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South-South Investment Treaties, Transnational Capital and African Peoples

Document Cited authorities 1 Cited in Related
Vincent
Date01 June 2013
AuthorIbironke T. Odumosu-Ayanu
Published date01 June 2013
DOI10.3366/ajicl.2013.0058
Pages172-201
INTRODUCTION

The flow of private capital is one of the major drivers of the global economy in the twenty-first century. African countries are active participants in the global regime that protects and regulates the flow of foreign direct investment (FDI), contributing to the regime mostly as recipients of capital, but sometimes as providers of this much-coveted capital.1

L. Sklair and P. T. Robbins, ‘Global Capitalism and Major Corporations from the Third World’, 23 Third World Quarterly (2002): 81.

The legal aspects of this regime are being dominated by investment treaties, the North-South2

On the usage of ‘South-North’, see K. Mickelson, ‘Rhetoric and Rage: Third World Voices in International Legal Discourse’, 16 Wisconsin International Law Journal (1998): 353, at 365, drawing on I. Head, On a Hinge of History: The Mutual Vulnerability of South and North, University of Toronto Press (1991), p. 14.

 treaties being the most common. In recent years, investment treaties concluded among Third World3

For a discussion of the Third World category, see Mickelson, ibid., at 360; B. Rajagopal, ‘Locating the Third World in Cultural Geography’ 15 Third World Legal Studies (1998–9): 1.

 countries – South-South investment treaties4

This paper divides investment treaties into categories based on the identity of the states parties to the treaties – North-South, South-South and North-North investment treaties. Compartmentalising investment treaties in this manner is partly based on the history of the international economic order and the vibrant debate between developed countries and the Third World over the ordering of the global economy. It allows a clearer analysis of how the source of capital, shared experiences of states, and positioning as a capital importer and/or exporter under a single treaty impact the contents of these agreements.

 – have proliferated, with African countries participating actively in the rapid conclusion of these treaties. This paper analyses the tripartite relationship between the flow of investment capital among African countries (or between other Third World countries and African countries), the protection of FDI through South-South investment treaties, and these two factors’ contributions to the socio-economic well-being of African countries and peoples. It explores the relevance of the source of capital using regional investment treaties concluded among African countries as its case study

An analysis of South-South investment treaties demonstrates the similarities between the contents of these treaties and other investment treaties. This paper proceeds on the basis that if South-South investment treaties are different from other investment treaties, those differences are minor. In spite of the differences in origin of investment flows, similarities in the contents of investment treaties involving various combinations of developed and Third World country partners suggest that the source of FDI does not necessarily define the contents of investment treaties. Regardless of the source of FDI, investors are likely to demand similar rights and protection. Nevertheless, some investment treaties, including some South-South treaties, include some modest modifications. Modest changes in South-South investment treaties may be explained in part by the relationship between the parties, the ideas that the relevant actors subscribe to, and the extent to which power defines the parties’ relationship.

I explore the relationship between transnational capital, South-South investment treaties and African peoples’ socio-economic well-being in the remaining five parts of this paper. In part II, I introduce African countries’ participation in the investment treaty regime and their relationships with other Third World partners. Part III analyses this paper's conceptual framework for assessing the relationships and structures that define Africa's investment regimes. It analyses the influence of transnational investment capital on the investment treaties that African countries conclude among themselves or with other Third World countries, and the extent to which these treaties respond to issues that impact upon African peoples and economies. Part IV commences with a discussion of the rationale for South-South investment treaties. Other discussion in the part focuses on the contents of select African countries’ regional investment treaties with emphasis on the potential contributions of these treaties to broader socio-economic questions. Flowing from the discussion in part IV, part V extrapolates the (potential) socio-economic contributions of the treaties analysed in part IV. Part V is an optimistic reading of South-South investment treaties outlining some potential socio-economic contributions of these treaties. In spite of the optimism, the analysis remains cautious, recognising that these South-South investment treaties remain located within a capital-dominated frame. The choice to extrapolate the potential socio-economic contributions of these instruments stems from the recognition that incremental changes, while modest, are relevant in the relationships that globalisation produces. The hope is to build on these changes. Part VI concludes.

 AFRICA IN THE INVESTMENT TREATY REGIME

African countries receive relatively small amounts of FDI.5

UNCTAD, Economic Development in Africa: Rethinking the Role of Foreign Direct Investment, United Nations (2005), p. 4.

Like the rest of the world, the bulk of FDI flowing to African countries is from developed countries;6

UNCTAD, Economic Development in Africa Report 2010 – South-South Cooperation: Africa and the New Forms of Development Partnership, United Nations (2010), p. 79 notes that in 2008, developed countries accounted for 91.6 per cent of total inward FDI stock into Africa. Between 2000 and 2008, developing countries’ total FDI inflows averaged 20.8 per cent. See p. 81.

 however, South-South FDI is growing. In fact, in each of the seventeen African countries that Ernst and Young profiled in 2011, at least one of their top five investors between 2003 and 2010 in terms of number of FDI projects were Third World country-investors.7

Ernst and Young, It's Time for Africa: Ernst & Young's 2011 Africa Attractiveness Survey, Ernst and Young (2011), pp. 38–41.

 For Rwanda, all top five were Third World country-investors. While South-South FDI is growing, in Africa, the United Nations Conference on Trade and Development (UNCTAD) notes that there is a concentration in both source and destination countries. The North African countries, Angola, Mauritius, Nigeria, South Africa and Zambia are major host countries, while the Asian countries are the major source countries.8

UNCTAD, supra note 6, pp. 83–4.

 Investors from countries like Brazil, Chile and Mexico are also visible.9

Ibid., p. 88.

 South African franchises and service providers have a visible presence in other African countries.10

T. M. Shaw, A. F. Cooper and A. Antkiewicz, ‘Global and/or Regional Development at the Start of the 21st Century?: China, India and (South) Africa’, 28 Third World Quarterly (2007): 1255, at 1259. See also D. Aykut and A. Goldstein, ‘Developing Country Multinationals: South-South Investment Comes of Age’, in United Nations Department of Economic and Social Affairs, Industrial Development for the 21st Century: Sustainable Development Perspectives, United Nations (2007), p. 85.

 Nigeria also exports FDI to other African countries, Ghana being one of them.11

Ghana Investment Promotion Centre, ‘First Quarter 2012 Investment Report (1st January to 31st March, 2012)’, 8(1) The GIPC Quarterly Update (April 2012): 1, at 2. China, Nigeria, India, Lebanon and South Africa ranked among the top ten investor countries in Ghana by number of registered projects. Nigeria ranked second on this list. When the rankings are done by the value of registered FDI projects, Nigeria ranks third on the list of top ten.

 Given the volume of South-South FDI that is being transferred, assessing the impacts of South-South investment treaties on local economies and peoples is a relevant endeavour

Scholars’ increased attention to South-South investment flows is not surprising since it is reported that about a quarter of transnational corporations (TNCs) in the world are from Third World countries.12

S.-A. Lee, ‘South-South Investment in South, East and South-East Asia’, in Economic and Social Commission for Asia and the Pacific, Role of Regional Cooperation: Business Sector Development and South-South Investment, United Nations (2008), p. 29, at p. 42.

Some contend that Third World investors are a distinct category of international economic actors in a significant but also predictable way.13

P. Meagher, ‘Institutional Evolution and the Emergent Structures of South-South Investment’ (Draft: American Society of International Law, International Economic Law Interest Group, 1 November 2008): 15.

 While South-South investments are market seeking, resource seeking and efficiency seeking like North-South FDI, Third World investors are said to be ‘able to do business in a wider range of contexts, due to such advantages as lower cost structures, the ability (acquired in the home country) to cope with uncertainties in the business environment, and their capacity to deliver products and services more suitable to developing economies’ due to a ‘narrower technological gap’ between home and host Third World countries.14

Ibid., at 16.

 Third World investors also have the advantage of shared experiences and sometimes cultural ties that allows them to operate in conditions that others may regard as difficult, for example, operating in post-conflict countries.15

Ibid., at 17. See UNCTAD, World Investment Report 2006–FDI from Developing and Transition Economies: Implications for Development, United Nations (2006), p. 186.

 It has been noted that Third World investors also have a relatively more positive perception of ‘their investment location in...

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