Articles
Intellectual Property Rights as an Instrument of Foreign Direct Investment Promotion:
the case of Mozambican intellectual property system
2024 Volume 2024 Issue 104 Pages 1-29
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2024 Volume 2024 Issue 104 Pages 1-29
This study explores the relationship between intellectual property rights (IPR) and foreign direct investment (FDI) in the context of Mozambique’s economic development. The theoretical framework examines the role of IPR as instruments of public policy and the impact of strong or weak IPR protection on FDI. It considers two opposing theories: the IPR Theory, which suggests that strong IPR protection, incentivizes FDI by providing a secure environment for intellectual asset protection, and the Technology Diffusion Theory,which argues that weak IPR promote technology transfer and attract FDI by reducing costs.The case study of Mozambique is chosen to understand the interplay between IPR, FDI,and economic development. The contention posits that in the case of Mozambique’s dependency on the extractive sector, IPR exert a diminished influence on FDI attraction compared to the pronounced impact of natural resources. Conversely, in developed nations characterized by a knowledge-based economy, the significance of IPR becomes pivotal in shaping and enhancing the attraction of FDI. Nevertheless, it is widely acknowledged that enhancing the intellectual property system in Mozambique could yield numerous benefits. By doing so, a more conducive business environment can be created, allowing for economic diversification and the growth of emerging industries. Moreover, an improved intellectual property system has the potential to attract various forms of FDI, leading to the generation of employment opportunities and contributing to the development of human capital within the country. In conclusion, this study provides insights into the complex relationship between IPR and FDI, emphasizing that the relationship between IPR and FDI is complex and influenced by various factors, including industry characteristics, technological advancements, legal frameworks, and institutional quality, hence the need for careful analysis and consideration of specific country contexts. The findings underscore the potential benefits of strengthening intellectual property protection as a means to stimulate FDI and facilitate technology transfer in Mozambique.
The relationship between IPR and FDI is a complex and context-dependent phenomenon. This study explores the theoretical framework and literature surrounding IPR and FDI, with a focus on Mozambique. Additionally, general trends in sub-Saharan Africa regarding the extractive sector and resource-rich countries are discussed.
The IPR protection has traditionally been perceived as taking place across a North/South divide. Knowledge economies seek to exploit their technological edge by promoting maximally strong patent laws that reinforce the worldwide protection of their inventions (the ‘maximalist’ position), while developing countries seek weaker (minimal) patent protection in order to facilitate imitation of foreign innovations, to build their technological capacities and to benefit from lower retail prices (the ‘minimalist’ position)2. Because developing countries are behind the technological frontier, they are poorly positioned to benefit from stronger protection. Protection not only make goods unavailable, it also decreases opportunities for less developed countries to become creative in their own right (Dreyfuss & Kuanng, 2018).
The discussion on IPR protection positive and negative effect has been fragmented. At one end of the spectrum are observers who see intellectual property through a frame of incentives who believe that strong exclusive rights are necessary to prevent free riders from competing down the price of innovations and undermining the returns available from taking the risks entitled in creative production. They assert that without strong protection, there would be insufficient impetus to develop new medicine, technologies, educational materials, or cultural products for society to enjoy (Dreyfuss & Kuanng, 2018).
On the other end of the spectrum are cultural theorists who examine how society is structured through both the creation and the sharing of information goods (books, symbols, technology), and human rights advocates, who emphasize human flourishing and development goals, which likewise demand access to the fruit of human ingenuity (Dreyfuss & Kuanng, 2018).
The relationship between IPR protection and FDI is quite complex. On the one hand, a weak IPR regime increases the probability of imitation, which makes a host country a less attractive location for foreign investors. On the other hand, strong protection may shift the preference of multinational corporations from FDI towards licensing. As surveys of multinationals have shown, the importance of IPR protection varies between industries (Smarzynska, 2002). The concern about the IPR regime also depends on the purpose of an investment project, being the highest in the case of R&D facilities and the lowest for projects focusing exclusively on sales and distribution, extractive sector etc. (Mansfield, 1995).
One problem in the existing literature is the oversimplification of the relationship between IPR and FDI. The current discourse tends to present a dichotomy between strong IPR protection incentivizing FDI, as suggested by the IPR Theory, and weak IPR facilitating FDI through technology diffusion, as proposed by the Technology Diffusion Theory. This binary representation may not fully capture the complex and context-dependent nature of the relationship between IPR and FDI.
To overcome the problem of oversimplification in the existing literature, this study tries to bring a more nuanced and context-specific approach, taking into consideration the multifaceted dynamics of IPR and FDI interactions.
In Mozambique, FDI flows in the extractive industry in the last six (6) years accounted for over 80 percent of Mozambique’s total foreign investment in terms of investment value, with the majority of this investment absorbed by oil and gas companies. This paper shows that, the natural resources have more significant impact on FDI attraction in Mozambique than other factors such as IPR, market size, etc. However, in developed countries with knowledge-based industries IPR should have a more pronounced impact on FDI attraction.
The relevance of this study is that it combines two different fields of studies; one is the economic and the other is the legal, which make the study provide us with a broad view of the subject under analysis.
Additionally, general trends in sub-Saharan Africa are also discussed, showing the importance of the extractive sector in terms of revenue and exports. Many countries in the region are considered resource-rich, relying heavily on minerals, oil, and gas. The boom and bust cycles of commodity prices have affected the region’s resource-rich countries, presenting missed opportunities for sustainable and diversified prosperity.
Overall, this study seeks to analyze the interplay between IPR, FDI, and other relevant factors in the context of Mozambique’s economic development. By understanding these dynamics, the country can formulate effective strategies to leverage IPR and attract FDI, ultimately contributing to its growth and prosperity.
The first section of this study introduces the theoretical framework, presenting two opposing perspectives: the IPR Theory, suggesting that strong IPR protection incentivizes FDI by providing a secure environment for intellectual asset protection, and the Technology Diffusion Theory, arguing that weak IPR promotes technology transfer and attracts FDI by reducing costs.
In this section is also discussed the relationship between IPR and FDI highlighting that in developed countries, strong IPR protection plays a significant role in attracting FDI, especially in technology-driven industries where innovation is crucial. However, Mozambique’s FDI attraction may be more focused on sectors such as natural resources, agriculture, and infrastructure development, where the impact of IPR may be relatively lower. Despite this, intellectual property protection remains essential for Mozambique as it strives to diversify its economy and develop emerging industries.
In the second section, the study is dedicated to demonstrate the relevance of taking Mozambique as a case study. The case study of Mozambique is essential for understanding how IPR and FDI interact in a developing country context. Mozambique’s reliance on the extractive industry, coupled with efforts to diversify its economy, highlights the need for a well-calibrated intellectual property framework. Strengthening IPR can contribute to innovation, technological advancements, and knowledge transfer, fostering sustainable economic growth and attracting investors with expertise and capital.
The third section describes the legal and institutional structure in Mozambique, showing that the country has undergone significant reforms in intellectual property regulation. While these reforms are crucial for creating a robust intellectual property system, their direct correlation with changes in FDI levels is inconclusive. In this section is also pointed that, challenges persist in the enforcement of IPR in Mozambique, stemming from weaknesses in the judicial system and inadequate supervision mechanisms. Instances of piracy and counterfeiting are prevalent, and law enforcement efforts face obstacles such as corruption and resource constraints.
The fourth section brings a comparative perspective with other Sub-Saharan African countries, including resource-rich nations like Nigeria, South Africa, and Angola, provides insights into regional dynamics. The extractive sector’s dominance in Sub-Saharan Africa underscores the importance of diversified investment strategies and the role of intellectual property frameworks in fostering economic diversification.
The last section brings some lessons from the study where is concluded that, the relationship between IPR and FDI is intricate and influenced by various factors, making it essential to consider country-specific contexts. A nuanced and multifaceted approach that considers the interplay of industry characteristics, technological advancements, legal frameworks, and institutional quality is crucial for a comprehensive understanding of this complex relationship. Future research should delve deeper into specific country contexts and explore how a balanced intellectual property framework aligns with broader economic development goals.
The CIPR (2002) regards the IPR as instruments of public policy, which confer economic privileges on individuals or institutions solely for the purposes of contributing to the greater public good. The privilege is therefore a means to an end, not an end in itself (CIPR, 2002). Drahos (2016) defines IPR as rulegoverned privileges that regulate the ownership and exploitation of abstract objects in many fields of human activity. While to Stiglitz, (2006) the IPR, enable one person or company to have exclusive control of the use of a particular piece of knowledge, thereby creating monopoly power.
FDI by a Multinational corporation is the purchase of physical assets or a gain a measure of management control (Jensen at al. 2012). According to the differential rates of return approach, the FDI is the result of capital flowing from countries with low rates of return to the countries with high rates of return3. This proposition follows from the idea that, in evaluating their investment decisions, firms equate expected marginal returns are higher abroad than at home, and assuming that the marginal cost of capital is the same for both types of investment, there is an incentive to invest abroad rather than at home4.
Viewed from the developing countries perspective, FDI has been seen as provider of technologies and managerial skills essential for these countries to achieve rapid economic development5. However, technology transfer is, often conditioned by the protection of IPR. Furthermore, in choosing among the various available countries to invest, a firm would presumably be guided by both expected returns and the possibility of reducing risks. Thus, the IPR protections is part of these risks that companies are intending to reduce in their investment process, most of all those companies that have the knowledge as the main asset of their business.
According to the IPR Theory, strong IPR protection can incentivize FDI. When a country has robust IPR, it provides a secure environment for companies to protect their intellectual assets, such as patents, trademarks, and copyrights. This protection encourages multinational corporations (MNCs) to invest in countries with stronger IPR regimes, as they can expect to reap the benefits of their intellectual property without the fear of infringement or unauthorized use.
In the words of Keith Maskus, “Stronger protection of IPR in the host country can provide stronger incentives to foreign firms to invest in knowledgeintensive activities.” (Maskus, 2000).
Meanwhile, the Technology Diffusion Theory posits that weak IPR can facilitate FDI by promoting technology diffusion. In countries with less stringent IPR, there may be greater opportunities for technology transfer and knowledge spillovers. MNCs may choose to invest in these countries to take advantage of lower costs and gain access to local knowledge and technology. As noted by James Love, a policy advocate for intellectual property issues, “Weak intellectual property regimes can facilitate technology transfer. Foreign firms may be attracted to countries with weak patent rights because they can then practice their own patents and use technology patented by others at a lower cost.” (Love, 1997).
It is important to mention that these theories are not mutually exclusive, and the relationship between IPR and FDI is complex and context-dependent. Various factors such as industry characteristics, technological advancements, legal frameworks, and institutional quality can influence this relationship. Additionally, empirical studies have yielded mixed results, highlighting the need for careful analysis and consideration of specific country contexts.
1.2. Factors that attract FDIIn the past few decades, hundreds of theoretical and empirical studies have attempted to pinpoint the main factors in investors’ decisions on where to invest. Most empirical work have found that multiple factors are significantly associated with FDI inflows and that in some cases they interact6.
According to USAID (2005), it is possible to distinguish the followingtypes of FDI in terms of their motivation:
▶ Natural resource seeking FDI, which aims to gain access to a natural resource not available in the company’s home market;
▶ Market-seeking FDI, which aims to gain access to new customers, clients, and export markets;
▶ Efficiency-seeking FDI, which aims to reduce production costs by gaining access to new technologies or competitively priced inputs and labor;
▶ Strategic-asset seeking FDI, which aims to go after strategic assets in a local economy, such as brands, new technologies, or distribution channels.
It is evident that the attractiveness of these factors may vary based on the industry, the nature of the investment, and the specific goals of the investing company. Additionally, the interaction of these factors often plays a significant role in shaping FDI decisions.
1.3. Literature on the IPR/FDIMaskus (2000) examines the impact of patent rights on international trade, FDI, licensing, and economic growth and his conclusion asserts that, there are valid concerns regarding the potential market power wielded by firms with stronger intellectual property protection. The overall body of evidence strongly indicates that IPR serve as a vital foundation for facilitating technology transfer, fostering local innovation, and promoting long-term economic growth.
According to Todaro and Smith (2011), FDI serves four primary roles in developing countries. One of these roles is to bridge the gaps in management, entrepreneurship, technology, and skills, as many developing countries face deficiencies in terms of new technology, knowledge, and skills.
Therefore, the process of technology transfer from a highly developed country to a developing country is contingent upon the intellectual property protection system in the receiving country. Several studies7 suggest that multinational corporations determine their investment destinations based on the degree of importance attributed to intellectual property. Consequently, developing countries with a lenient intellectual property system attract less FDI compared to those with a more stringent intellectual property framework.
Multinational companies undertake direct investment abroad on the ground that having one or more specific benefits, must clearly outweigh the additional costs which the company is exposed to in its operations in foreign markets. In this perspective this is only possible through ownership advantage (Petrović-Ranđelović & Jankovic-Milic, 2017).
Ownership advantages of the company relate to the possession of a particular product or a particular manufacturing process, which other companies do not have the right to use. In addition, this includes parts of intangible capital of the company, such as IPR, managerial, marketing and entrepreneurial knowledge and skills, organizational skills, and more (Petrović-Ranđelović & Jankovic-Milic, 2017).
Ayappan & Chin (2018) also support this perspective, stating that robust protection of IPR encourages an influx of FDI into host countries. Firms that are seeking protection for their invention will prefer to invest in a country with greater protection. Countries with better protection would encourage more transfer of technologies towards local firms once FDI is not only transfer of capital itself but also transfer of technology.
The findings of a research made by The World Bank and International Finance Corporation in 1995 about Intellectual Property Protection, Direct Investment, and Technology Transfer in Germany, Japan and the United States corporations, indicate that, in relatively high-technology industries like chemicals, pharmaceuticals, machinery, and electrical equipment, a country’s system of intellectual property protection often has a significant effect on the amount and kinds of technology transfer and direct investment to that country by Japanese and German, as well as U.S. firms (Mansfield, 1995).
Traditionally, Mozambican GDP has been dominated by the agriculture, construction, and financial sectors. Although the informal agriculture sector employs approximately 70% of the population, it only contributes around 25% of GDP, reflecting inefficiencies, lack of economies of scale, and low valueadded processing. Several megaprojects are projected to be the key drivers for the Mozambican economy. The principal Mozambique exports to the World by 2020 were as follow, Mineral Fuel, Oil Etc.; Bitumin Subst.; Mineral Wax (36.4%). Aluminum and Articles thereof (30.6%). Ores, Slag and Ash (6.9%). Tobacco and Manufactured Tobacco Substitutes (4.7%), Edible Fruit & Nuts; Citrus Fruit or Melon Peel (3.6%)8.
In 2020, the pandemic led to a 1 percent GDP contraction, the first in 28 years, as domestic and global demand fell and liquefied natural gas (LNG) investments were delayed. Production dropped in all sectors except agriculture. The services sector (notably the hospitality and restaurant industries) was disproportionately affected in 2020 (World Bank, 2022).
2.2. Why the case study of Mozambique?Both IPR and FDI are indeed crucial factors for economic development. Given that Mozambique is actively seeking economic growth, it becomes essential to analyze and comprehend the factors that can have positive or negative effects on the country’s development. By understanding the interplay between IPR, FDI, and other relevant factors, Mozambique can formulate effective strategies to leverage these elements for its economic advancement.
Although intellectual property is of utmost importance for creation and innovation, its development in Mozambique is still a relatively new phenomenon and requires significant improvement. This improvement can only be accomplished through a thorough study. Hence, it is believed that such a study will identify the primary challenges faced by Mozambique’s Intellectual Property System, leading to proposed enhancements and the establishment of an effective protection for IPR. It is further believed that an efficient system for intellectual property protection will create a more favorable business environment, thereby attracting increased Foreign Investment to the country.
Mozambique’s reliance on the extractive industry, which typically involves the extraction of natural resources such as minerals, oil, and gas, might seem less directly related to the need for a developed IPR system. The extractive industry often involves tangible assets rather than intellectual property like patents, trademarks, or copyrights.
However, it’s worth noting that economic diversification is a common goal for many developing nations. While Mozambique may currently rely heavily on the extractive industry, there is often a recognition that diversifying the economy is crucial for long-term sustainability and resilience. Intellectual property and innovation can play a significant role in economic diversification by fostering sectors such as technology, research and development, and creative industries.
In this context, the focus on IPR and FDI may be part of a broader strategy to encourage economic diversification. Strengthening the IPR system could be seen as an important step in attracting investment in industries beyond extractives, encouraging innovation, and fostering a more knowledge-intensive economy. This, in turn, could contribute to reducing the country’s dependence on a single sector.
This study also aims to explore the potential for diversification and the role of intellectual property in emerging sectors beyond the current extractive industry. This kind of strategic analysis can be important for countries like Mozambique looking to ensure sustained economic growth and development.
2.3. Mozambican specific factorsThe extractive sector (mainly gas and coal exploration) has been the main determinant of attracting FDI flows to Mozambique. Thus, the type of FDI that the country attracts is one that is looking for more competitive production factors – raw materials (Mucanze & Correa, 2017). As noted by Sambo (2020), although the extractive industry sector is not the biggest contributor to the GDP in Mozambique, is the sector with the highest percentage change in GDP, and at the same time is the same sector that attracts more FDI.
As depicted in Figure 1, FDI flows experienced a significant surge in 2021, with an increase of 68.1% compared to the previous year. Over the past Six years, the expansion of FDI in Mozambique was largely driven by a significant rise in capital inflows from Mega Projects. These projects were primarily associated with the extractive industry, specifically the exploration and research activities related to hydrocarbon prospects in the Rovuma Basin, as well as the revitalization of the coal mining sector. The investment influx stemming from these endeavors played a substantial role in influencing the growth of FDI during the mentioned period9.
Source : UNCTAD
When it comes to sectoral distribution, over this six years illustrated on the figure 1 above, the extractive industry dominates as the primary recipient of investments, accounting for 64.5% of the total FDI. Following closely is the Storage, Transport, and Communications sector, making up 32.8% of the total FDI. Other sectors such as Agriculture, Electricity, Gas and Water, and Real Estate Activities collectively represented 2.7% of the total FDI.
The fluctuations and negative trend in FDI inflow depicted in Figure 1 for the years 2016-2021 can indeed be attributed, at least in part, to the undisclosed debts incurred by the Mozambican Government that became known in 2016. These revelations led to significant political and economic instability in the country, ultimately deterring FDI. This situation highlights that while natural resources play a crucial role in attracting FDI, they alone are insufficient. There are other essential factors that come into play when attracting FDI to Mozambique.
Mozambique’s colonial past, socialist policies, and subsequent economic reforms have all contributed to the shaping of its intellectual property regulation. The historical context, ideologies, and the country’s evolving economic and political landscape have played significant roles in determining Mozambique’s approach to protecting intellectual property over the years.
Intellectual Property (IP) regulation in Mozambique dates back to 1959 when it was introduced by the Portuguese metropolis through Decree No. 30679 on August 24, 1940. The regulations were applied in Mozambique through Ordinance No. 17 043 on February 20, 1959.
Following Mozambique’s independence from Portugal in June 1975, the newly formed government adopted a centrally planned economy that emphasized collective ownership, thereby impacting the approach to IPR. During this period, private property was actively discouraged, and intellectual property lost its significance within the new socio-political landscape. However, a significant turning point occurred in 1990 with the introduction of a new Constitution. This constitutional revision marked a transition from a centrally planned economy to a free market system and from a single-party rule to a multi-party democracy, placing the citizen at the core of the state system.
The 1990 Constitution brought about crucial changes by explicitly guaranteeing fundamental rights and liberties. It enshrined the freedom of expression and information in Article 74, recognized the right to education in Article 92, and most importantly, affirmed the right to private property ownership. Additionally, the 1990 Constitution specifically established the protection of IPR in Article 79, emphasizing the importance of safeguarding and respecting intellectual creations and innovations.
In 1999, the previously mentioned code was repealed, and Mozambique introduced a new Industrial Property Code under Decree No. 18/99 on May 4. Subsequently, in 2006, another Mozambican Industrial Property Code was approved through Decree No. 4/2006 on April 12. However, this decree was later revoked by Decree No. 49/2015 on December 31. As a result, a current and updated Industrial Property Code was implemented.
In addition to these domestic regulations, the Mozambican government has actively engaged with various regional and international organizations involved in intellectual property matters. Notably, Mozambique has become a member of prominent organizations such as the World Trade Organization, the World Intellectual Property Organization, and the African Regional Intellectual Property Organization. This demonstrates Mozambique’s commitment to aligning its intellectual property framework with international standards and fostering cooperation on intellectual property issues at the global and regional levels.
In 2003, Mozambique established the Instituto de Propriedade Industrial (IPI), which serves as the national IP Office. The IPI is a public institution with its own legal identity, administrative autonomy, and financial independence. Its primary objective is to contribute to the development and enforcement of policies and laws related to industrial property.
The establishment of the IPI brought about significant positive changes in the realm of industrial property rights. It not only facilitated the consolidation of the industrial property system but also played a vital role in terms of education and awareness. The IPI’s involvement in training and dissemination activities injected new energy and enthusiasm into the promotion and understanding of industrial property rights within Mozambique.
Table 1 : FDI inflow to Mozambique vs the IP legal reforms
| Year | FDI inflow in Millions Dollars |
|---|---|
| 1999 | $382 |
| 2003 | $337 |
| 2006 | $154 |
| 2012 | $5 629 |
| 2013 | $6 175 |
| 2015 | $3 867 |
| 2016 | $3 093 |
Source: UNCTAD statistics of different years
Previous studies have indicated that a strong Intellectual Property System can have a positive impact on attracting FDI to a country. However, Table 1 reveals that this assumption does not hold true in all contexts. In the case of Mozambique, despite the implementation of several legal and institutional reforms, there is no conclusive evidence of a direct correlation between these reforms and changes in foreign investment levels.
It is worth noting that the temporary increase in investment observed in 2012 and 2013 can be attributed to the investments made in the extractive industry. The extractive industry, unlike other sectors, is not primarily driven by the protection of IPR. This data suggests that while a robust intellectual property system is important, it is not the sole determinant of attracting FDI. Other factors, such as sector-specific considerations and overall investment climate, also play significant roles in shaping investment patterns.
3.2. Law enforcementDespite the extensive legal and institutional reforms undertaken by the Government of Mozambique to strengthen the enforcement of IPR, challenges persist due to the weaknesses in the Mozambican judicial system and inadequate supervision and accountability mechanisms for offenders. As a result, the protection of IPR remains problematic in Mozambique.
Instances of widespread piracy, such as the sale of pirated DVDs, fake pharmaceuticals, clothing, software, mobile phones, TVs, ardent spirits, etc. are prevalent in the country, often produced and distributed in large quantities. Additionally, enforcement efforts are infrequent and highly selective, contributing to the persistence of these illicit activities.
The lack of a robust judicial system and effective oversight mechanisms hampers the efficient prosecution of IP violators, undermining the overall effectiveness of IP protection measures in Mozambique.
“According to the international technology company Hewlett Packard HP press release, in December, 2017, local officials seized 64,000 illicit items from various warehouses and shops in Maputo, leading to the dismantling of a major print supplies counterfeiter. The seized goods included counterfeit toner cartridges, as well as the components needed to assemble fake print supplies. The counterfeiter had been supplying fake cartridges in bulk to six retail outlets.”10
The Mozambican police, specifically the Criminal Investigation Police (PIC), is responsible for the enforcement of intellectual property laws. The PIC, in collaboration with other relevant government agencies, such as the Inspectorate-General of Economic Activities (IGAE), plays a crucial role in combating IPR infringements. However, issues such as corruption, limited resources, the predominance of the informal sector, among others, emerge as the primary obstacles to the effective oversight and accountability of offenders.
The effectiveness and efficiency of judicial processes in handling IPRrelated cases significantly impact enforcement efforts in Mozambique. Additionally, the lack of experience within Mozambique’s justice institutions in matters of protecting IPR is another factor that undermines the success of law enforcement in IPR-related disputes.
Mozambique has implemented border control measures to prevent the entry of counterfeit and pirated goods. Customs officials are responsible for inspecting and seizing infringing goods at ports of entry. However, resource constraints and capacity limitations may hinder the effectiveness of these measures.
Mozambique collaborates with international organizations, such as WIPO, JPO, EPO, etc. to enhance its capacity in IPR enforcement. This cooperation includes training programs, technical assistance, and sharing best practices in combating counterfeiting and piracy.
In delving into the intricate interplay between IPR and FDI promotion, a comparative perspective that extends beyond Mozambique to other Sub-Saharan African countries unveils a nuanced understanding of the regional dynamics. Examining Mozambique alongside its counterparts allows discerning variations and commonalities in their intellectual property systems and their impact on FDI. Analyzing the general trends in the extractive sector in Sub-Saharan Africa, it becomes apparent that while resource-rich nations dominate the economic landscape, the reliance on natural resources underscores the need for diversified investment strategies. Nigeria, as the largest economy heavily dependent on its oil industry, stands in stark contrast to South Africa, where a diverse range of industries contributes significantly to its GDP. Angola’s oilcentric economy presents another facet for comparison.
The divergent economic structures and reliance on specific sectors underscore the role of intellectual property frameworks in fostering innovation, technology transfer, and economic diversification. By drawing parallels and distinctions between Mozambique and its Sub-Saharan counterparts, it is aimed to unravel the multifaceted relationship between IPR, FDI, and economic development. This comparative perspective serves as a foundation for dissecting the specific case of Mozambique, providing a holistic view that contributes to the broader discourse on intellectual property as a catalyst for sustainable economic growth in Sub-Saharan Africa.
According to the World Bank (2023), the extractive sector is a critical part of Sub-Saharan Africa’s economy, in terms of both revenue and exports. Minerals, oil, and gas account for a third or more of exports from most countries in Sub-Saharan Africa, and they can reach similar shares of government revenues.
The resource-rich countries are the driving force of the Sub-Saharan African (SSA) economy, and in 2013 the Africa Progress Report, pointed out that, it accounts for more than 80% of the total GDP of Sub-Saharan Africa11.
Today there are markedly more resource-rich countries in Sub-Saharan Africa than there were at the turn of the twenty-first century, and the number is trending even higher because of new discoveries every year.
The International Monetary Fund (IMF) defines a country to be ‘resourcerich’, when exports of non-renewable natural resources such as oil, minerals and metals account for more than 25 % of the value of the country’s total exports12.
By this definition, the number of resource-rich countries rose from 18 of 48 before the most recent commodity price boom from 2004, to 26 of 48 countries by the end of the boom in 2015. This means that the majority of countries in Sub-Saharan Africa can be categorized as resource rich, with more on the path to reaching this status given two decades of major new discoveries. This trend was caused by a combination of new discoveries, new production, and rising resource prices that pushed up levels of resource abundance and resource dependence and pulled more countries into this resource-rich grouping. During the last commodity price boom, from 2004 to 2014, economic growth accelerated to record highs in the region’s resource-rich countries. The previous boom and bust in commodity prices in Sub- Saharan Africa resulted in missed opportunities for the region’s resource-rich countries to convert their resource revenues into sustainable, diversified prosperity (World Bank, 2023).
Table 2 : Country Classification by Resource Abundance in Sub-Saharan Africa13
| Resource-rich countries | Non-resource-rich countries | |||
|---|---|---|---|---|
| Oil | Metals & minerals | |||
| Angola | Botswana | Benin | Gambia | São Tomé and Príncipe |
| Chad | Democratic Republic | Burkina Faso | Ghana | Senegal |
| Republic of Congo | of Congo | Burundi | Guinea-Bissau | Seychelles |
| Equatorial Guinea | Guinea | Cabo Verde | Kenya | Somalia |
| Gabon | Liberia | Cameroon | Lesotho | Sudan |
| Nigeria | Mauritania | Central African Republic | Madagascar | Tanzania |
| South Sudan | Namibia | Comoros | Malawi | Togo |
| Niger | Côte d’Ivoire | Mali | Uganda | |
| South Africa | Eritrea | Mauritius | Zimbabwe | |
| Sierra Leone | Eswatini | Mozambique | ||
| Ethiopia | Rwanda | |||
Source : World Bank (2023)
Nigeria, as of 2021, holds the position of the largest economy in Africa with a GDP of $440.83 billion. However, it heavily relies on its oil industry. In the first quarter of 2021, oil accounted for approximately 9.25% of Nigeria’s GDP, representing an increase from the 5.8% recorded in the fourth quarter of 2020. Oil also contributes around 85% of the country’s export earnings and approximately 50% of total government revenues14.
South Africa, following Nigeria, is the second-largest economy in the region with a GDP of $419.02 billion (2021). Its key industry sectors encompass mining, transport, energy, manufacturing, tourism, and agriculture15. Notably, South Africa’s major exports include Platinum ($24.5 billion), Gold ($20.1 billion), Iron Ore ($7.68 billion), Diamonds ($7.02 billion), and Coal Briquettes ($6.72 billion)16.
During the 2020/21 Ethiopian fiscal year, agriculture, industry, and services contributed 32.5%, 29.3%, and 39.6% to the country’s GDP, respectively. In 2020, Ethiopia’s major goods exports comprised coffee (25.1%), gold (18.6%), cut flowers (13%), oil seeds (11.5%), chat (11.1%), pulses (6.5%), and leather products (1%). Ethiopia witnessed a 21% increase in total export earnings by value compared to the previous year, with a GDP of $111.27 billion in 202117.
In Kenya, the agriculture sector remained dominant, constituting 22.4% of the GDP in 2021, despite a 0.1% contraction from the previous year. Agriculture accounts for approximately 65% of Kenya’s export earnings, according to the Food and Agriculture Organization. The manufacturing sector however, while Kenya’s most industrially developed sector, only contributed 7.2% to the country’s GDP in 2021. Nevertheless, Kenya experiences rapid growth in the technology sector, with a 34.9% internet penetration rate and ranking seventh in Africa in terms of internet users. Kenya’s GDP in 2021 was $110.34 billion18.
Similar to Nigeria, Angola’s economy is heavily reliant on its oil sector. Oil production and associated activities contribute approximately 50% of the country’s GDP, over 70% of government revenue, and more than 90% of its exports. Angola’s GDP in 2021 was $67.4 billion19.
In conclusion, this study has examined the relationship between IPR and FDI in the context of Mozambique’s economic development. Through a comprehensive analysis, it has become evident that the interplay between IPR and FDI is complex and influenced by various factors.
The theoretical framework presented two opposing perspectives: the IPR Theory and the Technology Diffusion Theory. While the former suggests that strong IPR protection incentivizes FDI by providing a secure environment for intellectual asset protection, the latter argues that weak IPR promote technology transfer and attract FDI by reducing costs. However, the findings of this study indicate that there is no one-size-fits-all approach, and the relationship between IPR and FDI is contingent upon industry characteristics, technological advancements, legal frameworks, and institutional quality.
The impact of IPR on FDI attraction can vary between developed countries and developing countries like Mozambique. In developed countries, where industries are typically more advanced and technology-driven, IPR protection can play a significant role in attracting FDI.
Developed countries often have well-established innovation ecosystems and a history of technological advancements. Strong IPR protection provides assurance to foreign investors that their intellectual property will be safeguarded, encouraging them to bring in new technologies, conduct research and development activities, and transfer knowledge to local industries
Developed countries often have a higher concentration of industries that heavily rely on research and development (R&D), such as pharmaceuticals, biotechnology, telecommunications, and advanced manufacturing. In these sectors, the protection of patents, copyrights, and trademarks is crucial to incentivize innovation and attract FDI. Investors seek environments where their intellectual property is protected, as it allows them to recoup their investments and generate profits from their innovative products or services.
In contrast, Mozambique’s FDI attraction may be more focused on sectors such as natural resources, agriculture, and infrastructure development, where the impact of IPR may be relatively lower. However, it is important to note that IPR protection still has significance in Mozambique, particularly as the country strives to diversify its economy and develop emerging industries. Intellectual property protection can encourage innovation, technological advancements, and knowledge transfer in these sectors, contributing to sustainable economic growth and attracting investors who bring expertise and capital.
Furthermore, this study emphasizes the importance of considering countryspecific contexts when analyzing the relationship between IPR, FDI, and economic development since, the relationship between IPR and FDI is complex and influenced by various factors, including industry characteristics, technological advancements, legal frameworks, and institutional quality, hence the need for careful analysis and consideration of specific country contexts.
It is recommended for the future researches to adopt a more nuanced and multifaceted approach that considers the interplay of various factors. Researchers could explore how industry characteristics, technological advancements, legal frameworks, and institutional quality interact with IPR in influencing FDI. Additionally, a more comprehensive understanding of the role of IPR in FDI could be achieved by conducting in-depth case studies in specific country contexts.
Future literature should also explore how a balanced and well-calibrated intellectual property framework aligns with broader economic development goals and societal needs.
1 Research Assistant and Master’s student in Law and Politics at Kansai University
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4 ibid
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8 https://www.trade.gov/country-commercial-guides/mozambique-market-overview
9 Banco de Moçambique. (2021). Balança de pagamento – Moçambique ano 18. Maputo: BM/CDI
10 https://clubofmozambique.com/news/hp-lauds-inae-for-raids-against-counterfeit-goodsmozambique
11 https://www.tralac.org/images/docs/408/africa-progress-report-2013-summary.pdf
12 IMF 2013: “Boom, bust, or prosperity? Managing Sub-Saharan Africa’s natural resource wealth” p 6
13 Resource-rich countries are those with rents from natural resources (excluding forests) that exceed 10 percent of gross domestic product during the period 2015-2021(World Bank, 2023).
14 https://www.trade.gov/country-commercial-guides/nigeria-market-overview
15 https://www.gov.za/about-sa/south-africa-glance#:~:text=Key%20economic%20sectors,%2C%20manufacturing%2C%20tourism%20and%20agriculture.
16 https://oec.world/en/profile/country/zaf#:~:text=The%20most%20recent%20exports%20are,and%20India%20(%249.5B).
17 https://www.trade.gov/country-commercial-guides/ethiopia-market-overview
18 https://www.trade.gov/knowledge-product/kenya-market-overview
19 https://www.trade.gov/country-commercial-guides/angola-market-overview
