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Mining Interests Driving Investment Protection Negotiations with Madagascar and Tanzania

Published by MAC on 2008-03-19

Mining Interests Driving Investment Protection Negotiations with Madagascar and Tanzania

19th March 2008

by Embassy Magazine

Diplomats hope successful talks will prompt investment in agriculture and tourism, while opposition critics hope human rights won't be forgotten in the deals.

By Michelle Collins

Canadian mining interests abroad are at the root of the government's

recent push to sign investment protection agreements with developing

countries, a drive that now includes Tanzania and Madagascar.

Natural Resources Minister Gary Lunn revealed in a speech to the Prospectors and Developers Association of Canada on March 3 that Canada would be initiating Foreign Investment Promotion and Protection Agreement (FIPA) talks with the two African nations as well as Indonesia.

"The agreements we are negotiating reflect our understanding of the

importance of foreign investment as a driver of the mining industry

and social and economic development around the world," Mr. Lunn said.

Canada has launched a series of FIPA negotiations, mainly in countries that host major Canadian-owned mining operations, since the Conservatives came to power more than two years ago. While negotiations with India and Jordan have concluded, talks with Vietnam, Mongolia, China and Kuwait are ongoing.

Last year, International Trade Minister David Emerson signed Canada's first FIPA in eight years with Peru, where Canadian direct investment reached $2.3 billion in 2005, including major mining projects. At the time, Mr. Emerson said the investment deal would create "a predictable environment for Canadian investors." Canada currently has 23 FIPA agreements.

Canada's share of the world's mineral production exceeds $40 billion

per year. About 1,200 Canadian mining companies operate in 100 countries, including a large number of African nations.

Executive director of the Prospectors and Developers Association of

Canada Tony Andrews says the mining industry holds FIPAs in high regard.

"In general, we communicate to the government that we very much support these FIPAs, but we don't single out particular countries,"

Mr. Andrews says of the current talks. "A FIPA is important because

it mitigates some of the risk associated with some of the investing

in countries that have weak governments, and possibly conflict as well. It offers some assurances to your investments."

Deals Inspire Confidence: Envoy

While mining appears to be the main thrust behind the rash of FIPA talks, diplomats from Madagascar and Tanzania were hopeful Canadian

investment would reach into other areas.

With several Canadian firms operating in Madagascar's mines, Clara Randrianjara, counsellor at the Embassy of Madagascar in Ottawa, says a trade agreement between the two countries is for everyone's benefit. Ms. Randrianjara says Madagascar's growing agriculture and

tourism industries may also become important sectors for Canadian investors.

Tanzanian High Commissioner Peter Allan Kallaghe says Tanzania is happy to be among the first African countries Canada has initiated such talks with. Currently, Canada is the largest foreign investor in Tanzania, where Barrick Gold has invested about $1.3 billion since 1999.

"We see this as an instrument to inspire more confidence in the investment climate," Mr. Kallaghe says. "We're very appreciative to

the Canadian government agreeing to enter negotiations with us. It is significant of the confidence in us, so we can entice more Canadian

companies to invest."

Walid Hejazi, professor of international competitiveness at the Rotman School of Management at the University of Toronto, says these

FIPAs are a part of the government's move into foreign economies.

"Canadian companies have expanded globally at a far greater pace than foreigners have invested in Canada," Mr. Hejazi says.

He says Canada's role as a "host country" for investments-for instance, for every dollar that Canada invested abroad in 1970, there was $7 invested in Canada-changed around the year 2000 when Canadian

investment abroad surpassed foreign investment into Canada.

"We were very restrictive in foreign investment, we were not a big player," Mr. Hejazi says. "That's changed, now we're out there in a

big, big way."

Desperate for a Deal: NDP

International Trade Minister David Emerson says the negotiations with Madagascar, Tanzania and Indonesia are just now getting under way, and he would not speculate on when they might be completed.

"Whenever you put money on the line, you need some security and rule

of law and stability in terms of protecting your investment," Mr. Emerson told Embassy on March 13. "It involves a variety of issues including agreements that may be in place with the government in Madagascar."

However, NDP Trade critic Peter Julian says he has very strong concerns about the ongoing FIPA talks with these countries.

Mr. Julian says the Conservative government is disregarding fundamental Canadian values with these agreements because they're "desperate to get a deal."

"We look at Indonesia, there are clear and continuous human rights violations," Mr. Julian says. "This is part of the government agenda, seeming to want to give credibility to countries that have human rights violations. We're seeing that with Colombia."

Mr. Julian says trade agreements should be based on a fair trade model that demands high ethical conduct on the part of companies operating abroad, and says Canada could use such trade negotiations

as leverage to demand foreign governments address human rights violations.

While Liberal Trade critic Navdeep Bains also hopes to see labour and human rights issues addressed in the FIPAs, he says they are a good

step to improving bilateral relations with these countries, and ultimately toward signing free trade agreements.

"It's a continuation of the work the Liberals have been doing," Mr.

Bains says, citing 19 FIPAs signed under the Liberal government with

countries in Latin America, the Middle East and Asia.

"Our only concern is that we can't rely solely on FIPA, we should look at how we can sign air agreements, and science and technology investment agreements," he says.


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