The Geese That Fail To Fly: The AGOA, Textile and Apparel related FDI and implications for technological spillovers in Sub-Saharan Africa

Abstract

Many countries in Southeast Asia have used technological spillovers from textile and apparel related Foreign Direct Investment (FDI) to industrialise and diversify their economies and integrate their markets to the global economy. In a bid to promote similar industrial activities in sub-Saharan Africa (SSA), the African Growth Opportunity Act (AGOA) was implemented by the American government in 2000 to give countries in SSA tariff free access to American markets on specific products, including textiles and apparels. While few SSA based countries have utilised this opportunity to attract textile and apparel related FDI, create employment and grow exports to the US, even fewer have benefited from spillovers. This study prescribes policy options for SSA countries to attract textile and apparel related FDI and how technological spillovers can be obtained from such activities. The study revealed that an Export Processing Zone and an East/South Asian connection established before the implementation of the AGOA, low cost of inputs and good industrial relations served as magnets for FDI.  The study also revealed that the lack of local ownership of textile and apparel firms and mid-level management skills in the SSA countries, the nature of the locating firms and restriction of global value functions to production by the foreign firms were obstacles to FDI spillovers. The study recommends promoting the establishment of local firms and situating them in proximity to foreign firms, skills upgrading of the local labour force especially in upstream value chain functions, promoting backward and forward linkages with foreign firms and encouraging FDI by large multi-national textile and apparel firms rather than small family-owned businesses.

Suggested citation

Olawale Adejuwon , Waheed Oladele (2022). The Geese That Fail To Fly: The AGOA, Textile and Apparel related FDI and implications for technological spillovers in Sub-Saharan Africa African Journal of Science Policy and Innovation Management, 3(1). https://doi.org/10.69798/32298292

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