| International direct investments can promote | | | | broad legal framework, the Governments assure |
| sustainable economic development | | | | investors security of title and guarantees that |
| The legal protection of international foreign | | | | investment in the country will not be expropriated. |
| investments by states is one key instrument and a | | | | There are also statutory guarantees for contract |
| very important mechanism to ensure the sustainable | | | | enforcement, recourse to legal systems for redress |
| economic development in African countries. It is one | | | | and binding arbitration conclusions. These are all part |
| complex issue of Public International Law domain, | | | | of a well-established legal system whose |
| especially when it comes to specific measures | | | | independence and integrity continue to be guaranteed |
| adopted by states at the level of the national legal | | | | by the national Constitution. |
| frameworks. | | | | The level of investment protection is generally |
| The legal, business and economic environment for | | | | measured on the basis of criteria related to: the |
| FDI in Eastern and Southern Africa (ESA) and the | | | | standard of treatment of investment (MFN and |
| protection of international foreign investments is | | | | National treatment principles), the performance |
| regulated at various levels, by international | | | | requirements, expropriation and nationalization regime |
| agreements / treaties, regional agreements and | | | | and dispute settlement laws. |
| national codes or legislation. The domestication of | | | | The commitment to sound and consistent |
| international agreements / treaties as well as regional | | | | macroeconomic polices, constitutional guarantees |
| agreements into national legal systems and their | | | | against expropriation of investment and for |
| subsequent enforcement by individual states requires | | | | protection of investment are clearly outlined in the |
| specific procedures of ratification and implementation. | | | | Constitution and the national investment laws and |
| The UN Conference on Trade and Development | | | | regional strategic orientation documents. Since |
| (UNCTAD) describes investment agreements as "the | | | | developed countries and international development |
| most important protection of international foreign | | | | agencies have emphasized the need for |
| investment." They are creating more rights and | | | | democratization as a determinant criteria for |
| powers for foreign investors - particularly the | | | | attributing funds to African countries, there are new |
| transnational corporations. In many African countries, | | | | trends and strategic approaches of attracting foreign |
| the implementation of international and regional | | | | funds, under the logic of good governance and |
| instruments is not as effective as one would expect. | | | | transparency. |
| The causes of this hiatus are to be traced in various | | | | In general, legal protection of foreign investments |
| structural and institutional structures inherent to | | | | covers the following key aspects: |
| national legal systems in these countries. | | | | (a) Discrimination in treatment of foreign investments. |
| The topic under investigation relates to the state of | | | | (b) Expropriation requirements for foreign |
| effective legal protection of international investments | | | | investments. |
| in Eastern and Southern African countries, mainly | | | | According to the new trends in investment regimes, |
| within two regional blocs; i.e. SADC and COMESA. This | | | | constitutional provisions and investment codes |
| article is the summary of a study conducted within | | | | adopted a general legal framework for investment |
| the region, with the objective to identify and analyze | | | | policy in the countries under review. These trends |
| international law instruments applicable in the region, | | | | can be summarized in the following important |
| as well as the national situation in Mozambique as a | | | | guarantees: |
| specific study case on the domestication and | | | | (i)Liberal, free market economic environment |
| enforcement of international agreements. | | | | together with appropriate political and social policy |
| Africa is working hard to improve its general policy | | | | and pro gram framework; |
| framework for FDI | | | | (ii) Adherence to the principles of democratic |
| The general policy framework of FDI on the African | | | | governance, constitutional guarantee of rights to |
| Continent has improved greatly in recent years, a | | | | freedom and liberty, welfare, property ownership and |
| trend that is continuing in many countries that were | | | | protection. In this regard, the countries are |
| not in recent past or are not currently affected by | | | | constitutionally obliged to encourage, promote and |
| wars. However, the environment for foreign | | | | protect beneficial investment as the enabler of |
| investments protection in Africa is still inadequate to | | | | socioeconomic change and progress. |
| attract high quality and efficiency-seeking | | | | (iii) Full integration into the wider global economy |
| investments and the incentive framework continues | | | | through regional organizations membership of and |
| to suffer from a number of deficiencies. Faced with | | | | adherence to charters and principles of and a host of |
| increased international competition, foreign investors' | | | | bilateral trade agreements among others. These |
| global strategies seek to maximize their | | | | testify to these countries resolve at participation and |
| competitiveness by locating facilities in multiple | | | | integration in the global economy. |
| locations around the world. In this "increasingly | | | | (iv) Articulation of policies and strategies to make |
| globalized" world, attracting foreign investment | | | | trade and investment development a gateway to |
| depends more on the ability to provide a favorable | | | | regional and the larger African continental market. |
| investment protection regime and competitive | | | | (v) Conducive legal and institutional framework with |
| factors of production. | | | | more open laws that support and encourage free |
| The former requires a stable, efficient, and | | | | circulation of goods and persons, including modern |
| service-oriented environment that welcomes | | | | labor laws. |
| investors into most economic activities without | | | | The principles above highlighted are however more |
| discrimination. Modern legal and intellectual property | | | | often on the papers than really implemented in |
| rights, effective competition policies, a strong | | | | practice. The framework of regional cooperation is |
| judiciary and minimum bureaucratic harassment are all | | | | becoming a more compelling channel for the |
| important to attract foreign investors. The latter are | | | | improving of national laws and policies. |
| the ultimate determinants of FDI. Competitive factors | | | | During the lat two decades, the overwhelming |
| of production no longer mean just cheap raw labor | | | | experience in many Eastern and Southern African |
| and basic infrastructures. Today they require | | | | countries is of poor investment environment. African |
| adaptable labor skills, sophisticated supplier networks | | | | countries in general, have not offered foreign |
| and flexible institutions. Tax incentives can enhance a | | | | investors the kind of investment climate that they |
| country's attractiveness but if other factors are | | | | find attractive. For a number of years, some African |
| unfavorable, they will be insufficient to significantly | | | | governments were very suspicious of foreign |
| increase inflows of FDI. | | | | investors. In very recent years, many African |
| This study argues that African countries in the | | | | countries have reformed their policies toward foreign |
| eastern and southern region have made so far | | | | investors. Some have also acted to reduce the |
| commendable efforts to reform their legal and | | | | administrative barriers that have so commonly |
| institutional frameworks for the promotion of | | | | remained long after policies were reformed. Yet, the |
| investments. However, there still need to take into | | | | reforms have not led to the increased inflows of |
| consideration the requirements for attracting foreign | | | | foreign investment that were anticipated and needed. |
| investments. In some instance, as illustrated by the | | | | Part of the explanation derives from the fact that |
| case of Mozambique, investment laws were | | | | investors often are ill informed about the changes |
| modernized. But the Investment Protection Centre | | | | that have occurred in countries whose investment |
| still need to have the authority required to decide on | | | | climates were once inhospitable. Another part of the |
| investments, and need to be empowered and given | | | | explanation lies in the tendency of many investors to |
| autonomy. An other issue relates to some outdated | | | | think of Africa, or at least parts of Africa, as facing |
| regulations which need to be harmonized with the | | | | similar problems, even those problems that may in |
| new investment regimes. Legislation on land and | | | | fact be quite localized. Thus, war, civil disturbances, |
| ownership of production factors, labour laws, financial | | | | collapsed regimes, as well as continuing bureaucratic |
| procedures, and other administrative barriers are the | | | | barriers and remaining inhospitable policies toward |
| main key issues which need to be streamlined in | | | | investors affect the reputation of neighboring |
| order to satisfy international standards for attracting | | | | countries, as well as the country experiencing the |
| foreign investments | | | | problems |
| In their attempted efforts to attract FDI and | | | | Experience in African countries has demonstrated |
| determined to benefit from it to the fullest, the | | | | that creating an enabling environment for investment |
| countries under review reformed their legal | | | | requires finding solutions to constraints, which include, |
| frameworks for a better protection of foreign | | | | among others: |
| investments. These changes are currently taking | | | | -unstable macro-economic framework or conditions; |
| place in an environment characterized by the | | | | inadequate infrastructure; inappropriate banking and |
| proliferation of investment rules at the bilateral, | | | | financial systems and regulatory and supervision legal |
| sub-regional, regional and multilateral levels. The | | | | and institutional frameworks; |
| resulting investment rules, numerous Preferential and | | | | -inadequate resource mobilization and allocation |
| Free Trade Agreements with investment | | | | mechanisms; lack of or limited information; |
| components, Bilateral Investment Treaties (BITs) and | | | | socio-economic problems; |
| Multilateral Investment Agreements (MIA) are | | | | -unstable political and social environment; cumbersome |
| multi-layered and multi-faceted, with a myriad of | | | | legislation and procedures, rules and regulations etc.; |
| obligations differing in geographical scope and | | | | -lack of specialized or some legislation and |
| coverage and ranging from the voluntary to the | | | | procedures; |
| binding commitments. They constitute an intricate | | | | -skilled human resources; |
| web of obligations that partly overlap and partly | | | | -market size, debt burden and balance of payments |
| supplement one another. This study is of actual | | | | problems; ineffective and inefficient institutional |
| interest for research, as it attempts to review this | | | | framework, set-up or delivery; etc. |
| proliferation of legal frameworks for the protection | | | | An enabling environment for foreign investment |
| of international investments in the Southern and | | | | should include: |
| Eastern African regions. There is real need to | | | | -stable macro-economic environment , good and |
| understand the policies, mechanisms developed in this | | | | reliable infrastructure , law and order; secure property |
| very sensitive area, and to analyze the issues that | | | | rights; enforceable contracts; a functional financial |
| are raised in the implementation of such intricate | | | | system; market determined prices - including the |
| frameworks. | | | | exchange rate and interest rates; etc. |
| The policy strategy currently pursued by many | | | | The legal and institutional frameworks are not |
| Southern African countries is explicitly intended to | | | | sufficient to guarantee a flow of foreign investments |
| improve conditions for foreign direct investment | | | | in the Eastern and Southern African region. Other key |
| (FDI). Over the past two decades many countries | | | | factors are equally important |
| have implemented broad ranging economic reforms, | | | | Conclusion |
| including the liberalization of domestic markets and | | | | In its final conclusion, the study finds that over two |
| some privatization, which has had an effect on the | | | | decades, countries in the Eastern and Southern |
| flow and nature of foreign investment. However, In | | | | African region have made considerable efforts to |
| the past, Africa has, on average, been relatively | | | | create adequate legal and regulatory frameworks for |
| unsuccessful in attracting FDI in spite of very large | | | | the protection of foreign direct investments. |
| increases in global flows | | | | However there remain serious impediments which still |
| However, the general policy framework of FDI on | | | | affect negatively the flow of foreign investments. |
| the African Continent has improved greatly in recent | | | | Inconsistent policies and inadequate host country |
| years, a trend that is continuing in many countries | | | | operational measures HCOMs, together with outdated |
| that are not destroyed by wars. However, the | | | | labour laws are some of the challenges which call for |
| environment for foreign investments protection in | | | | more reforms. |
| Africa is still inadequate to attract high quality and | | | | It further reaches the conclusion that there is need |
| efficiency-seeking investments and the incentive | | | | for awareness within the governments in the region |
| framework continues to suffer from a number of | | | | on key issues related to the promotion and |
| deficiencies. Faced with increased international | | | | protection of investments. It can be formulated as |
| competition, foreign investors' global strategies seek | | | | follows: foreign investors want to gain market |
| to maximize their competitiveness by locating facilities | | | | access, have their investments protected and be |
| in multiple locations around the world. | | | | free to operate in a manner of their choosing. Host |
| In this 'increasingly globalized' world, attracting foreign | | | | countries want to develop services and |
| investment depends more on the ability to provide a | | | | infrastructure, meet local needs, produce exportable |
| favorable investment protection regime and | | | | goods and improve locally available technology. |
| competitive factors of production. The former | | | | The interest of foreign investors and host |
| requires a stable, efficient, and service-oriented | | | | governments can be harmonized if the investment |
| environment that welcomes investors into most | | | | meets both sets of agendas. This can be done if |
| economic activities without discrimination. Modern legal | | | | investors decide on the viability of specific projects |
| and intellectual property rights, effective competition | | | | and the host governments decide on the priority |
| policies, a strong judiciary and minimum bureaucratic | | | | sectors and conditions of FDI consistent with their |
| harassment are all important to attract foreign | | | | economic and development objectives. |
| investors. The latter are the ultimate determinants of | | | | As in the case of Mauritius, this should be a credible |
| FDI. Competitive factors of production no longer | | | | development programme backed by credible policy |
| mean just cheap raw labor and basic infrastructures. | | | | framework conducive to long-term economic and |
| Today they require adaptable labor skills, | | | | social stability. With such policies, the countries are |
| sophisticated supplier networks and flexible | | | | more likely to have the capacity over time to service |
| institutions. Tax incentives can enhance a country's | | | | the repatriation of profits, provide a skilled and |
| attractiveness but if other factors are unfavorable, | | | | healthy labour force, and develop suitable |
| they will be insufficient to significantly increase inflows | | | | infrastructure. |
| of FDI. | | | | Part of this credible programme should cover the |
| Experiences in Eastern and Southern Africa for FDI | | | | need for convergent bilateral and multilateral |
| protection are changing rapidly | | | | investment and trading arrangements in the COMESA |
| Many countries of the Eastern and Southern African | | | | and SADC regions to avoid trade and investment |
| region, mainly through their respective Economic | | | | deflection and diversion. This should also go along |
| Integration Organizations, have adopted adequate | | | | way towards removing administrative and fiscal |
| legal environment to attract foreign investments. | | | | barriers to the promotion of investments. There is |
| Legal guarantees and protections for foreign | | | | also need to adopt appropriate legal, regulatory and |
| investments are generally contained in the national | | | | institutional frameworks to ensure efficient and |
| Constitutions and in specific Investments laws. In a | | | | smooth implementation of the Work Programme. |