New types of bilateral investment agreements offer Africa a chance for meaningful investments

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Addis Ababa, 02 April 2016 (ECA) – To attract investments, African countries have signed numerous Bilateral Investment Treaties (BIT) and Double Taxation Treaties (DTT) in the hope of improving their economies.

However, according to the Economic Commission for Africa’s (ECA) recent study Investment Policies & Bilateral Investment Treaties in Africa: Implications for Regional Integration, it has been noted that most of the BITs are signed a long time ago and tend to favour the investor, leaving African states battling investment disputes and not much to show for the investments made.

The report, launched today in Addis Ababa during Africa Development Week, based on a survey of 37 countries estimates that one third of all bilateral investments treaties globally, currently estimated over 3000, are signed by African countries. The report clearly reveals that investment plays a key role in promoting economic growth, sustainable development and financing development projects.

However, the findings also note the ambiguity between investments and Bilateral Investment Treaties (BITs) and further point out that the impact of these on economic growth in Africa remains debatable.

There is simply no conclusive evidence on the effect on Foreign Direct Investment.

Hence Ms. Fatima Haram Acyl, the African Union Commissioner for Trade and Industry urged “policy makers to use the report to understand the role of international investments.”

“Many respondents indicated that investment treaties do not necessarily bring in much investment and pointed out that BITs may be politically motivated, and that recently more investment is coming from countries without a BIT (e.g., China),” the report says.

One of the panelists, Mr. Paul Jourdan, independent mineral policy analyst, pointed out that perhaps African countries “signed these bilateral investment agreements too fast” without scrutinizing the details.

“Investors should add value instead of depleting the country. We should insist on value addition investment. Let’s send a clear message that investors can’t come to Africa and take value,” he said.

Mr. Nobuya Haraguchi, Industrial Research Officer at the UNIDO Office of the Deputy to the Director General said many of the new investment agreements are “coming to the stage where they can be renegotiated and this provides a window of opportunity for African countries to make the BITS more favourable for each country.”

Commenting on creating maneuvering room, Mr. Daniel Tanoe, Director of the African Trade Policy Centre at ECA noted “the current trend of treaties tries to ensure that investors have responsibilities as well,”

The session, moderated by Ms. Lerato Mbele, a South African journalist and broadcaster, included a discussion on the necessity for an inclusive participatory process in contract and investment agreement negotiations.

Stephen Karingi, the Director of Regional Integration and Trade Division at ECA, in reference to attaining favourable terms in investment treaties, noted that “we must not forget we have regional integration as a pillar to create opportunities within the limited resources we have so that everyone can benefit.”

“Our economies are so small that we need to join together. We can think together about tax incentives but we mustn’t diminish the benefits to our people because of incentives,” he argued.

Other discussions focused on the competitive perspective that investors are highly interested in, on improving negotiation skills, as well as solutions around legal impediments such as setting up regional or continental bodies to arbitrate in dispute cases.

The publication, a very welcome contribution to the debate on investments was highly appreciated by many states as some are engaged in contract negotiations on investments made in the extractive sector.

The report offers informed lessons on how member States should approach and craft future BITs with provisions that seek to balance the rights and obligations of host countries and investors; minimise costly arbitration; and does not restrict countries’ policy space and legitimate public policy making to pursue their transformation objectives.

 

Issued by:
Communications Section
Economique Commission for Africa
PO Box 3001
Addis Ababa
Ethiopia
Tel: +251 11 551 5826
E-mail: ecainfo@uneca.org