Foreign Direct Investment in Blantyre, Malawi - Millennium Cities ...

“medium” investments scored relatively lower on the composite measures. If an investment was
considered highly feasible, yet scored “low” in its potential impact on the development of the country, it
was placed in the “low” region. The same principle was followed if the industry scored “high” in impact
and “low” in feasibility. The difficulty in comparing different industries, coupled with a dearth of
quantitative data, necessitated that this evaluation be qualitative in nature. This is also reflected by the fact
that not all factors under feasibility and impact had significant information to be included for all industries.
The Feasibility component of the framework is comprised of the following factors:
Demand Factors
• Excess demand - Does demand for the good exceed the available supply?
• Demand trend - What does future demand look like?
• Price sensitivity - How will changes in the price of the good affect demand?
Supply Factors
• Technological requirement - Does the technology for the production of the good exist locally or
must it be imported? At what cost?
• Supply of qualified labor - Is the available labor qualified for the process? Is training required?
• Competitive production cost - Can the good be produced at a competitive cost for the local
market? International market?
• Industry structure - How many firms operate in the sector? How will this affect operations?
• Price sensitivity - How will changes in the price of inputs affect production?
• Access to financing - How will access, or the lack thereof, to financing affect operations?
Enabling Environment
• Taxes - What are the taxes like for companies in this sector/industry?
• Tariffs - How will high trade tariffs affect imports of raw materials and exports of finished
goods?
• Subsidies - Are there currently any subsidies in this sector/industry that might distort the market?
• Trade agreements - Are there any trade agreements that might benefit this sector/industry? How?
• Domestic policy - Are there any government policies facilitating investment in the
sector/industry?
• Infrastructure - How does the existing infrastructure affect the viability of the sector/industry?
Profitability
• Payback period - What is the length of time required to recover the cost of an investment,
calculated as Cost of Project/Annual Cash Inflow?
• Break-even analysis - What is the number of units that must be sold to produce a profit of zero
and recover all associated costs?
The Impact component of the framework includes the following factors:
• Employment - How much employment will the investment generate?
• Technology transfer (skills) - Will this investment improve the skills of the labor force?
• Income – Which demographic segment will most benefit from the increase in wages derived from
this investment?
• Local competitive environment - Does this investment spur competition locally and thus improve
efficiency and productivity in the sector/industry?
• Linkages - Are there any backward or forward linkages that can be made with other industries?
Are there any improvements in value chains?
FDI in Blantyre Page 12