Thursday, July 26, 2007

More Prospect for Private Sector Investment

The peace and stability prevailing in Sierra Leone is bound to attract donor support and confidence in the economy. In spite of the fact that the country is hoping for a successful presidential and parliamentary elections, the political will on the part of the next government in creating the enabling environment for private sector investment will undoubtedly yield dividends. The present effort to improve business oriented sectors like the energy sector needs to be fast-tracked so as to crate more positive impact on business concerns by reducing operational costs.

It is not an exaggeration to say that these are not the best times for business activities in general as there is every reason to believe that the business climate will change for the better in the ensuing years. When all favourable conditions are put in place, there is a need to encourage more private sector investment so that poor Sierra Leoneans will have a better life. There will be more job creation and poverty reduction as contained in the 2007 national budget. This spells out the best way to determine the improvement of trade as stated in the statement of economic and financial policies.

The allocation of more resources to support pro-poor priorities in the national budget is the best way to determine the level of commitment the succeeding government will show to the poor and vulnerable. The content of the country’s 2007 budget states that foreign donors fund 42.73% in 2007. This presents a dependency syndrome of government’s on our donor partners.

Also, of the total domestic revenue of Le 674, 908, 000,000 (six hundred and eight million Leones). This shows that there is a room for improvement on domestic revenue.

One way to explore the possibilities is to encourage more private sector investment rather than continuing to depend on donors, most of whose support are recycled, while others are stiff grants that have become more burdensome.

It is good that government encourages investment in the mining sector so as to increase the volume of resources it accrues from the mining sector from a current paltry of approximately 4.5% to at least 45% in the next two years. Government can also review all mining concessions to multinational cooperation so that the country can generate more resources to the national budget. This will not only bring a success to the economy but also attract investors mostly in the private sector to acquire wealth in that sector and contribute to national development.

It is necessary also to improve the agriculture sector which is considered to be the largest in the country’s economy. It’s good that subsidies be provided in the forum of credit for our local farmers, and also guaranteed price mechanism for local agricultural products and ease access to markets. One strategy to enhance this is to invest on the rehabilitation and construction of roads as well as the energy and power sector, and also protection strategies for local products are pursued though the imposition of appropriate tariffs on selected import items.

Sierra Leone is having lots of agricultural products which if accessible will contribute greatly to reduce hunger and improve economic growth. The country is having some products that are not much accessible; this is perhaps why there is continuous increase in price of most local commodities. Items such as palm oil required much attention as a way to reduce hunger and accelerate friendly investment ground in the country. The investors on the other side will see how serious the country is and it will give them the urge to come in and help in our poverty reduction drive.

Likewise, it will be encouraging to invest on the level of human capital. Thus, throughout the economy there will be incentives for people to invest in their human capital attainment, and thus the societal level of human capital investment will increase.

The result is that as more private sector development is encouraged and others out there will not be reluctant to come on board as they will see the realities on the ground. The country will then have high levels of human capital incentives to invest in more human capital due to positive spillovers, high level of human investment and high levels of human capital. This positive re-enforcement mechanism can however also work in the reverse thus creating a trap. If a society like ours is having low levels of human capital attainment, the positive spillovers will be negligible; and the incentives for further capital attainment will be low.

Due to lack of incentives, human capital will be low resulting in a continued low level of human capital for the society. However, in Sierra Leone since human capital is an important determination of economic growth, the society which is been having low human capital is moving slowly to develop while it is been trapped in a cycle of poverty.

This writer’s contention is that, perhaps, financial sector development that will attract private sector investment, functions much the same way that human capital attainment functions.

A lack of financial institutions in an economy will make it very difficult for people to survive. One notion that is often heard when one discusses the lack of financial institutions in economically depressed areas is that, people in low-income areas simply do not save.

And this is why there is lack of financial institutions comprising of those established by both private sector and government. Some economists consider this notion that the causations is on the other way round. People in poorer areas do not save at high levels due to lack of financial institutions. It can also be said that people in economically disadvantaged areas do save. They simply do not save via financial institutions.

This savings usually takes the form of literally saving money in a cookie jar or under the mattress. We should not forget also to improve on financial institutions in Sierra Leone as they play an active and major role in the development for any country across the globe, most especially in Sierra Leone which is suffering from the pains of poverty. It is therefore required to develop financial institutors and encourage investment in that area so that the country will attain its economic growth.

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