The "global labor shortage" conceals profound disparities, even within the same country. While the healthcare, construction, and manufacturing sectors are affected by profound crises, hiring international talent isn't always the solution. Some countries have taken a different stand lately by choosing to prioritize foreign investment over international talent. What are their motivations?
Sharp rise in foreign investment
Countries like Canada, Australia, and Japan are making significant efforts to attract and keep foreign talent. Canada has set an ambitious goal of welcoming 500,000 new immigrants each year by 2025, which attracts many potential expatriates annually. Japan, on the other hand, is facing a massive demand for foreign workers, with a projected need for an additional 6.74 million workers by 2040, posing a major challenge for the country. These countries, along with others experiencing significant labor shortages, are grappling with a long-standing demographic crisis.
Not all countries are facing the same situation. African countries, in particular, are experiencing a different scenario. By 2021, 62% of Africans will be under the age of 25. This indicates ongoing demographic growth. Nigeria, the most populous country in Africa and an economic powerhouse is currently facing political delays that hinder its progress. Unemployment, especially among the youth, who are vital for the continent's development, is a significant issue worsened by the impact of Covid. Instead of relying on foreign talent, African countries prefer to invest in training their own citizens to develop their national talent pool. Kuwait and Indonesia have also chosen this path.
Africa
Egypt, Nigeria, Ethiopia, Mozambique, the Democratic Republic of Congo (DRC), Morocco, South Africa, Congo, Ghana, and Senegal. The 2021 report of the United Nations Conference on Trade and Development (UNCTAD) has published the list of the 10 African countries that received the most foreign direct investment (FDI) in 2021. Among them are the African powers: Nigeria, the continent's leading power, Egypt, South Africa and Morocco. In 2021, investment in Africa reached 83 billion dollars, double the figure for 2020. This record can only be partly explained by the fact that the pandemic is catching up.
The United Nations Conference on Trade and Development (UNCTAD) has released its 2021 report, which includes a list of the top 10 African countries that received the highest amount of foreign direct investment (FDI) in that year. The countries on the list are Egypt, Nigeria, Ethiopia, Mozambique, the Democratic Republic of Congo (DRC), Morocco, South Africa, Congo, Ghana, and Senegal. Among them are the African powers: Nigeria, the continent's leading power, Egypt, South Africa and Morocco. In 2021, investment in Africa reached $83 billion, which is twice the amount compared to 2020. This record can only be partly explained by the fact that the continent has been catching up since the pandemic.
Powerful African nations are relying on foreign investment to boost their economies. Recognizing their potential, especially in terms of natural resources, governments view foreign investment as a means to address the issue of unemployment, which hinders economic advancement. Instead of relying on foreign talent, these countries prefer to invest in training and enhancing their own skilled workforce through robust education programs. For example, South Africa is known for its prestigious IT schools and universities that train some of the continent's top professionals. Senegal and Morocco also boast excellent training institutions, particularly in fields like artificial intelligence, telecommunications, security, and information systems.
Retaining national talent and attracting foreign investment
There are numerous training programs and professions that are in high demand globally. The challenge lies in two aspects: attracting foreign direct investment (FDI) while also retaining their national talent. FDI plays a crucial role as it enables the implementation of large-scale projects that generate employment opportunities and motivates African talent to stay within their countries. In 2021, South Africa made significant announcements regarding two major projects. The first involves an African campus funded by a billion-dollar investment from the American company Vantage Data Centers, while the second is a clean energy project sponsored by Hive Energy, a British company, with an investment of 4.6 billion dollars.
Morocco is engaged in a significant project worth $20 billion involving solar and wind energy supply to the UK through a network of undersea cables spanning 3,800 kilometers. In 2021, Morocco experienced a 52% increase in foreign direct investment (FDI), totaling $2.2 billion. Large-scale projects are multiplying on the African continent. Investment projects in Tanzania and Uganda tripled in 2021. Ethiopia, too, is attracting significant attention, particularly from China. FDI in Ethiopia has soared by 79%, reaching $4.3 billion in 2021. China has been the leading investor in Ethiopia for several years, with its ambitious "Road Belt Initiative" launched in 2014. This initiative aims to establish a new "Silk Road Economic Belt" and enhance China's influence and presence in global trade. Over 60 countries, including around 20 African nations, have joined this program.
Kuwait
Kuwait's government has adopted a strategy that combines job creation with foreign investment. This approach aims to attract foreign capital while ensuring employment opportunities for Kuwaiti citizens. Foreign direct investment (FDI) plays a central role in Kuwait's New Kuwait Vision 2035, a development plan introduced in 2017. Similar to Dubai 2030 and Saudi Arabia's Vision 2030, this plan aims to diversify the Kuwaiti economy and transform the country into a thriving financial and economic hub. To encourage more foreign investment, the government is considering opening up the real estate sector. A ministerial committee has proposed allowing non-Kuwaitis to purchase homes for investment purposes. As of 2020, FDI in Kuwait is primarily concentrated in the telecommunications sector (around 20.6%), investment companies (20%), banks (12.8%), and industry (9.6%).
Government statistics indicate that approximately 13,000 buildings (around 320,000 flats) would be impacted by investment. Many of these properties are currently under mortgages with banks. According to the proposal, foreign investors would need to be permanent residents without a criminal record and not already own a flat. The size of the flat would be limited to 350 square meters. The Ministry of Justice will make the final decision on whether to allow foreign investment in this sector. Supporters of the project believe that foreign investment could revive the struggling property sector and contribute to economic growth by injecting funds. A decision is expected once the new government is formed, with National Assembly elections scheduled for 6th June.
Indonesia
The country is aiming to become one of the top 5 global economic powers and sees foreign direct investment (FDI) as a key driver. FDI has increased by more than 20% in the first quarter of 2023, bringing relief to the government, which was facing the threat of recession at the end of 2022. The country heavily relied on exporting its natural resources to avoid economic decline, but unfortunately, unemployment rates have risen significantly. Official statistics indicate that only 5.83% of the population will be unemployed in 2022, but the actual figure is likely much higher. Instead of relying on foreign talent, Indonesia has chosen to prioritize foreign capital to stimulate its economy. The government has opened up more than 200 sectors, including industry, energy, and telecommunications, to foreign investment. According to the "positive investment list," only one sector has no restrictions on foreign investment, while limitations apply to others based on specific criteria.
The government has identified priority sectors based on specific criteria, such as being labor-intensive, capital-intensive, export-oriented, and pioneering industries like metals, oil, and renewable energies. These criteria were chosen for a reason. The industrial sector has been severely affected by the economic downturn. According to the South Korean newspaper Korean Tempo, nearly 45,000 workers were laid off between January and September 2022, with the pace of job cuts increasing from July onwards. Manufacturing and textiles are particularly vulnerable industries. In April 2020, the government introduced a program called "Pre-employment" with the aim of helping laid-off workers transition to new trades through training rather than providing compensation. To attract foreign investment, the government is offering various tax incentives, with potential reductions of up to 50% based on the nature and duration of the investment. Additionally, specific tax deductions are being promoted, especially in the textiles, automotive, and oil sectors.
Conclusion
For these countries, promoting foreign investment is also a way to address the issue of brain drain. The governments believe that economic and social development can only be achieved with the contribution of their own people. These individuals are eager to contribute to the growth of their countries, but they also demand greater political stability, as seen in countries like South Africa, the Democratic Republic of Congo (DRC), and Indonesia. There are concerns about the potential risks associated with excessive liberalization of investment. Ethiopia, a major hub for Chinese trade, and Uganda, which has ties to the French oil group TotalEnergie and its controversial oil megaproject, have attracted attention. Critics have raised concerns about human rights violations and environmental disasters. Despite a dismissal by the Paris court in March 2023, opponents of the project continue their fight. They support foreign investment but insist on implementing adequate controls and safeguards.