Some W. African FDI flows may be drug proceeds: UN Wed 29 Oct 2008, 6:08 GMT
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By Pascal Fletcher

PRAIA (Reuters) - Sharp increases in foreign direct investment in at least
three poor West African states could point to a surge in illegal proceeds
from cocaine-trafficking swelling their economies, U.N. crime experts said
on Tuesday.

A report by the United Nations Office on Drugs and Crime (UNODC) on "Drug
Trafficking as a Security Threat in West Africa" singled out Guinea-Bissau,
Gambia and Guinea as states which had seen a jump in foreign direct
investment (FDI) and other inflows not clearly justified by economic
performance.

These countries are part of a West African region which U.N. anti-narcotics
experts say is under attack from powerful Colombian drug-trafficking cartels
which are channelling at least 50 tonnes of cocaine each year, and possibly
nearly double that, through the area on its way for sale in Europe.

The UNODC says the investment flows are a form of money laundering by
criminals who are undermining the region's democratic governments and
distorting its more vulnerable economies, which are mostly dependent on raw
materials exports.

"Foreign direct investments in these (three) countries, unexplained so far
by their economic performance, have exploded. Remittances have grown. Even
the currencies of the region are being revalued," UNODC executive director
Antonio Maria Costa said while presenting his agency's report in Praia, Cape
Verde.

"We sense there is no causality that would justify such a rapid increase,"
he told a two-day conference of West African ministers aimed at forging a
common strategy to confront the drug-trafficking threat.

"This is a form of money laundering, it comes in as foreign direct
investment, it goes into rural real estate, purchase of land, hotels,
tourism," Costa said.

In Guinea-Bissau, a small, poor former Portuguese colony whose main export
is cashew nuts, the UNODC report said U.N. data showed that after years of
little or no FDI, the country suddenly attracted $42 million of FDI in 2006,
equal to nearly a sixth of GDP.

Police have made major seizures of cocaine in Guinea-Bissau in the last two
years, and suspected Colombian and Venezuelan traffickers have been detained
there, but later released.

The UNODC report said FDI inflows into Gambia also grew from around $40
million in the first years of the new millennium to $70 million in 2006.
Much of this gain could be legitimate, the UNODC said, but a more detailed
analysis could uncover anomalies linked to the drug trade.

The Gambian dalasi currency also saw a rapid appreciation in late 2007,
apparently unexplained by local economic conditions.

THREAT TO STABILITY

For French-speaking Guinea, the world's leading exporter of the bauxite ore
from which aluminium is made, the UNODC report said FDI inflows increased
from just $10 million in 2000 to $108 million in 2006.

International mining companies have bauxite and alumina operations in Guinea
and are eyeing big investment plans.

But at the same time the country, most of whose population live in poverty,
is under scrutiny from international law enforcement agencies which believe
it is a major cocaine trans-shipment and storage hub used by traffickers.

Costa said that even if these FDI inflows could be initially beneficial for
the countries concerned, the likely illicit origin of some of them were a
threat to their political and economic stability.

"Even if it looks like legitimate investment, in the end it undermines
legitimate powers and institutions -- these people don't play by the rules,"
he said.

The UNODC report said the street value of the cocaine transiting the region,
estimated to be worth $2 billion a year, often amply exceeded the respective
total annual commodity export earnings of individual West African states.

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