FDI

The national policy outlined in the Economic Transformation Act No. 45 of 2024 (the Act or the ET Act ) identifies promoting foreign investment as a key driver in Sri Lanka’s economic transformation. It further underscores the need to attract export-oriented foreign direct investment (FDI) to support the ‘growth of non-debt creating inflows to the economy’. The policy sets forth two specific investment goals. The first is to increase the country’s net FDI inflow to at least five per cent of Gross Domestic Production by the year 2030. The second is to ensure that at least forty per cent of the country’s net FDI is in exports of goods or services by the same year. Achieving these goals requires Sri Lanka to create a conducive business environment. The preamble to the ET Act also emphasizes the need for a law that fosters an investment-friendly environment within the country. It further affirms Sri Lanka’s commitment to establish ‘a transparent, inclusive, and rules-based system that promotes fair and equitable treatment’ for both domestic and foreign investors. To that effect, the ET Act provides for a comprehensive set of investment guarantees. Yet, they mainly focus on protecting the interests of foreign investors and placing them in an advantaged position relative to domestic investors. The idea behind prioritizing investor protection is to ostensibly promote FDI which has been identified as a key driver of Sri Lanka’s economic growth in the post-economic crisis era. Thus, the ET Act manifests the structural biases inherent in international law on foreign investment while perpetuating the long-standing power disparity between foreign and domestic investors by embedding it within Sri Lanka’s domestic legal system.

Based the observation from Ghana and Kenya, there is the need to improve the efficiency and effectiveness of investment tax incentives to ensure transparency, accountability, reduce associated costs, and check abuse.

While international trade has undergone significant structural changes recently, particularly with the proliferation of new generation of free trade agreements (FTAs), the debate on the consequences of IIAs for sustainable development continues to widen and intensify. In effect, while there has been fundamental changes in the international investment landscape in terms of players (now comprising state-owned enterprises and sovereign wealth funds) and FDI direction (with emerging economies now being, not only recipients, but increasingly home states), governments are also now adopting industrial policies and development strategies that contrast with their erstwhile hands-off approach to economic development.

“Not acceptable at this level”, a professor commented on one of my exam questions that asked students to “[d]escribe the salient features of the Southern African Customs Union (SACU).” This happened in 2017 at the University of Namibia (UNAM) where, until last year, I taught the International Economic Law module, a module pitched at the level of a bachelor honors degree. The professor – an academic from a leading South African university hired to moderate examination papers from UNAM’s Faculty of Law – recommended that I tweak my question as follows: “Discuss the validity of the Southern African Customs Union in the WTO framework”.

The call for an open, rules-based approach to investment facilitation at the multilateral level is informed by a tipping point in the international investment arena. As discussed below, this paradigm shift and various precedental challenges have made it imperative to seek international investment policy coherence.

Developmental statism differs from the R4I model insofar as the economic activities of foreign state firms, as opposed to local state firms, drive R4I dealings. This should concern policy makers because of what an externally driven agenda implies for the long-term development of host states.

In this essay, I argue that the AfCFTA needs to rethink its relationship with the continental emancipatory movements. Its focus on economic integration without social-emancipatory movements undermines its central aim of creating “the Africa we want.” Its top-down approach fails to capture labor movements in Africa. Additionally, by creating yet another integration organization in Africa despite the existence of several regional and continental integration projects it cashes organizational costs that could have been spent in creating a labor-friendly integration project.