Introduction - UNDP The Gambia

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The growth and development of the
manufacturing and processing sector is also
handicapped by the limited nature of the
domestic market, shortage of skills and
trained professionals, restricted and
competitive foreign markets for locally
produced goods and weak support structures
for the development of a manufacturing and
processing sector. Figure 2 shows the
breakdown of private sector activity by
industry ( from Situation Analysis of the
Contribution of the Private Sector Towards
the Millennium Development Goals in The
Gambia, 2005)
This concentration of private sector
enterprises has the further pull-effect of the
population from the rural areas, thus
contributing to the depletion of the rural
population and accentuating rural-urban
migration and rural poverty. This is because
people are forced to move to areas where they
can get jobs. Since the major private sector
enterprises, which are major employers, are
not located in the rural areas, able-bodied
people in these areas are forced to migrate to
the urban centres where jobs, goods and
services are more readily available than in the
rural settings.
Figure 2: Breakdown of the Private Sector by
Industry
Although the private sector is supposed to be
the engine of growth, its development is
currently retarded by three major factors:
• low investment resulting from high-risk
perception
• poor legal environment and regulatory
framework with poor economic
governance
• weak financial services.
Low Investment as a Result of High-risk
Perception: The level of risk perception is a
major determinant of investment in a
country. In The Gambia, two risk factors are
of concern to potential investors: political
risks and economic risks. The political risk
relates to political uncertainty in the country
and to developments in the sub-region – the
effects of protracted wars and civil unrest in
neighbouring countries. The expropriation in
1999 of the Gambia Groundnut Corporation
(GGC), a groundnut processing company, has
lingered as a source of potential concern to
investors.
Economic risks are associated with factors
such as chronic balance of payments deficit
that make foreign exchange scarce, high
public indebtedness and governance issues
such as a weak judicial and slow resolution of
commercial disputes and lack of transparent
“rules of the game” exacerbated by the
problems and delays associated with
administrative “red-tape”. Risk ratings by two
well-known international rating services help
to gauge the country’s standing in terms of
investors’ perceptions.
The rural areas are experiencing increases in
poverty due to unemployment, lack of
opportunities for income generation and lack
of purchasing power for goods and services.
Sadly, the concentration and development of
the private sector in the urban areas run
counter to the efforts towards achieving the
goals of the MDGs on poverty reduction.
According to the WDI 2002 Euromoney and
the International Country Risk Guide, the
creditworthiness ratings for The Gambia in
2001 are reported at a level of 27 and 69
respectively. These ratings rank the risk of
investing in an economy in a range of 1
(high) to 100 (low) to create opportunities for
long-term investments. Similarly, Fitch
ratings show deterioration in the country’s
credit rating (which declined from B- in 2002
to CCC+ in 2005). These low ratings have
adverse effects on the country’s ability to
mobilise external resources, attract foreign
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Building Capacity for the Attainment of the Millennium Development Goals in The Gambia National Human Development Report 2005
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