Developing economies are characterised by high costs of capital and limited sources of investment funds. This acts as one constraint on the potential growth rates of these economies, and so the attractiveness of these economies to foreign investors should be an important consideration of policy makers.

There is a wealth of evidence that indicates that the investment climate, or the ‘business friendliness’ of a country is a key determinant of its attractiveness as an investment destination.

This Trade Brief examines the relationships between the ‘business-friendliness’ and investment and growth performance of African regions; by global comparison. The Africa aggregate is compared with two other major economic groupings – an industrialising East Asian group and the ‘transitioning’ group of former socialist countries. The same panel data set is then interrogated by African sub-region in order to gauge differences within Africa. Finally, several brief policy lessons are drawn out in the conclusion.

Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the author and do not purport to reflect the views of tralac.