New investment law on the way

Windhoek – The Namibian government is in the process of drafting a new investment bill in order to ensure that foreign investment has significant benefits to the country and government does not approve any proposals that are contrary to national interest, the Minister of Finance Calle Schlettwein has announced.

He said that there is evidence that foreign investment can have both positive and negative effects, but added that government must have a flexible approach to ensure that national interest is protected.

“The Bill also makes provision for certain economic activities that are reserved for the Namibian Government and the Namibian private sector.  However, the Bill is flexible in that the Minister may issue regulation to prioritise specific industries and the terms of conditions to which industries must comply,” he added.

The Minister said that foreign investment brings many benefits, such as supporting existing jobs and creating new ones, encouraging innovation, introducing new technologies and skills, bringing access to overseas markets and promoting competition amongst industries. 

He pointed out that Government also recognised community concerns about foreign ownership of certain Namibian assets and would continue to enhance the wellbeing of Namibians by supporting economic growth and prosperity. 

“Experience shows that for foreign investment to play a positive role, the government must have the right and powers to regulate the terms of their entry and operations.  This is exactly the philosophy that we will adopt with the reform of the Foreign Investment Act into a more flexible approach by reviewing both domestic and foreign investment proposals against the national interest case-by-case,” he emphasised.

Schlettwein said that Government looked forward to finalising the Bill soon and to interact with the private sector on the intention and consequences the law.

Furthermore, the Finance Minister said that Government has started to review the current Export Processing Zones regime that might be replaced with other alternatives that are more effective and less costly.

Firms in the EPZ regime are currently exempted from paying import duties and VAT on machinery, equipment and raw material imports for manufacturing purposes and paying corporate tax.

“In this regard, the Ministry of Industrialisation, Trade and SME Development and the Ministry of Finance are working jointly on a customized incentive regime that will stimulate the Namibian economy in the most effective way.  Much progress has been achieved so far and we look forward to interact with the private sector as well,” he said.

Schlettwein said that government’s decision was based on a study that was conducted in 2013, which found that Namibia tax incentives might have induced some foreign companies to invest in Namibia. 

“This finding is based mainly on the evidence from the official statistics that indicated an expansion of manufacturing exports over the review period and the fact that this sector is targeted by special incentives.  The availability of natural resources in abundance might have been the key driver of foreign investment in Namibia,” he reckoned.

He said that offering tax incentives to attract foreign and/or domestic direct investment is a widespread phenomenon and Namibia offers both tax and non-tax incentives to existing and new manufacturing enterprises after their registration. 

“Whether tax incentives were instrumental in attracting FDI, the study concludes that the provision of fiscal incentives might have been costly, given that investors would have come to Namibia anyway even if incentives were not offered to them.  This finding seems to suggest that factors other than fiscal incentives might have played a more prominent role in the attraction of FDI that came to Namibia during the period reviewed by this study,” he said. 

The study also indicates that factors, such as the availability of infrastructure, the functioning of Government and the rigidity of the employment market were not regarded as significant factors to influence the investment decision-making and further confirmed that the availability of natural resources, the attractiveness of the Namibian market in terms of political stability and certainty of Government investment policies has played a key role in attracting FDI to Namibia.

Schlettwein further addressed the ‘Growth at Home’ strategy, saying that significant strides have been made in materialising the three interventions by the Ministry of Industrialisation, Trade and SME Development through the Special Industrialization Programme and the impending establishment of the Namibia Industrial Development Agency (NIDA).

The first intervention is to support value addition, upgrading and economic diversification through a needs oriented and comprehensive approach to industrial development and structural transformation of the Namibian economy towards more productive economic activities. 

The second approach is to promote market access at home and abroad in order to stimulate the development of local industries, and create conditions that will boost Namibian exports on international markets, such as the Free Trade Area with SADC and the Economic Partnership Agreement (EPA) with the European Union. 

The third intervention that are aimed at promoting a favourable investment and business climate, which include reforms of industrial infrastructure, review of the Small and Medium-sized Enterprises (SME) Policy, legislative amendments to the Foreign Investment Act and the Export Processing Zones Act, the re-design of registration processes for businesses and intellectual property rights, and the establishment of a regular Public Private Dialogue Platform.

June 2015
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