TANZANIA AND THE MULTILATERAL AGREEMENT ON INVESTMENT (MAI)

The twenty nine members of the Organisation for Economic Cooperation and Development (OECD) have been busy for the last seven years negotiating a proposed ‘Multilateral Agreement on Investment (MAI)’ which, initially at least, is designed to create a ‘level playing field’ for investment between member countries of the OECD. It is beginning to create some alarm in developing countries including Tanzania however because of some of its proposed provisions. For example, the draft Agreement states that the MA1 would not allow developing countries which wished to join:

– to discriminate in favour of their own national investors compared with foreign investors;
– to place restrictions on the entry of or the nationality of key management personnel;
– to require investors to achieve a certain percentage of local content or export a certain proportion of output unless the investor gives some advantage to the country e.g. by offering to spend money on research.

The British government favours MAI in principle but over 120 questions have been asked in the British parliament and the European parliament has voted against the MAI by 437 votes to eight. Requests for exemptions from its rules fill 1,000 pages. The US negotiator said in February that his government would not sign it and a coalition of some 600 international organisations has come together to oppose the MAI.

Christine Lawrence, after discussing the matter with the World Development Movement (25 Beehive Place, London SW9 7QR Tel: 0171 737 6215) and sending them a copy of the last issue of TA (no 59) received the following reply:

‘There can be few better examples of the type of country whose long term future under an MAI regime gives rise for concern than Tanzania. There are real risks of a neo-colonialist scenario of low wage economies largely dependent on natural resources, with no available path to broad-based development. The Business Section of ‘Tanzanian Affairs’ No 59 mentions the great interest in a ‘Minerals Sector’ conference and (a few paragraphs later) concern for the fate of vast numbers of small scale mining labourers.

There is a good example of how the MAI might affect Tanzania on page 24 (of TA 59). The opening paragraph describes current efforts to attract foreign investment and states ‘there are no limits on the number of experts allowed in under the immigration quotas in the mining and petroleum sectors’ – implying that limits do exist in other sectors. Such limits ensure that local people are employed in the investment venture; thereby increasing their skills and creating potential for future home-grown industry. The MAI would abolish the right of countries like Tanzania to exercise such policies – the multinational would have the right to employ only expatriates should it so wish.

Tanzania could avoid this type of restraint by not signing the agreement but it would run the risk of being excluded from mainstream foreign investment, which is a key element of the development process, as evidenced by the existing enthusiasm outlined in ‘Tanzanian Affairs’. We have seen from the history of the World Bank structural adjustment programmes that it is virtually impossible for the poorest countries to opt out of economic prescriptions backed by the richest countries.’

Following discussions in the Britain-Tanzania Society, Tanzania Trade Centre Director in London, Simon Mlay, has made a number of other points:

a) the ability of Tanzania to generate enough foreign earnings to service and repay her huge external debt ($8.09 million on December 31 1997) and to provide foreign exchange needed to finance the development of infrastructure, education, health and other social services is a cornerstone of a sustainable development strategy and as such the Government should be able to exercise the option of favouring foreign investments that show commitment to sourcing raw materials locally as well as promoting exports. MAI prohibits government from seeking to promote this and strengthens investors’ reluctance to refuse to consider any such requirement even when there are ‘advantages’ on offer by the Government.

b) Tanzania’s rich natural resources (minerals, timber, arable land etc) are collectively owned by the people; the Government needs to promote the interests of the people by ensuring that they become stakeholders in partnership with foreign investors as the economy is liberalised. MAI will tie the hands of Government and make foreign investors unwilling to negotiate even where their operations entail displacing indigenous people whose livelihood depends on the resources taken over by the foreign investor.

c) OECD is the leading source of investments into sub Saharan Africa. Tanzania does not have the option of staying out of the MAT nor does it have a realistic chance of negotiating meaningful exceptions when they decide to accede Given the weak regulatory and legal framework and the silence of MAI in respect of off-shore registered companies, it should be of concern that MA1 could unwittingly worsen the drain on resources through tax evasion and dubious accounting practices.

d) Any multilateral agreement on investments or trade that is not negotiated within the framework of the UN systems (e.g. UNCTAD) with the full participation of all members is unlikely to fully represent the interests of developing countries.

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