A decision by the government of Tanzania to amend public-private partnership (PPP) laws and withdraw from international arbitration will scare away investors, experts said on Thursday.
The experts said the move will also make it difficult for Tanzania to do business with international financial institutions.
Honest Ngowi, an economics lecturer at Mzumbe University, said withdrawing from international arbitration will scare away investors because most foreign investors prefer international arbitration in resolving disputes.
“No one will be willing to invest in a place where disputes are resolved by local courts,” Ngowi said.
“This is not good news as far as investments are concerned, though I am yet to look at the new amendments thoroughly.”
Kigoma Urban Member of Parliament Zitto Kabwe said the move was a setback to efforts aimed at attracting more investors who could have contributed to the government’s drive toward an industrialized economy.
Kabwe said the amendment of the law is self-pleasing, because the problem is not arbitration but the government’s actions not to respect contracts.
“Its simple. Nobody will invest in Tanzania,” he said.
Tanzania is a member of the World Bank where the International Center for Settlement of Investment Disputes (ICSID) is affiliated, Kabwe said.
However, his sentiments differed from that of Semboja Hadji, an economics professor from the University of Dar es Salaam, who said the amendment of the law is of great importance, taking into consideration the stages in development that Tanzania has taken.
“To a serious investor who intends to come and make money, the change in the law was nothing; but to an investor who is coming with some other hidden agenda then this law is not suitable for him,” Hadji said.
He said the accommodation of international arbitration sections in the country’s laws were formulation during a time that the country had no expertise in any of the key sectors.
“This time we have trained our people and we have experienced judges and lawyers who can handle such issues,” Hadji said.
Tanzanian Parliament on Wednesday made amendments to some articles in the PPP Act, giving supreme powers to the country’s judicial system, instead of international arbitration bodies, to resolve disputes.
Attorney General Adelardus Kilangi told Parliament in the capital Dodoma that local courts are better placed to resolve investment disputes than international arbitration bodies.
“It is for this reason the government tabled the amendments of the PPP laws so that all disputes arising from government contracts with private entities are heard and determined within the country,” Kilangi told lawmakers.
The government’s chief legal adviser said most of the arbitrators in the international bodies are biased, forcing the government to use its own courts.
Under the amendments of the PPP Act, which was approved by parliament on Wednesday, all PPP agreements, negotiations and legal disputes shall be processed locally.