Investment for Sustainable Development

The East African Community (EAC) recognizes the crucial role of investment in fostering development. Increased Foreign Direct Investment (FDI) has the potential to fuel agricultural transformation, bolster industrial development, and stimulate the growth of service sectors. These factors, in turn, contribute to job creation, value addition, and economic growth. Reflecting this understanding, EAC partner states have actively pursued attracting FDI through investment regimes, bilateral treaties, and participation in multilateral negotiations.

However, a closer examination reveals a critical shortcoming in the current investment model – its failure to deliver sustainable development. Existing treaties and policy frameworks often prioritize investor rights over those of host countries and their citizens. This prioritization of short-term profits over long-term well-being manifests in several concerning trends. While FDI inflows have increased, reaching an estimated $7 billion in 2014, tangible benefits for local communities remain limited. Statistics indicate a disconnect between increased investment and metrics such as job creation, value addition, and technology transfer. These figures suggest that the current model fails to ensure a trickle-down effect that empowers local communities. Furthermore, the existing model can weaken a government’s ability to regulate in the public interest. This, in turn, can lead to violations of Economic, Social, and Cultural Rights (ESCs) and environmental rights.

A paradigm shift is underway on the global stage, with a growing movement calling for a transformation of investment models. The objective is to ensure that FDI acts as a catalyst for sustainable development, not a hindrance. This shift is reflected in several initiatives:

• Regional Efforts: The EAC partner states are actively developing a Model Investment Treaty that seeks to balance investor rights with development goals. This treaty represents a significant step towards a more equitable approach.
• National Reviews: Several countries, like South Africa, are undertaking comprehensive reviews of their national investment policies. These reviews aim to ensure alignment with sustainable development objectives.
• Global Movement: A growing chorus of voices challenges the current model, particularly the Investor-State Dispute Settlement (ISDS) provisions that can limit a government’s ability to regulate for the public good.