INVESTMENT COMPASS TOOL FOR BENCHMARKING FDI DEVELOPED BY UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD) PRESENTED BY ENGR. MUSTAFA BELLO,FNSE. EXECUTIVE SECRETARY NIGERIAN INVESTMENT PROMOTION COMMISSION

Introduction UNCTAD’s Investment compass is a data viewing site that has 50 countries in the investment compass; It is an interactive tool for analyzing the main economic and policy determinants of the investment environment; It permits comparisons between countries, between a country and a region, and between a country and a best performer. The tool comprises of 60 indicators based on international statistics and on special national surveys conducted by UNCTAD.

METHODOLOGY The investment compass has selected and developed key indicators considered to have an influence on the investment environment; These indicators provide comparative measures to benchmark foreign direct investment (FDI); The Investment Compass provides results in terms of areas, which are broken into groups of variables, these variables are also broken into key indicators; The Investment Compass shows in graphical form - a hexagon - a country’s FDI benchmark organized around six areas namely;

Resource Assets Infrastructure Operating Cost Economic Performance and Governance Taxation and Incentives Regulatory Framework

MODEL STRUCTURE The hexagon shows the six areas used as indicators to varying degree. They have been arranged according to the degree of impact of the National Policy i.e. from the lowest policy action to the highest policy action. Multi-stage process, the Investment Compass provides results in terms of areas, which are broken down into groups of variables; as will be shown on subsequent slides

MODEL STRUCTURE: RESOURCE ASSETS AVAILABILITY OF RAW MATERIALS HUMAN CAPITALMARKET SIZE

MODEL STRUCTURE CONTINUES INFRASTRUCTURE INFORMATION & COMMUNICATION TECHNOLOGY BASIC INFRASTRUCTURE

MODEL STRUCTURE CONTINUES OPERATING COSTS LABOUR COSTS OTHER COSTS

MODEL STRUCTURE CONTINUES ECONOMIC PERFORMANCE AND GOVERNANCE MACROECONOMIC PERFORMANCE GOVERNANCE

MODEL STRUCTURE CONTINUES TAXATION BUSINESS AND PROFESSIONAL SERVICES (PV TAX) ICT (PV TAX) TOURISM (PV TAX) MANUFACTURING (PV TAX)

MODEL STRUCTURE CONTINUES REGULATORY FRAMEWORK ENTRYOPERATIONS PROTECTIONS AND EXIT

To demonstrate the way it works I have tried to compare Nigeria with both Egypt and Malaysia. Nigeria and South Africa comparison would have been the best due to the fact that the two countries attract more than 40% of the FDI that comes to Africa.

CONCLUSION The result of the UNCTAD’s Investment Compass of 2002 seems to rate Nigeria fairly well if the democratic system that was inaugurated in 1999 after sixteen years of military rule and its negative image is put into consideration. The results of Nigeria-Egypt shows that Nigerian investment environment was preferable than Egypt, and thus attracted FDI to the tune of USD22 billion as against Egypt with USD 20 billion. Unlike the Nigeria-Egypt, Nigeria-Malaysia result shows that Malaysia was a more preferred environment with influx of FDI to the tune of USD 56 billion.

RECOMMENDATION Nigeria tax system is very cumbersome. We need to have a policy that should address direct and indirect present value tax (PV Tax) in at least the following sectors; Business and Professional Services, ICT, Tourism, and Manufacturing. Both these direct and indirect PV Tax should then be added to give one value per sector. These values can be used to assess tax impact on investors return or a tax burden on project cash flow. Finally, we need to improve on our security system in order to attract more investors into the country. Thank you.