Fair and stable investment contracts for the extractive sector

Project description

Title: CONNEX Support Unit
Commissioned by: German Federal Ministry for Economic Cooperation and Devel-opment (BMZ)
Country: Global
Lead executing agency: Government institutions and structures involved in contract ne-gotiations (such as responsible line ministries, ministries of finance, presidential offices)
Overall term: 2017 to 2020

Context

The extractive sector is very important to the economies of many developing countries. In many part-ner countries, more than a fifth of the gross domestic product is generated through raw materials. This sector thus offers great opportunities for economic and social development. Well negotiated invest-ment contracts that can be professionally implemented are a major success factor here. They regulate the relationship between state and investor and clarify rights and responsibilities. However, partner countries often lack the necessary information, capacities and specialist knowledge required to nego-tiate with investors on an equal footing. In many cases, they conclude raw material contracts that do not come close to tapping the existing economic potential, give rise to financial disadvantages and therefore fail to fully realise their development potential.

Existing offers of support often have a regional or sector-specific focus and are therefore insufficient-ly tailored to the needs of partner countries seeking support. With a view to meeting these needs, the CONNEX Initiative to provide support in contract negotiations was established at the G7 summit in Brussels in 2014. The CONNEX Support Unit is the implementation structure of the CONNEX Initiative and is responsible for implementing the support activities.

Objective

The CONNEX Support Unit is an effective and innovative instrument that supports partner countries in complex contract negotiations, principally in the extractive sector. Its aim is to facilitate the conclusion of stable investment contracts.

Approach

To achieve this goal, the CONNEX Support Unit makes independent experts available to developing and transition countries on request. These experts with different areas of specialisation support local negotiation teams in negotiating large-volume investment contracts. The main focus here is on prepar-ing and implementing specific contract negotiations. This offsets information and capacity deficits on the part of governments and allows negotiations on an equal footing. The CONNEX Support Unit sup-ports governments at short notice on request. In this way, it supplements long-term approaches in development cooperation such as developing a legal framework and establishing institutions. 

The CONNEX Support Unit makes use of existing synergies with other service providers such as the African Legal Support Facility (ALSF) and the International Senior Lawyers Project (ISLP). The aim here is to maximise the benefits for partner countries. This cooperation and the creation of strategic alli-ances with various regional organisations are key to the long-term success of the CONNEX Support Unit’s activities.

Results

A development-oriented approach to foreign direct investment is an essential prerequisite for sustain-able development as defined by the United Nations 2030 Agenda. Fair contracts contribute to eco-nomic development and the mobilisation of revenues, while supporting the achievement of the Sus-tainable Development Goals (SDGs).

The CONNEX Support Unit has implemented support measures for complex contract negotiations in more than twelve countries worldwide. Thanks to the support of CONNEX in negotiating investment agreements, the partner countries have been able to mobilise additional resources from the extractive sector and increase this sector’s contribution to sustainable development.

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