A decade after the African island nation graduated from least developed country status, it now seeks to diversify foreign investment flows and strengthen local producer linkages.
A thriving tourism industry in Cabo Verde means growth for some of the islands that make up the archipelago, but not all, and not equally.
There is significant opportunity to expand tourism and actively pursue investors interested in capitalizing on the sunny side of Capo Verde’s economy, a recent UNCTAD analysis of the country’s investment climate shows.
Home to more than half a million citizens – and with a large diaspora – Cabo Verde is well known among European tourists for offering the archetypal beach holiday.
This tourism industry, together with fisheries, accounts for 50% of the country’s gross domestic product and 80% of its exports. It employs 40% of its work force.
The two sectors have strong foreign investor participation, but the benefits have not reached all citizens, the report notes.
UNCTAD’s newly published Investment Policy Review (IPR) of Cabo Verde shows investment and economic development are concentrated in three of the country’s 10 islands.
The local private sector, largely composed of small and medium-sized enterprises, has not found its way into the value chain of larger investors, primarily all-inclusive tourist resorts, it indicates.
While the country has made progress in several areas, including reducing poverty, fostering gender equality, and improving child and maternal health, social tensions have emerged around issues of housing and employment.
“UNCTAD’s IPR is a strategic reference for improving our country’s business environment, for improving our legal framework and attracting more and better FDI,” said Fernando Elisio Freire, Minister of State, Parliamentary Affairs and the Presidency of the Council of Ministers and Minister of Sports for Cabo Verde, at the launch of the report.
“It will help the government transform Cabo Verde and achieve sustainable and inclusive growth.”
According to UNCTAD’s investment and enterprise director, James Zhan, “the expansion of the tourism sector into new segments beyond the all-inclusive model can potentially directly benefit poor and vulnerable groups, as well as women.”
The review makes several recommendations to help Cabo Verde reform its business climate.
It also outlines how government can better use foreign investment to foster increased economic diversification, generate additional jobs and better linkages with the local economy.
Cultivate a desire to invest
One measure to improve this situation, identified in the IPR, is for the government to take a more pro-active stance to attracting the type of investors it needs.
“The IPR encourages the government to move from passively awaiting investor proposals to actively targeting foreign investors to get the best deal for the country,” said UNCTAD’s head of investment policies, Joerg Weber, at the launch on 4 December.
More targeted policy interventions are needed to enhance the tourism market and attract investors to niche tourism sectors, such as cultural, adventure, health and events tourism.
This should be pursued as part of a broader strategy to transform Cabo Verde into a lead destination for sustainable tourism, the report indicates.
Summing up Cabo Verde’s new orientation towards investors, Ana Barber, President of Cabo Verde’s investment promotion agency, TradeInvest, said the country needs more proactive destination marketing and profiling of its export and investment opportunities.
“We have started mapping the country’s opportunities and need to offer aftercare services to investors and be a partner throughout the lifetime of the investment.”
“We are open for business as an Atlantic hub. The IPR is aligned with the Government’s priorities and we look forward to working with UNCTAD to implement its recommendations.”
Ultimately, the report finds that Cabo Verde needs to clearly articulate what type of investors and investment it wants to attract and develop local capacity to benefit from FDI’s positive spill-overs.
To date, UNCTAD has supported 46 developing countries and economies in transition by conducting investment policy reviews. It has also provided technical support to implement the reviews’ recommendations.
Studies show the reviews have helped countries attract and benefit more from increased FDI, while improving business climates.
