Memorandum from World Development Movement
(12 January 1999)
Thank you for your invitation to submit evidence
to the Committee with regard to its inquiry on inward and outward
investment in Scotland. The World Development Movement focuses
on poverty eradication in the poorer countries and has not undertaken
specific analysis of investment into or out of Scotland. However,
we regard many of the fundamental issues as applicable internationally.
WDM's most recent involvement in these issues has been through
our campaign to stop the proposed Multilateral Agreement on Investment
and through our proposals for a new investment framework. We offer
the following comments.
INTRODUCTION
1. Perhaps the fundamental failing of the
MAI was to treat all investment as if it had the same benefits
or costs to the host community and society. From WDM's experience,
this is by no means true. There are numerous cases of investment
that harms local communities, takes land or resource rights away
from traditional users, destroys the environment or weakens the
local economy.
2. There are also many cases in which foreign
investors operating in the same industry generate very different
benefits for the local economy. For example, there are major differences
in job creation and local value added from a "screwdriver"
manufacturing plant versus a fully integrated manufacturer or
between a greenfield site and an acquisition of a Scottish company
by a foreign competitor (often resulting in subsequent rationalisation).
THE REGULATORY
ROLE OF
GOVERNMENTS
3. We consider that governments should play
a regulatory role in maximising the social benefits from foreign
investment and minimising the social costs. This intervention
is required because the best interests of society are not always
served by the practices of a company seeking to maximise profits.
4. Such a role for government should aim
to ensure that foreign investment contributes to the wider objectives
for society, such as in creating jobs, reducing poverty and promoting
sustainable development.
5. These objectives should take precedence
over the provisions that were included in the failed MAI, such
as:
— the rights of establishment for foreign
investors;
— "National Treatment" (requiring
that foreign investors be treated at least as well as domestic
companies);
— a prohibition on conditions (such
as those aimed at promoting local employment or links with local
suppliers;
— the right of foreign investors to
international dispute settlement.
6. WDM considers that these provisions are,
in some cases, beneficial to foreign investors, but do not necessarily
serve the wider interests of society or the objectives for foreign
investment outlined above. These provisions should not be raised
to the level of objectives and made mandatory, as was proposed
under the MAI.
7. If the MAI had been agreed, it is likely
that these provisions would have created conflicts with the developmental
aims of a Scottish Parliament. For example, changes in the obligations
of foreign landowners may have required compensation under the
MAI's definition of indirect expropriation (discrimination against
foreign investors would not have been required to establish such
a claim).
8. WDM's views on the failings of the MAI
and a possible replacement framework of international regulation
on investment were most recently outlined in our submission to
the Trade and Industry Select Committee. I attach a copy.*[2]
OUTWARD INVESTMENT
9. As recommended in WDM's most recent briefing
on a future regulatory framework, outward investors from Scotland
should have a legal (as well as moral) obligation to comply with
internationally-agreed norms for their investments overseas (such
as compliance with the core conventions of the International Labour
Organisation).
*
2 Not printed. Back
| 
