Review investment pacts for your benefit, EAC states told

Dar es Salaam. Many investment agreements are not in favour of Tanzania, stakeholders say.

That is why foreign direct investment (FDI) inflows into Tanzania have dropped for the third year running, they stress.

They were speaking in separate interviews on the sidelines of a workshop for development stakeholders in the East African Community (EAC) here.

They called on Tanzania to review investment treaties to have a win-win situation.

Laws and policies should bear in mind what Tanzania wants to achieve.

FDI inflows dipped by 24.4 per cent last year to $1.18 billion (about Sh2.6 trillion), down from the 2015 level, according to United Nations Conference on Trade and Development.

The Southern and Eastern African Trade Information and Negotiations Institute (Seatini) country director, Ms Jane Nalunga, said foreign investors enjoyed numerous legal rights without needing to worry about corresponding responsibilities.

Way back in 1959, Germany and Pakistan signed the first bilateral investment treaty (BIT) in the world without knowing they marked a new era as many countries have followed the example since then. Currently, the international legal system that governs international investment flows is shaped by a network of about 3,000 BITs and other international investment agreements (IIAs), according to the Netherlands-based organisation Both Ends that focuses on international trade and investment issues.

“This system no longer serves its purpose and needs to be changed profoundly,” opined Ms Nalunga.

“Not only is it questionable whether IIAs at all encourage international investment flows in support of sustainable development, but its current generation has also failed to address the uneven balance of rights and responsibilities between foreign investors and the host countries.”

In recent years, a large number of countries have faced costly international investment treaty claims on matters of economic policy, financial stability, and environmental and health regulations, according to Both Ends senior policy officer Burghard Ilge.

This reality, and especially the fact that 60 per cent of all investor-to-state-dispute settlement claims are brought against developing countries, has serious repercussions for poverty reduction, inclusive growth and sustainable development. This has in turn, he said, sparked many governments to rethink and revisit their current BITs regime.

Serious questions, according to him, are being raised by citizens and their representatives about the legitimacy and effectiveness of the BITs regime.

Reforming the multi-layered investment treaty regime calls for collective thinking and constructive engagement by all stakeholders: governments, inter-governmental organisations, the private sector, civil society, think-tanks and academia.

“Rethinking, reforming, and where necessary, terminating bilateral investment treaties is imperative because of superior treaty obligations under the UN charter and human rights convention,” suggested Mr Ilge.

Already the government has started reviewing treaties with some of investors.

In May, Attorney General Adelardus Kilangi told Parliament that his office had started reviewing contracts signed by Tanesco and Songas.

Last year, President John Magufuli assented to bills which require the government to own at least a 16 per cent stake in mining projects.

Dr Magufuli reiterated that no new mining licences would be issued until Tanzania put things in order and that the government would review all mining licences with foreign investors.

However, according to private sector development specialist Solomon Baregu, changing BITs is not enough as a sound legal and regulatory framework is needed.

“When signing agreements, the government should understand that it is entering into a deal. It should be strong in negation by providing investors with conditions on what we need, for national interests,” opined Mr Baregu.

“Let’s increase transparency in our treaties. There should be monitoring mechanisms for the treaties to be fruitful to the public.”

Investors, according to Mr Baregu, should have a deeper economic impact to the country and above all to everyone in terms of employment creation and technology transfer.

The Tax Justice Network -- Africa policy lead in charge of the tax and investments programme, Mr Jared Maranga, was of the view that the government should use its power to ensure that the country benefits from an investment.

“The government has the right to get what it negotiates and not what it deserves. We need to be strong but not ridiculous,” said Mr Maranga. For that to work, Kigali, Rwanda-based international trade negations independent consultant John Kanyangoga called for a friendly tax system.

“Taxes should be well calculated.”

Seatini executive director Nathan Irumba suggested for adoption and implementation of policies and rules that are friendly to multinational companies.

“If we are to record sustainable development, legal system should be friendly. It should be working properly,” explained Mr Irumba.