In the past two decades, African governments have paid billions to private companies in form of settlement of international disputes. Nearer home, Kenya is still reeling after the Goldenberg and Anglo Leasing rip-offs.
A new book, ‘‘Bounded Rationality and Economic Diplomacy: The Politics of Investment Treaties in Developing Countries’’, has some insights that reveal the continent’s weakest link with respect to international treaties – the capacity to negotiate effectively while protecting its interest.
Investment Treaties (agreement establishing terms and conditions for private investment by nationals and companies of one country in another country) or Foreign Direct Investment (FDI), facilitate economic development of recipient countries that may not raise the resources necessary to make the investments.
The recent Tokyo International Conference on Africa’s Development (TICAD) in Nairobi sought to increase Japanese investments in Africa. It was touted as a big win for African countries. However, like in many other similar treaties, the devil is often in the details.
The public never gets to know these details and in most case they come out only when there are disputes. A couple of years back, the then Foreign Affairs minister, Moses Wetangula, was asked by Githunguri MP Njoroge Baiya to list the number of treaties and international agreements that Kenya had entered into since independence.
Like the good lawyer he is, he huffed and puffed and prevaricated but never gave a convincing answer. The result is that this issue remains shrouded in mystery.
In many countries, negotiators of such treaties are people with experience and knowledge in the specific areas of investment. More often, negotiators come from academic institutions and are widely published in their respective fields.
Some countries send huge multidisciplinary delegations to the negotiation table. Prior to discussions, they spend many days developing their negotiation strategy.
In his review of the new book, Oleg Komlik from the global academic community of researchers, students and activists interested in Economic Sociology and Political Economy states that “During the 1990s and early 2000s, developing countries have incurred significant liabilities from investment treaty arbitration and paid billions of dollars to the Western corporations.”
Largely identical treaties
The book seeks to answer the following questions: why developing countries signed largely identical treaties which significantly constrained their sovereignty, and why did they expose themselves to expensive claims and give a remarkable degree of flexibility to private lawyers to determine the scope of their regulatory autonomy?
Komlik concedes that “Only few developing country governments realized that by consenting to investment treaty arbitration, they agreed to offer international investors enforceable protections with the potential for costly and far-reaching implications.”
There are many reasons why developing countries behave apathetically at high-level negotiations.
High on the list is lack of confidence. Some even show up at the negotiation table completely unprepared or sometimes appear unconcerned with the happenings on the negotiation table to the extent that in the end they sign agreements that hurt their country in the long run.
Komlik affirms that “The majority of developing countries however signed up to one of the most potent international legal regimes underwriting economic globalization without even realizing it at the time.”
Some agreements at times may be fairly straightforward but negotiators use flimsy excuses to delay or completely refuse to sign agreements without articulating reasons why they refuse to progress a collective agreement.
For example, some East African countries have refused to sign the Economic Partnership Agreement (EPA) between the EU and the East African Community (EAC). In the absence of any good reasons for not signing, the perception of frustrating Kenya in this pact is real.
Within the EU trade regime, Kenya is classified as a developing country whereas all the other four partners are classified as least developed countries (LDCs).
The Daily News of Tanzania quoted President Magufuli as saying: “There are a number of questions to be looked upon, why are we signing the agreement while the EU has imposed sanctions on Burundi? Why are we signing while UK has pulled out of the EU?”
Clearly, the questions have nothing to do with the EPA or the economic benefits to the region. Considering the fact that Burundi continues to violate human rights, such questions put Africa in bad light.
From the World Trade Organisation to TICAD, such conferences present opportunities to build home grown capacity.
We can choose to turn the idle capacity within academic institutions into a formidable negotiation teams that could not just help Kenya but the region. This can only be done through a deliberate effort to develop capacity. Of greater importance is the political will to do the right thing to avoid politicization of the economic process.
The writer is an associate professor at University of Nairobi’s School of Business