From Africa Recovery, Vol.12#2 (November 1998), Briefs page

Private-sector growth attracts foreign capital, says IMF

In the more intensely competitive environment for foreign capital flows, "African governments must give increased emphasis to policies that foster the private sector," stated Mr. J.B. Zulu, International Monetary Fund (IMF) Special Representative to the UN, during an informal briefing at the UN in New York on reform of the international monetary system. This is because "a strong domestic private sector attracts the foreign private sector," he explained.

This recommendation elicited a strong response from African ambassadors, who asked Mr. Zulu to clarify how these policies could be applied in the short run in cases where countries lack the middle class to sustain private-sector development and are unlikely to develop a sizable private sector for a long time. Responding that the appropriate policy prescription would be the same, Mr. Zulu rested his argument on the fact that the natural business incentive is strong throughout Africa, but often remains untapped in countries "where resources have shifted to the so-called government sector." Even for countries with a negligible private sector, Mr. Zulu stated, "good policies attract private-sector investment from domestic and foreign sources. Short-term, medium-term and long-term are words that no longer exist because economic interdependence is intensifying every day."

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