Fahamu (Oxford)

Tanzania: Fipa - the Myth of Reciprocity

analysis

The new investment code between Tanzania and Canada raises questions as to whose interests the Tanzanian state really serves, why, and to whom the Tanzanian state is accountable. Such a far-reaching investment regime has been adopted with minimal public awareness and debate among Tanzanian citizens

Hypocritical! This may be the most accurate word to characterize the recent Foreign Investment Protection Agreement (FIPA) between the United Republic of Tanzania and Canada.

Since the infamous demise of the proposed Multilateral Agreement on Investment (MAI) in 1999, Canada has been quietly using bilateral trade agreements to introduce the very investment terms that were then opposed by a groundswell of Global South countries and informed citizens. The most recent of these is an investment agreement with Tanzania.

WHAT TRANSPARENCY?

While Canadian government officials pose as champions of transparency in the realm of global governance, and have touted their support for the Extractive Industries Transparency Initiative (EITI) in Tanzania, this Agreement has had minimal public visibility.

Even though the Agreement was signed in Dar es Salaam on May 16, 2013, and tabled in the Canadian parliament on June 12, 2013, only recently was the Agreement made available on a Canadian government website.

There is no indication that the Agreement was also tabled in the Tanzanian parliament or that Tanzanian parliamentarians have had access to its content.

Further, while the terms of the Agreement apply to both central and 'sub-national levels of government - i.e. in Tanzania's case, to municipal and local government authorities - it is not clear that Tanzanian municipal and local government officials had any access to the proposed content of the Agreement, information about its implications or opportunity to provide input, debate or dissent. Indeed, in Canada, much of the opposition to the MAI in the late 1990s was due to the strictures it would have placed on municipal and provincial governments.

Given Canada's stated commitment to supporting transparency in governance practices in countries of the Global South, did Canada take any steps to encourage or enable the Tanzanian government to popularize the content of the proposed investment agreement, educate the citizenry and provide forums for discussion and debate?

Notably, the official signed version of the Foreign Investment Protection Agreement between the United Republic of Tanzania and Canada is written only in Canada's two official languages - English and French - and not in Kiswahili.

Does a Kiswahili translation exist, and if so, has it been circulated to Tanzanian stakeholders such as parliamentarians, local governments and civil society organizations? It appears not.

Can the Agreement be deemed to have legitimate legal status if it has not been subject to a legitimate democratic process?

WHAT MUTUALITY?

A second major concern is the imbalance in benefits to Tanzanian and Canadian investors. While the agreement purports to 'intensify economic co-operation and promote sustainable development for the mutual benefit of both countries' and to 'create and maintain favourable conditions for investments by investors of one Party in the territory of the other Party', this is little more than rhetorical flourish: the agreement is surely primarily designed to protect Canadian investments in Tanzania.

The economic difference between Tanzania and Canada is of 'David and Goliath' proportions: at $1.8 trillion GDP (Canada) versus $28 billion GDP (Tanzania) in 2012, Canada's economy is 65 times larger than Tanzania's.

While direct investment figures indicating Tanzanian FDI in Canada and Canadian FDI in Tanzania are not available - 'due to issues of commercial confidentiality' - they are predictably at least as disproportionate as the trade figures: in 2012, Canadian exports to Tanzania were valued at $80.5 million, while imports from Tanzania were just under $9 million.

While there is an active and growing Canadian investor presence in Tanzanian transportation, electricity infrastructure, mining equipment and services, and the oil and gas sector, Canada's most important presence in Tanzania is in mining.

In 2011, there were 16 Canadian mining companies active in Tanzania with cumulative mining assets amounting to $2.3 billion. Indeed, benefits and protections for Canadian mining companies appear to subtend the latest round of bilateral investment agreements that Canada has instigated.

Significantly, similar agreements signed with Zambia and Cameroun were announced at the annual Prospectors and Developers Association of Canada (PDAC) conference in March 2013, where they were applauded by mining company officials.

WHAT ARE THE DETAILS? (IF THE FIPA ENCOURAGES MORE CANADIAN INVESTMENT IN TANZANIA, WON'T THAT BE GOOD FOR TANZANIA?)

The Canada-Tanzania FIPA agreement features all the now-classic elements of a neo-liberalized investment regime designed to favour and benefit transnational business. It limits the possibilities for Tanzania to introduce policies that will protect and favour domestic businesses and Tanzanian citizens against aggressive foreign competition.

A substantive body of scholarship and analysis has accumulated since the late 1990s demonstrating the manner in which such investment protections frequently run counter to national (and nationalist) policy priorities, and social and environmental values.

It has been widely acknowledged that Global South countries are prohibited by such agreements from using the very policy measures that industrialized countries relied on during the 20th century to protect local and national economies, and enable sustainable developmental growth.

The Tanzania-Canada FIPA includes these classic features, about which we offer a few thoughts:

- No prohibitions on transfers of capital out of Tanzania. Capital will be freely transferred in convertible currency, i.e. in Canadian or USA dollars.

Canadian investors cannot be obligated to keep investment profits in Tanzania, in order to be reinvested in sustainable development of the Tanzanian economy. Rather, profits accrue to Canadian investors, will leave Tanzania and benefit the Canadian economy.

- 'National treatment', 'most favoured nation' status, and prohibitions on 'performance requirements.' Canadian investors are guaranteed investment opportunities and conditions that are as beneficial as any other foreign investor in Tanzania.

Tanzania cannot privilege or prioritize Tanzanian investors over Canadians (the only stated exception here being artisanal miners, and the granting of primary mining licenses and gemstone mining licenses). Canadian investors are to be treated as though they are Tanzanian citizen investors on a mythical "level playing field".

It is clear that few Tanzanian citizens or businesses are actually in a position to compete with Canadian businesses. This will be particularly significant in the area of mining industry services and equipment provision, where Canadian companies are actively seeking new fields for investment.

Closing out Tanzanian mining services businesses will seriously hamper Tanzania's ability to benefit from upstream and downstream mining industry opportunities and greatly limits the capacity of the mining sector to foster broad-based sustainable development in Tanzania.

At the same time, Canada maintains an exemption from performance requirements as these apply to various federal-provincial economic development agreements and to Indigenous peoples.

That is, in strategic areas, Canada preserves its right to privilege employment and business contracts with Canadian citizens in various regions of the country to protect and foster local economic development opportunities.

- 'Expropriation': Tanzania will be prohibited from expropriating (e.g. nationalizing), either directly or 'indirectly' (the latter subject to 'case-by-case' and thus highly subjective criteria) Canadian investments, except for purposes of 'public interest' and only then with 'prompt payment' of fair market value compensation in convertible currency.

This provision (Article 10 in the Agreement) offers very strong protections for Canadian investors and creates a powerful chill effect for any future Tanzanian governments who might otherwise wish to acquire stronger control and ownership of the resource extraction sector.

- Tanzania will not be able to require Canadian investors to appoint Tanzanians to senior management positions or to require that a majority of any company's Board of Directors is Tanzanian.

This reduces 'capacity building' opportunities for Tanzanians to acquire experience in senior management and reduces the ability of Tanzania to maintain oversight and control of key economic initiatives.

Such measures tacitly function to perpetuate a colonial-style mode of foreign white domination.

- Tanzania cedes a measure of sovereign control by agreeing to have investment disputes arising between Canadian investors and the Tanzanian state arbitrated and settled not in Tanzania's national courts, but via the International Centre for Settlement of Investment Disputes (ICSID).

- The Canada-Tanzania FIPA may, in principle, be terminated by future administrations, but its provisions apply for 15 years beyond the termination date to all investments made prior to termination;

- Uranium mining: While Canada included an exemption in the FIPA to enable it to maintain its right to restrict foreign ownership of uranium mining, there is no parallel exemption for Tanzania vis-à-vis its growing uranium prospecting and mining industry; that is, Tanzania's uranium mining sector is open to unrestricted foreign ownership;

- Canada's Investment Canada Act and the Canada Business Corporations Act trump the provisions of the FIPA in that Canada expressly maintains the right to review and make final determinations on the establishment of and levels of ownership of businesses by non-Canadians.

These Acts are exempt from Articles 4 (National Treatment), 8 (Senior Management and Entry of Personnel) and 9 (Performance Requirements) of the Tanzania-Canada FIPA.

By comparison, the exemption included for Tanzania's Investment Act vis-à-vis the FIPA pertains only to its right to require minimum capital investment by foreign investors.

CONCLUSION: DEVELOPMENTAL STATES, OR INSTRUMENTALIZED STATES?

This is a brief and preliminary analysis of the Canada-Tanzania FIPA, designed to catalyse wider discussion and debate. The official rhetoric casts the Agreement as a progressive project of two states with mutually-beneficial national economic development goals.

Our scrutiny of the Agreement rather identifies two states acting in the interests of Canadian investors with a particular (although not explicit) focus on the corporate mining sector.

This raises questions as to how much longer the Canadian state can maintain a mythology - its international reputation - as a nation with a strong commitment to human rights, the rule of law, and transparent, participatory democratic process as a hallmark of "good governance".

For Tanzanians, it raises questions as to whose interests the Tanzanian state really serves, why, and to whom the Tanzanian state is accountable, if such a far-reaching investment regime can be adopted with such minimal public awareness and debate among Tanzanian citizens.

Please find the link: http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/fipa-apie/tanzania-text-tanzanie.aspx?lang=eng

- Paula Butler and Evans Rubara

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