Increasing Agricultural Productivity:
Encouraging Foreign Direct Investments in the COMCEC Region
53
 Cost factors, which relate to objective, quantitative operating costs; and
 Quality factors, which are based on investors’ subjective perceptions of qualitative
operating conditions and are formed by the actual experiences of the investor and other
investors who already have invested in one of the potential regions. 75
Comparing the quantitative operating costs and qualitative operating conditions associated with
agriculture in the COMCEC Region enables to identify locations with a strong competitive
position, relative to other agriculture-competing locations. This can subsequently be
incorporated into inward investment promotion strategies and marketing efforts. Such
operating costs and conditions can be measured by site selection factors, which function as
determinants of FDI.76 Three broad determinants are necessary in order to attract FDI:
 Economic conditions prevalent in the economy (e.g. market, resources and
competitiveness);
 Government policies towards the private sector in general and FDI in particular (e.g.
macro policies, private sector, trade and industry and FDI policies); and
 Investment strategies of the foreign investors (e.g. risk perception and location, sourcing
and integration transfer).
Though such broad groupings of FDI site selection factors are not particularly associated with
the agricultural sector, these are linked with FDI in general. Agriculture-specific FDI requires
additional site selection factors which are prone to the industry’s specific needs. It should be
stressed that several of such FDI determinants need to be addressed in order for any location to
be competitive and an attractive destination for FDI.
Table 21 provides an overview of the broader FDI determinant categories and corresponding
site selection criteria that corporate investors use to assess potential locations. This table does
not provide an exhaustive list of site selection factors but rather outlines which factors
corporate investors adhere to and how investment climates are valued. As becomes evident,
economic conditions are either measured in quantitative cost factors as well as subjective
quality factors77.
Site selection criteria related to host country policies and investor strategies are generally
harder to measure in quantitative terms and are more frequently evaluated through investors’
perceptions. Indeed, from the investor perspective, its own perceptions of the country’s risk
profile, it strategies on location and sourcing of inputs, the forging of strategic alliance and
availability of key inputs are among the key considerations that form part of its investment
decision.78 Economic conditions mainly refer to the availability and cost of suitably skilled
manpower and quality of availability of physical infrastructure, which are thoroughly
considered by the investor prior to undertaking an investment.
75 FAO 2008, MIGA, 2007.
76 OIC, 2009.
77 MIGA, 2007.
78 OIC, 2009.