The Legal Protection of International Investments in Eastern and Southern Africa – Lessons From Case

nternational direct investments can promote sustainable economic development

The legal protection of international foreign investments by states is one key instrument and a very important mechanism to ensure the sustainable economic development in African countries. It is one complex issue of Public International Law domain, especially when it comes to specific measures adopted by states at the level of the national legal frameworks.

The legal, business and economic environment for FDI in Eastern and Southern Africa (ESA) and the protection of international foreign investments is regulated at various levels, by international agreements / treaties, regional agreements and national codes or legislation. The domestication of international agreements / treaties as well as regional agreements into national legal systems and their subsequent enforcement by individual  Investment climate  states requires specific procedures of ratification and implementation.

The UN Conference on Trade and Development (UNCTAD) describes investment agreements as “the most important protection of international foreign investment.” They are creating more rights and powers for foreign investors – particularly the transnational corporations. In many African countries, the implementation of international and regional instruments is not as effective as one would expect. The causes of this hiatus are to be traced in various structural and institutional structures inherent to national legal systems in these countries.

The topic under investigation relates to the state of effective legal protection of international investments in Eastern and Southern African countries, mainly within two regional blocs; i.e. SADC and COMESA. This article is the summary of a study conducted within the region, with the objective to identify and analyze international law instruments applicable in the region, as well as the national situation in Mozambique as a specific study case on the domestication and enforcement of international agreements.

Africa is working hard to improve its general policy framework for FDI

The general policy framework of FDI on the African Continent has improved greatly in recent years, a trend that is continuing in many countries that were not in recent past or are not currently affected by wars. However, the environment for foreign investments protection in Africa is still inadequate to attract high quality and efficiency-seeking investments and the incentive framework continues to suffer from a number of deficiencies. Faced with increased international competition, foreign investors’ global strategies seek to maximize their competitiveness by locating facilities in multiple locations around the world. In this “increasingly globalized” world, attracting foreign investment depends more on the ability to provide a favorable investment protection regime and competitive factors of production.

The former requires a stable, efficient, and service-oriented environment that welcomes investors into most economic activities without discrimination. Modern legal and intellectual property rights, effective competition policies, a strong judiciary and minimum bureaucratic harassment are all important to attract foreign investors. The latter are the ultimate determinants of FDI. Competitive factors of production no longer mean just cheap raw labor and basic infrastructures. Today they require adaptable labor skills, sophisticated supplier networks and flexible institutions. Tax incentives can enhance a country’s attractiveness but if other factors are unfavorable, they will be insufficient to significantly increase inflows of FDI.

This study argues that African countries in the eastern and southern region have made so far commendable efforts to reform their legal and institutional frameworks for the promotion of investments. However, there still need to take into consideration the requirements for attracting foreign investments. In some instance, as illustrated by the case of Mozambique, investment laws were modernized. But the Investment Protection Centre still need to have the authority required to decide on investments, and need to be empowered and given autonomy. An other issue relates to some outdated regulations which need to be harmonized with the new investment regimes. Legislation on land and ownership of production factors, labour laws, financial procedures, and other administrative barriers are the main key issues which need to be streamlined in order to satisfy international standards for attracting foreign investments

 

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