Ideas & Debate

Free citizenships won’t end foreign investors apathy

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A Kenyan passport. FILE PHOTO | NMG

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Summary

  • Indeed, opportunities for foreign investments should be pursued vigorously to supplement local capital, create new jobs, bring in new technologies, while expanding our export base.
  • Investment licensing processes should be clear and with minimum bureaucracy while keeping the processes uniform and predictable for all economic sectors.

Last week, Kenya Investment Authority (KenInvest) suggested free citizenships to attract foreign investments. There was also a recommendation to lower minimum entry capital for foreign direct investments (FDIs).

Indeed, opportunities for foreign investments should be pursued vigorously to supplement local capital, create new jobs, bring in new technologies, while expanding our export base.

However, we need to carefully interrogate the root causes of low FDIs before opting for citizenship freebies, which I doubt have ever been a critical issue with serious investors. Foreign investment frameworks — policies, laws, regulations, institutions, incentives and business costs must be right and facilitative.

Investment licensing processes should be clear and with minimum bureaucracy while keeping the processes uniform and predictable for all economic sectors.

Let us take a quick virtual trip to Rwanda where I think Kenya can learn a few tricks on how to effectively make FDIs happen. All foreign investment requests are centralised, facilitated and processed in an amazingly effective one-stop investment institution - the Rwanda Development Board (RDB) headed by a CEO who sits in the cabinet, a reflection of how foreign investments are prioritised by the government.

Sector ministries and agencies feed their inputs to RDB, which assists foreign investors to meet the requirements of the Law on Investment Promotion and Facilitation, an amazingly simple and straightforward law, which does not require a lawyer to decipher. All fiscal incentives are indicated in the law.

RDB supports aspiring investors to expeditiously obtain other regulatory authorisations while assisting them to conduct realistic feasibility studies.

The board also assists to process visas and work permits, and I highly doubt any investor has ever requested citizenship. Special investor requirements and authorisations are expeditiously processed through higher authorities. The licensing process is hardly ever stuck in the bureaucracy.

I am not a legal expert, but I consider citizenship to be a sacrosanct subject that should be handled at the constitutional level, not through parliamentary Bills, for indeed it has far-reaching implications for the sovereignty of any nation. Unintended consequences of “economic” citizenships have occurred in several countries, where persons escaping justice elsewhere are said to have found residence justified by FDIs supported with laundered money.

Further, processing and granting of free investment citizenships will most likely face abuse through economic and political corruption.

Further, Kenya should avoid lowering threshold entry capital, and instead focus on high-value investors. Smaller capital investors are likely to frustrate the very SMEs we are busy promoting. Kenya should also be on the watch out for “cowboy” investors, the likes of those who have swindled Kenyans in the past. The lower the entry capital the larger the number of dubious investors we must contend with.

Kenya has other foreign investment frameworks — public-private partnerships (PPPs), export processing zones etc —, and these should as far as possible be harmonised to avoid contradictions.

Further, there is a need to assist county governments to get foreign capital through PPPs to benefit county efforts in areas such as agricultural processing.

In the industrial sector, we need to address key issues raised by the Kenya Association of Manufacturers (KAM), because these are the same challenges keeping away FDIs in the sector. Key among them is the need for tariff intervention on competing imports. No country anywhere in the world will significantly grow its industrial sector without effective protection against cheaper imports.

Finally, weak institutional coordination and follow-through may have cost Kenya critical FDIs. In 2013, Nigerian billionaire investor Aliko Dangote was in town and met senior government officials. He was seriously seeking to put up a cement factory in Kitui to use limestone deposits in Mutomo, fired with coal from Mui Basin in the same county.

I am not sure what exactly happened, but Dangote immediately went to Tanzania and by 2015 he had installed a cement factory in Mtwara fired with local natural gas and is soon commissioning a new 50-megawatt natural gas power plant. Did Kenya ever conduct a postmortem on why we lost this ready high-value mining/industrial FDI? How many similar FDIs have we lost?

Finally, a trip to Rwanda RDB may be useful in understanding how all ministries and agencies working in guided unison can deliver critical foreign investments and jobs.