15 July 2011

Investing in English

The Guardian reported on a recent study which is said to have uncovered evidence of economic advantages to African nations that are English-speaking.
The level of Foreign Direct Investment (FDI) is significant. FDI increased by an average of 6% over 2005-2008. Although dynamic economic performance is a key attraction for FDI, there is also a link between language and investment. FDI inflows from English-speaking countries such as the USA and the UK are typically highest in those countries where English is the lingua franca; in Bangladesh, Nigeria and Pakistan the share of FDI originating from English-speaking countries is 41%, 35% and 33%. By contrast, largely French-speaking Cameroon and Rwanda lose out, with only 2% and 1% of their total FDI inflows coming from English-speaking countries. However, those other markets investing in Cameroon and Rwanda, such as the UAE investing into Cameroon, will communicate in English as well, necessitating a strong grasp of the language within the countries.
I don't have a strong background in research methods, but evaluating only five nations (Cameroon, Nigeria, Rwanda, Bangladesh and Pakistan) does not seem like quite enough to say it is statistically significant. Over a larger sample size, it is possible that the direction might shift a bit. Pakistan and Rwanda are special cases that seem to be more of exceptions rather than the rule.

In Pakistan, the United States continues to pour money into the country that they hope can stabilize in order to maintain greater regional harmony (to some extent). This means that a lot of investments will be going into a nation that is very important in terms of national security and diplomatic interests. Rwanda is also interesting because the genocide likely has an impact on investments for better or for worse.

Trying to draw any real conclusions seems fruitless.  Like most studies, this piques interest and disappoints as it necessitates yet another study.

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