All posts tagged 'Sovereign Investment'

Diversification in agriculture and investment opportunities


One of the areas where diversification is most needed is agriculture.

There are many thousands of plants, some say 10.000, which gives edible and non-edible material to humankind.
And there are also many animals as part of the food chain and which provide by-products.

Examples of non-edible can be cotton, tobacco, wood and roots/bark, animal skins, furs and bones, plant extracts.

And there are many with high selling price: porcini mushrooms, truffles, Siberian kiwi, acerola and kakadu plum (extremely high vitamin C contents), pine nuts, waygu meat, wools(cashmere, alpaca), some flowers, spices (saffron), essential oils and plant extracts(e.g. bergamot), seafood

There are also many very niche products: donkey milk (used in hospitals for new-borns with milk allergies/rejection), ostrich eggs and meat, buffalo milk used for mozzarella, trumpet zucchini which vine vertically and giant onions up to 2 kg which grow on horizontal nets above ground, essential oils of many plants

Each of the thousands niche products of agricultural goods and derived products can be worth millions and provide excellent profitability and jobs for farmers, while staying away from commoditised mainstream products where competition is very high and selling prices low.

Obviously agriculture should provide food security inprimis, both as cheap and easy access to nourishments and as a state security itself.

But there are many opportunities for enterprising people to carve out a niche to thrive. I believe that we are in an era, where often investments are made for "innovative start-ups selling Chihuahua pet food", but too little money flows into agriculture, where there are still many opportunities to be found.

FDI Foreign Direct Investments are bad for a sovereign economy


Let's imagine you have a house, which needs some improvements. Since you don't have the finances or skills to do it yourself, you ask others to chip in. Somebody will do the hydraulic pipelines of water and heating, some will put in new wooden floors, somebody else will custom design a new kitchen, somebody the landscaping of the garden.
Now, who owns the house?
With works completed, the heating system is very expensive because of foreign technologies, to walk on parquet floors you need to wear special footwear, kids and dogs cannot use garden so to not damage the grass lawn, because the "investors" want to safeguard their "investments".

In a sovereign economy, foreign investments have many disadvantages, in some cases they are a trap. An economy can only be sovereign if the state is very strong, to direct the economy down the right path to become advantageous for the country and its people. Even with a strong government, large investors have incredible power to influence an economic and political system.

The advantages of receiving FDI Foreign Direct Investment is clear: investment, jobs and knowledge transfer.

The list of disadvantages of receiving FDI Foreign Direct Investment is very long:
-Hindrance to Domestic Investment
-Modern-Day Economic Colonialism/predatory exploitation
-Disappearance of local cottage and small scale industries
-Replacement of local technologies with expensive proprietary foreign ones
-Takeover/elimination of unique or critical local companies
-Cultural erosion
-Profit repatriation

How does a sovereign economy need to manage FDI Foreign Direct Investment?

1) Excellent governance, i.e. resistance to pressures
2) Allow only FDI in real economy (i.e. manufacturing)
3) Give local investors same (tax) benefits as FDI investors
4) Disallow takeover/elimination of unique or critical companies/technologies

Summing up, FDI Foreign Direct Investment is mostly a bad deal for receiving sovereign economies, and only advantageous if the sovereign economy is able to apply a very strong governance in order to reap its (limited) benefits.