Foreign Direct Investment – Does the Rule of Law Matter? Elias C. Chipimo Annual LAZ Conference 2017

FDI – Does the Rule of Law Matter? “It depends” In some instances the answer may be “Yes” In certain instances the answer may be “No” The key to determining the answer will always lie in the vision and objectives to which a nation has aligned itself

Introduction – Rule of Law Is there an objective definition of “Rule of Law”? Different things to different people Prisoner (access to justice) Investor (effective enforcement of rights) Regular citizen (lack of accountability) “Why should any society seek to establish the rule of law and how does this impact foreign direct investment”?

Rudiments of the Rule of Law

Rudiments of the Rule of Law Balancing power in society – no one is above reproach and ordinary citizens have a right to air and have their grievances addressed A set of principles that provides objective standards for applying laws so that: (1) no one is disadvantaged by being denied access to a known and documented set of laws and (2) no one can circumvent laws due to wealth or position in society

Rudiments of the Rule of Law Combination of three critical elements: Legal and regulatory regime Institutional framework Cultural context World Justice Project Established in 2006 Created under the American Bar Association Established 4 principles that underpin the rule of law

4 Universal Principles (WJP) 1. The government and its officials and agents as well as individuals and private entities are accountable under the law. 2. The laws are clear, publicised, stable, and just; are applied evenly; and protect fundamental rights, including the security of persons and property and certain core human rights.

4 Universal Principles (WJP) 3. The process by which the laws are enacted, administered, and enforced is accessible, fair, and efficient. 4. Justice is delivered timely by competent, ethical, and independent representatives and neutrals who are of sufficient number, have adequate resources, and reflect the makeup of the communities they serve.

FDI – Lessons Learned Recognition that legal and institutional reform does not happen overnight Extensive overhaul of a country’s legal and institutional system is not a necessary precondition to attract large multinational investment Foreign investment is a dynamic force in the forefront of the push for reform

FDI – Lessons Learned Often the requirement of foreign investors is not grand sweeping changes but mundane specific ones Because of their practical approach and specific demands, foreign investors are well suited to articulate rule of law challenges FDI can facilitate effective legal and institutional change

FDI – Does Rule of Law Matter? Yes No Inclusive development Patronage (who you know) Broad-based FDI Specific Economic diversification Narrow mono- economic base Large, small and micro-scale investment One-off big investment intention

Thank You Questions