By Amin Kef Sesay
Frustrated foreign Investor Kim’s suicide note reads: “If the Ministry of Fisheries and Marine Resources (MFMR) were to be operated in this way, it could benefit individuals but the country’s development would be set back. With my death today, I want to let the world know about my injustice…”.
Commenting on this sad, tragic, unfortunate incident in our country, The Calabash can only state that if the institutional structure governing the enforcement of property rights, of commercial contracts, and of the legal framework for economic activity more broadly is weak or if corruption is important, not only are the costs of doing business magnified but the risks associated with capital investment are increased. Both outcomes contribute to lowering the risk-adjusted return to capital.
The upshot is that favourable endowments of labor and natural resources are not enough to generate a high return to investment in physical capital.
If Government can provide healthy and well-trained labor forces, good infrastructure, and high-quality governance, then markets will provide the physical capital that will allow an increase in living standards.
Because of this failure, FDI flows into the country and Africa generally continue to languish. In searching for the reasons for this stagnation, The Calabash has dug deep into the investment environment and uncovered a maze of second-order administrative barriers to the implementation and operations of investments. These barriers affect both domestic and foreign private investors, they also have a disproportionate impact on foreign investors who usually have higher visibility and who tend to adhere more strictly to legal requirements.
With the hope of promoting private sector development, the Government avows that it has liberalized the business climate through undertaking a sweeping change of policy in the past decade to liberalize and open the economy.
To varying degrees, attention has been focused on areas such as
Creating a stable macroeconomic environment; Liberalizing controls on foreign exchange transactions; Liberalizing price, licensing, and other controls on both domestic markets and international trade; Rationalizing tax and tariff structures, including reduction of
average rates; Liberalizing investment laws and restrictions; and actively promoting foreign investment and exports.
However, despite these and other improvement, the suicide of Kim suggests that old habits die hard.
In a country with a long history of Government’s intervention and administrative direction over economic decisions, the business environment suffers from complex, overlapping controls beyond those easily identified as constraints on investment.
The persistence of these “second-tier” administrative barriers to investment, combined with a lack of institutional capacity in the Government agencies responsible for them often translates into a situation where these mere procedural tasks become major obstacles to investment. Such difficulties can often be overcome only after long delays or with extraordinary payments.
This discourages investors, even many who may have made a preliminary decision to commit to the country.
“One-stop shop” established to streamline investment procedures, has been a big disappointment by failing to improve the situation and made it worse.
The reality is far removed from the incantations of Government officials that they are now “open and friendly” to private investors. The country still needs more comprehensive reform efforts, combined with radical overhauls of the way in which Government agencies operate.
At an implementation level, many officials remain distrustful of private businesspeople or at least view them simply as a source of
supplemental income generation.
Both views can mean the persistence of otherwise lower-level irritants to business formation and operation, a persistence that often magnifies the irritants to the point of constraints in an overall investment climate that remains hostile.
In many cases the “old” attitudes still prevail among bureaucrats, who assert their authority through less direct controls, such as their ability to interrupt business operations for otherwise routine clearances, inspections, or verifications.
In this environment, existing private businesses commonly complain of administrative “harassment ” to undertake an investment, from registering a company to starting operations, in full compliance with existing laws and regulations.
In a tweeter post by popular human rights Lawyer, Augustine Sorie –Sengbe Marrah, he said, “Today, a former client took his life on allegations of injustice at the Ministry of Fisheries. Mr Kim was a good businessman who helped countless Sierra Leoneans. In my work, I hear about injustices everyday till I get sick to the stomach. Our Judiciary needs to do a lot more!”
