Looking at the restrictions that comes with foreign investments from China and other powerful countries leading to the imposition of foreign policies usually impoverishing African countries.
The conditional restrictions do impose foreign policies thereby hindering efforts of Smaller countries in Africa to maintain control over their economy. Therefore, how can they manage such a situation: economic policies specifically.
When African countries opt for foreign investment it is usually because they are already impoverished. By stimulating their economic development and economic growth with foreign investment they sede the control of their economy automatically. To combat this, African countries should present their economic plan (how they plan to utilise the investment, and what the investment is for), this to some extent if accepted by China and the West when they invest will give African countries some control. The impositions are intended at ensuring that the investment will be fruitful to the investors in terms of returns. The reason why a country would invest on another is because they seek profits on the investment too hence justifying why they would suggest economic policy reforms and structural adjustments accompanying their investment funds. To have full control of the economy African countries should avoid borrowing in the first place. Negative economic conditions of African states necessitates borrowing. By borrowing they give up some control of their economy. However, the countries are still in charge of their economy to facilitate the imposed restrictions so in some sense they are still in control of their economy, just that the direction of their executed policies has not been thought out by them but stems from external epistemic communities.
It is the expectation that the flow of Foreign Investment (FI) has declined during 2020. The flow of FI is not expected to recover and return to old levels before the end of next year. Despite the risk (portfolio investment in particular) countries compete to attract FI. The FI is welcome, especially, in small countries where resources are lacking/insufficient.
To limit the risk associated with the flow of foreign investment, I think countries need to:
· Define their national priorities down to the sectoral level.
· Enhance and solidify banking regulation.
· Implement comprehensive reform of the tax laws (Fight tax evasion and limit tax avoidance).
· Improve transparency of bidding processes (Fight corruption)
· Rely on public-private partnership (PPP) in infrastructure projects, but strictly regulate them.
· Improve financial markets (improve access to financial resources and reduce the need for FI).
In short, regulations and the implementation of these regulations is the key to protect the national economy against shocks result from FI. The source of FI is as important as well.
During a decade of strong Chinese investment, Africa experienced unprecedented growth. Foreign investment is always good, if accompanied by timely regulatory policies.
I don't see how a foreign country can impose restrictions on FDI to the disadvantage of the host country. Such a restriction could be very risky for China because the host country can cease the investment in the future (example, Zimbabwe and white farmers).
Most of the restriction by China is on loans and grants which is different from FDI.
Countries irrespective of their size enter into agreements with a view of diversifying their GDP and related factors. Their exposure to a variety of sources for assistance should be used as a leveraging power in order to enhance as well as protecting their economic independence, agreements with the prospective investor should be based on mutual trust and should be honoured to the latter. Terms and agreements should be affordable and not beyond the country's ability to comply.
Strengthening comparative and competitive advantages of the products of local producers is perhaps one of the best ways.
Though the question is complex, but a very vital step in maintaining control of the economy is to reduce corruption. Not the lip service or platitude employed by many African governments. The aid they receive from the West or East ends up in the pockets of a few, the aid collected ostensibly for infrastructure is used to acquire property abroad. Hence there is no infrastructure to power small and medium scale enterprises which is the power house of every economy. The people giving the aid know this but do not care because, who wouldn't like it when they get more interest from loans given?
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