Playing Hard to Get in a Sea of Many Fish : The Practical Implications of Saddling Foreign Investors with Host-Country Development

This chapter delves into the practical implications of an emerging critical trend in the field of foreign investments. Since 2002, countries such as South Africa, Namibia, and the Bolivarian states have adopted new investment legislation and measures. Some have gone as far as denouncing the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention), others like Namibia and South Africa have indicated their intention to no longer include investor-state arbitration in future international investment agreements (IIAs) to which they become parties. In Africa, this critical movement has culminated in the drafting of the Pan-African Investment Code, which lays a special emphasis on sustainable development in investment matters. What these countries mostly have in common is the fact that they have imposed new obligations on foreign investors. I basically submit that these heavier obligations and measures are going to lead to the under-supply of capital and will undermine the very sustainable-development goals that inspire them. Although they are foisted on foreign investors in the name of sustainable development, these obligations are problematic and, most importantly, they do not have the intended effects. The chapter is divided in four sections. In the first section, I outline the ‘attractions of foreign investors'. In the next section, I present in some detail the new and heavier obligations of foreign investors. I show that, in essence, these new obligations boil down to asking foreign investors to actively participate in the development of host countries. The third part of the chapter explores the practical implications of placing such heavy burdens on the shoulders of foreign investors. It is the crux of the entire chapter. The fourth and final substantive section raises a fundamental question regarding the line separating appropriate regulation and efficient contracting