by Munetsi Madakufamba
A proposal for the establishment of a Multilateral Investment Agreement (MIA) in the World Trade Organisation (WTO), to be adopted in the near future, has sparked widespread concern among some sections of civil society who are now lobbying their governments to reject it.
During a visit to Zimbabwe in early October this year, Martin Khor, head of the Malaysian office of the Third World Network (TWN), urged all Southern African Development Community (SADC) member states to join hands with other developing nations in resisting the adoption of the MIA, or risk losing sovereignty in determining national economic and socio-political policies that are crucial to domestic capacity-building.
Contributing to an NGO discussion in Harare aimed at mapping out a strategy on raising awareness among SADC countries, Khor confirmed that developed countries are lobbying to introduce the foreign investment treaty in the WTO, and that plans were already at an advanced stage.
Khor said the Northern countries, among them the European Union (EU), were pushing and hoping to get the principle approved in December 1996 at the first WTO Ministerial Meeting in Singapore, or at least to get agreement to start a WTO working group on trade and investment as a first step toward negotiating an agreement.
In a seminar paper on “The WTO and the Proposed Multilateral Agreement: Implications for Developing Countries and Proposed Positions”, the TWN alleges that a paper outlining proposals of the MIA rules — entitled “A level playing field for direct investment worldwide” — was informally circulated to WTO diplomats in Geneva, Switzerland.
If adopted, the MIA would give trans-national corporations (TNCs) rights to establish 100 percent equity ownership in all sectors of the economy, except defence and security, in any WTO member country. The agreement would also ensure “national treatment” to TNCs. In other words, national policies/laws that favour local companies such as giving priority to indigenous firms in the awarding of tenders would be deemed discriminatory, and therefore WTO-illegal and have to be cancelled.
At first sight MIA seems a noble idea insofar as it promises more foreign investment inflows that SADC has been clamouring for, but a closer look shows that the treaty has wide-ranging implications for the host country’s domestic policy.
For example, no country at present has adopted a total right of entry policy. Foreign companies may be allowed to operate in such strategic sectors as telecommunications and where they are allowed, Approval is made with conditions. These conditions may range from restricting the percentage of company that a foreign investor can take, to ownership rights where foreigners are not allowed to own land.
Moreover, the institutional framework of the WTO is such that host countries of foreign investment that fail to meet the proposed regulations could then be subject to the imposition of trade sanctions and or penalties. Thus, developing countries would give up their right to regulate TNCs under the threat of sanctions being placed on their exports.
As part of an effort to prevent the WTO from adopting the MIA, NOOs representing sections of civil society in many countries worldwide have petitioned the trade organisation.
“Such a proposal would abolish the power and legitimate right of states and people to regulate the entry, conditions, behaviour and operations of foreign companies and foreigners in their country. This is a prime and fundamental sovereign right which is essential for any country to determine its own economic and social policies,” reads part of the petition.
For countries in transition — still recovering from the legacy of colonialism and apartheid — the right and ability to regulate foreign direct investments is an issue of paramount importance, to enable a relevant mix of policies for the transition to appropriate models of development.
Tanzania and Zimbabwe have already expressed their anxiety over a move they believe is designed to erode the role of the state in determining autonomous investment policies. President Mugabe has been briefed by the Malaysian Prime Minister, Dr Mahathir Mohamad, who, along with other key Asian leaders, is a strong critic of the multilateral agreement.
Third World Economics, a fortnightly publication by TWN, quoted Dr Mahathir as saying the proposed MIA could take away the business of local firms and banks, which are still coming to grips with harsh dictates of the current economic order, and cause them to dose down. He likened the present disparity in world trade to a match in which the contestants were giants on one side and midgets on the other.
“Imagine huge foreign banks opening up branches in various parts of the country. They can afford to make losses here whilst making profits elsewhere and thus continue their business. But if our banks make losses here in their own country, they cannot continue operating and will dose down,” says the Malaysian Prime Minister.
The issue of “foreign investment regime per se” was previously rejected by developing countries as part of the agenda item on “trade-related investment measures” in the Uruguay Round negotiations, for fear of losing autonomy and the right to regulate foreign direct investment.
Analysts say the WTO, an organisation originally mandated to govern issues at the border vis a vis trade ‘matters, is surprisingly crossing the floor to issues pertaining to domestic policy and are now warning of “imperialism in a new gun”.
Brian Raftopoulos, Director of the Zimbabwe-based Institute for Development Studies (IDS), says the civil society should act swiftly in sensitising governments and stimulating debate on possible implications in the SADC region. He says governments should move fast in view of the time before the MIA is tabled as an agenda item for the December WTO Ministerial Meeting in Singapore. (SARDC)
