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Wednesday, 22 July 2009

Bigger than Lumwana? 2nd Edition

A Chinese investment story we discussed a while back, actually also many times on the House of Chiefs (e.g. here, here and here), gained new momentum this week with the formal $3.6bn Investment Promotion and Protection Agreement (IPPA) between Zambia and Zhongui Mining Group. I have not seen the details of the IPPA, perhaps Mr Mutati would be so kind enough to publish it ? Without the details it is difficult to know what Zambia has agreed to.

All I know is that IPPAs usually contain special provisions. They are designed to encourage investor confidence by setting "high standards of investor protection applicable in international law". The elements usually include provisions for equal and non-discriminatory treatment of investors and their investments, compensation for expropriation, "transfer of capital and returns" and "access to independent settlement of disputes". Also they are usually not well received due to their secrecy (e.g. see this Tanzanian case).

Mr Mutati has a website, perhaps now is a good time for him to upload some documents that are actually worth reading. I am not holding my breath though, if the Development Agreements saga is anything to go by.

5 comments:

  1. 34,000 jobs according to this article:

    http://www.daily-mail.co.zm/media/news/viewnews.cgi?category=5&id=1248244678

    The world economy will not remain in the doldrums forever, the Chinese appear to be pre-positioning themselves for the recovery.

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  2. I suspect much more it terms of indirect impacts. The level of investment is impressive given the economic conditions.

    My worry is lack of transparency, which makes it difficult for us to understand the trade-offs.

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  3. Cho;
    I think the Chinese are just playing it safe. For starters I think the Chinese are scared of being left with a stash of 1.2 trn in dollar reserves. Remember some people have been making noises about the dollar losing its shine because of the state of the US economy and it's heavy indebtedness. Makes sense to have these dollars in assets. The Chinese investments are seemingly long term and not necessarily based on short term profit motives. They want to lock in commodity sources for their future growth considering the fact that a huge number of Chinese are still relatively untouched by the current growth. There is still some 80% of some way to go.

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  4. Much as the Chinese would want to turn their dollars into assets, the current economic conditions in a way are favouring them in that they have the bargaining power. It is therefore very difficult (for me) to envision Zambia signing a very favourable deal.

    I also known for a fact that the Chinese are very shrewd business men. They like to negotiate commercial deals with the full weight of their political power. With offers of 'free' stadium and this and that, many politicians would be on their knees signing the deal.

    It's not an easy position to negotiate from. So perhaps our politicians should take precaution before accepting those 'kind gestures'.

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  5. Zedian,

    Much as the Chinese would want to turn their dollars into assets, the current economic conditions in a way are favouring them in that they have the bargaining power. It is therefore very difficult (for me) to envision Zambia signing a very favourable deal.

    Especially when there is a government that basically does not care about the future of the economy, the country or the people.

    What we need to do, is to separate the civil service and parastatals - the state - is separated from the political class, the cabinet, MPs and the ruling party.

    Regulation, not privatisation.

    ReplyDelete

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