A new paper investigates the effect of foreign presence on the productive of manufacturing industries in Ghana :
.."We find that the presence of foreign firms in a sector has a negative effect on the productivity of domestically owned firms, but a positive effect on most foreign owned firms, regardless of the productivity measure. Interestingly, the effect of foreign ownership per se is ambiguous and depends on the model specification. Unlike in recent work on China, it does not appear that the negative level effect from foreign ownership is compensated for by a positive growth effect, at least not in any reasonable time period. We also find that, after controlling for labor quality and unobserved heterogeneity, foreign firms do not pay higher wages in Ghana. However, they also do not appear to have a negative effect on wages paid by domestic firms."In truth none of this surprising, since much of the literature does acknowledge that spillovers from new FDI to domestic firms are not inevitable. The right conditions need to exist for them to occur. A reason why I remain unconvinced by the new Zambian Shenzhen . The key questions relates to the nature of these conditions are, and whether countries like Ghana or Zambia possess those conditions. Two of these conditions come to mind :
First, for positive spillovers to occur there has to be a smaller technological gap between domestic and FDI firms. It therefore follows that FDI will not generate the spillovers unless it is placed within a broader economic policy context. Investment in basic infrastructure, education and training, and encouragement of Zambian firms to invest in technological development becomes crucial. These policies will do a great deal in increasing Zambian firms technological capability, and hence make it easier for the nation to benefit from spillovers.
Secondly, there needs to an institutional framework that prevents state capture from domestic firms. As this recent paper from CDG notes, inflence-peddling in Zambia has affected industrial competition and ultimately productivity. If domestic firms (e.g. ZAMTEL , ZESCO) can be prevented from influence-peddling and be subjected to more competition, they may be more willing to go into partnership with foreign firms. Part of that influence peddling is to eliminate the practice of "parastatal madness" for government owned firms, although the problem is not restricted to parastatals.
I am sure there are other conditions, and would be interested to hear what others think!