
0
.0%
6
60.0%
18
54.5%
2
100.0%
Very Important
5
50.0%
0
.0%
4
40.0%
9
27.3%
0
.0%
136
APPENDIX D: CROSS TABULATION POSITION AND VARIABLES
position
1
Q1
Q2
Q3
Q4
Q5
Q6
Q7
Q8
Q9
137
2
3
Not impotant
Count
0
Column N %
.0%
Count
0
Column N %
.0%
Count
0
Column N %
.0%
Little important
0
.0%
1
5.3%
0
.0%
Important
21
61.8%
8
42.1%
1
25.0%
Very Important
13
38.2%
10
52.6%
3
75.0%
Not impotant
0
.0%
0
.0%
0
.0%
Little important
2
5.9%
2
10.5%
1
25.0%
Important
17
50.0%
9
47.4%
2
50.0%
Very Important
15
44.1%
8
42.1%
1
25.0%
Not impotant
3
8.8%
0
.0%
0
.0%
Little important
6
17.6%
8
42.1%
0
.0%
Important
17
50.0%
9
47.4%
3
75.0%
Very Important
8
23.5%
2
10.5%
1
25.0%
Not impotant
0
.0%
1
5.3%
0
.0%
Little important
7
20.6%
6
31.6%
0
.0%
Important
19
55.9%
11
57.9%
3
75.0%
Very Important
8
23.5%
1
5.3%
1
25.0%
Not impotant
0
.0%
1
5.3%
0
.0%
Little important
6
17.6%
7
36.8%
0
.0%
Important
16
47.1%
6
31.6%
3
75.0%
Very Important
12
35.3%
5
26.3%
1
25.0%
Not impotant
2
5.9%
1
5.3%
0
.0%
Little important
5
14.7%
3
15.8%
2
50.0%
Important
6
17.6%
5
26.3%
2
50.0%
Very Important
21
61.8%
10
52.6%
0
.0%
Not impotant
0
.0%
0
.0%
0
.0%
Little important
2
5.9%
3
15.8%
1
25.0%
Important
20
58.8%
13
68.4%
1
25.0%
Very Important
12
35.3%
3
15.8%
2
50.0%
Not impotant
1
2.9%
1
5.3%
0
.0%
Little important
6
17.6%
2
10.5%
1
25.0%
Important
15
44.1%
13
68.4%
2
50.0%
Very Important
12
35.3%
3
15.8%
1
25.0%
Not impotant
0
.0%
0
.0%
0
.0%
Little important
5
14.7%
5
26.3%
0
.0%
Important
14
41.2%
6
31.6%
4
100.0%
Q10
Q11
Q12
Q13
Q14
Q15
Q16
138
Very Important
15
44.1%
8
42.1%
0
.0%
Not impotant
1
2.9%
2
10.5%
1
25.0%
Little important
11
32.4%
7
36.8%
2
50.0%
Important
10
29.4%
6
31.6%
0
.0%
Very Important
12
35.3%
4
21.1%
1
25.0%
Not impotant
1
2.9%
1
5.3%
0
.0%
Little important
4
11.8%
7
36.8%
1
25.0%
Important
18
52.9%
8
42.1%
1
25.0%
Very Important
11
32.4%
3
15.8%
2
50.0%
Not impotant
1
2.9%
0
.0%
0
.0%
Little important
4
11.8%
5
26.3%
0
.0%
Important
16
47.1%
4
21.1%
1
25.0%
Very Important
13
38.2%
10
52.6%
3
75.0%
Not impotant
3
8.8%
0
.0%
0
.0%
Little important
6
17.6%
3
15.8%
0
.0%
Important
16
47.1%
11
57.9%
2
50.0%
Very Important
9
26.5%
5
26.3%
2
50.0%
Not impotant
3
8.8%
1
5.3%
0
.0%
Little important
10
29.4%
5
26.3%
1
25.0%
Important
15
44.1%
9
47.4%
2
50.0%
Very Important
6
17.6%
4
21.1%
1
25.0%
Not impotant
2
5.9%
0
.0%
0
.0%
Little important
3
8.8%
3
15.8%
3
75.0%
Important
14
41.2%
11
57.9%
1
25.0%
Very Important
15
44.1%
5
26.3%
0
.0%
Not impotant
1
2.9%
0
.0%
0
.0%
Little important
4
11.8%
5
26.3%
1
25.0%
Important
20
58.8%
7
36.8%
1
25.0%
Very Important
9
26.5%
7
36.8%
2
50.0%
APPENDIX E: CROSS TABULATION TYPE OF COMPANY AND
VARIABLES
type of company
Q1
Q2
Q3
Q4
139
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
Construction
Cou
Colum
nt
nN%
0
.0%
government
Cou
Colum
nt
nN%
0
.0%
manufacture
Cou
Colum
nt
nN%
0
.0%
mining
Cou
Colum
nt
nN%
0
.0%
service
Cou
Colum
nt
nN%
0
.0%
0
.0%
0
.0%
0
.0%
0
.0%
1
4.3%
0
.0%
6
66.7%
6
42.9%
7
70.0%
11
47.8%
1
100.0
%
3
33.3%
8
57.1%
3
30.0%
11
47.8%
0
.0%
0
.0%
0
.0%
0
.0%
0
.0%
0
.0%
0
.0%
0
.0%
2
20.0%
3
13.0%
1
100.0
%
.0%
5
55.6%
7
50.0%
5
50.0%
10
43.5%
4
44.4%
7
50.0%
3
30.0%
10
43.5%
0
1
100.0
%
0
.0%
1
7.1%
1
10.0%
0
.0%
0
.0%
5
55.6%
1
7.1%
2
20.0%
6
26.1%
0
.0%
2
22.2%
9
64.3%
4
40.0%
14
60.9%
0
.0%
2
22.2%
3
21.4%
3
30.0%
3
13.0%
0
.0%
0
.0%
1
7.1%
0
.0%
0
.0%
1
100.0
%
2
22.2%
1
7.1%
2
20.0%
7
30.4%
0
.0%
6
66.7%
10
71.4%
6
60.0%
11
47.8%
0
.0%
1
11.1%
2
14.3%
2
20.0%
5
21.7%
Q5
Q6
Q7
Q8
Q9
140
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
0
.0%
0
.0%
1
7.1%
0
.0%
0
.0%
0
.0%
3
33.3%
4
28.6%
1
10.0%
5
21.7%
1
100.0
%
.0%
3
33.3%
5
35.7%
4
40.0%
12
52.2%
3
33.3%
4
28.6%
5
50.0%
6
26.1%
0
1
100.0
%
0
.0%
1
7.1%
0
.0%
1
4.3%
0
.0%
1
11.1%
1
7.1%
3
30.0%
5
21.7%
0
.0%
3
33.3%
2
14.3%
1
10.0%
7
30.4%
0
.0%
5
55.6%
10
71.4%
6
60.0%
10
43.5%
0
.0%
0
.0%
0
.0%
0
.0%
0
.0%
0
.0%
1
11.1%
3
21.4%
0
.0%
2
8.7%
1
4
44.4%
6
42.9%
5
50.0%
18
78.3%
0
100.0
%
.0%
4
44.4%
5
35.7%
5
50.0%
3
13.0%
0
.0%
2
22.2%
0
.0%
0
.0%
0
.0%
0
.0%
1
11.1%
2
14.3%
2
20.0%
4
17.4%
1
4
44.4%
9
64.3%
4
40.0%
12
52.2%
0
100.0
%
.0%
2
22.2%
3
21.4%
4
40.0%
7
30.4%
0
.0%
0
.0%
0
.0%
0
.0%
0
.0%
0
.0%
2
22.2%
2
14.3%
2
20.0%
4
17.4%
0
.0%
3
33.3%
5
35.7%
2
20.0%
14
60.9%
1
100.0
%
4
44.4%
7
50.0%
6
60.0%
5
21.7%
Q1
0
Q1
1
Q1
2
Q1
3
Q1
4
141
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
0
.0%
0
.0%
2
14.3%
1
10.0%
1
4.3%
0
.0%
4
44.4%
3
21.4%
2
20.0%
11
47.8%
0
.0%
3
33.3%
5
35.7%
3
30.0%
5
21.7%
1
100.0
%
2
22.2%
4
28.6%
4
40.0%
6
26.1%
0
.0%
0
.0%
0
.0%
1
10.0%
1
4.3%
1
100.0
%
1
11.1%
4
28.6%
1
10.0%
5
21.7%
0
.0%
4
44.4%
7
50.0%
4
40.0%
12
52.2%
0
.0%
4
44.4%
3
21.4%
4
40.0%
5
21.7%
0
.0%
0
.0%
0
.0%
1
10.0%
0
.0%
0
.0%
1
11.1%
2
14.3%
1
10.0%
5
21.7%
1
2
22.2%
6
42.9%
4
40.0%
8
34.8%
0
100.0
%
.0%
6
66.7%
6
42.9%
4
40.0%
10
43.5%
0
.0%
0
.0%
1
7.1%
2
20.0%
0
.0%
1
100.0
%
1
11.1%
3
21.4%
1
10.0%
3
13.0%
0
.0%
3
33.3%
7
50.0%
5
50.0%
14
60.9%
0
.0%
5
55.6%
3
21.4%
2
20.0%
6
26.1%
0
.0%
1
11.1%
0
.0%
1
10.0%
2
8.7%
1
100.0
%
1
11.1%
2
14.3%
4
40.0%
8
34.8%
0
.0%
5
55.6%
7
50.0%
4
40.0%
10
43.5%
0
.0%
2
22.2%
5
35.7%
1
10.0%
3
13.0%
Q1
5
Q1
6
142
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
Not
impotan
t
Little
importa
nt
Importa
nt
Very
Importa
nt
1
100.0
%
0
.0%
0
.0%
1
10.0%
0
.0%
0
.0%
1
11.1%
3
21.4%
2
20.0%
3
13.0%
0
.0%
2
22.2%
7
50.0%
3
30.0%
14
60.9%
0
.0%
6
66.7%
4
28.6%
4
40.0%
6
26.1%
0
.0%
0
.0%
0
.0%
0
.0%
1
4.3%
0
.0%
1
11.1%
2
14.3%
4
40.0%
3
13.0%
0
.0%
5
55.6%
5
35.7%
4
40.0%
14
60.9%
1
100.0
%
3
33.3%
7
50.0%
2
20.0%
5
21.7%