Committee : ECOSOC
Country : Republic of Rwanda
Delegate : Sendy Jasmine Karunia Hadi, University of Indonesia
Topic : National Sovereignty and Foreign Direct Investment in Afric
Sovereignty and Promised Economic Growth. For a long time, Foreign Direct Investment in Africa has been a trade off between the two. As Borgean C. noted, FDI poses detrimental consequences upon Africa's sovereignty despite its benefits.The problems are rooted from the imbalance of power between foreign investors and African countries asoftentimes weget the lower-hand due to ourneeds of FDI. This is because the developed country as the origin of the investors tend to push developing nations to create lenient obligations for investor, while the country is imposed with many restrictions. This has resulted innegative implications in the political, social, and economic dynamic of a country, such as national regulation intervention and vital asset confiscation. Such cases can already be found in Sri Lanka in which they had to give up its Hambantota Port to China for failing to repay the loans. It may seem, at first, that it is a natural consequence. But, Hambantota Port was never economically feasible at the first place. Meaning that from the very first inception of the FDI, it was already forecasted that Sri Lanka only had slim to no chance of profiting from the project. In the case of Rwanda, we have FDI inflows of $410 million in 2016andhas experienced outstanding economic growth rate of 6.1% averagely because of FDI (African Investment Report 2017). However with that benefit, we still can’t rest assured with the high probability of infringements. Take for an example the railway building in Kenya by China. Instead of only refurbishing the existing line, they built the new one and that intensified the debt problem due to overpricing scheme it imposed.2 With that, we can see that FDI projects can be lucrative and underperforming at times.
Rwanda believes that there’s this urgency to balance between the two and past national/international actions have shown the efforts to do so. Seeing that Rwanda must safeguard its sovereignty, we have enacted Company Law of 2009, which requires investors to comply with disclosure requirements on their investment interest. By promoting transparency this way, it could be ensured that FDIs would be implemented in a manner beneficial to Rwanda and in compliance with applicable laws of Rwanda. This will result in a better balance between FDI and sovereignty. In the international level, UNCTAD has released several documents to regulate the mechanisms further through UNCTAD’s Training Manual on Statistics for FDI and the Operations of TNC, making sure the policy designed forinward FDI is benefitting the country economically.
Despite those efforts, there are still many instances where countries' sovereignty is compromised due to FDI. For example, the case of China-Ecuador where Ecuador faces huge budget deficits from getting China’s loan and now their oil industry is being controlled by China. As an investment destination, Rwanda proposes several solutions to address the concerns:
1. encouraging African countries to reaffirm its position on FDI negotiation by evaluating their borrowing capacity, rights and obligations, and profitability of the FDI;
2. encouraging African countries to prioritize beneficial projects for FDI by considering more value-adding projects;
3. promoting enforcement of information disclosure obligation to prevent asymmetric information between investors and the State. Furthermore, investors must conduct due diligence in ensuring compliance with the law of host State.
With those solutions in mind, Rwanda is thrilled to coordinate with other delegates in talking about this issue to reduce future costs of FDI.
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