Corporate Foreign Policy

The EU is a key trade partner of Kazakhstan, accounting for USD 53 billion of its foreign trade turnover and 47% of accumulated foreign investment. And on June 3rd, the President of the European Commission, José Manuel Barroso, completed his first official visit to the post-Soviet nation.

During his two-day visit, he met with President Nursultan Nazarbayev, Prime Minister Serik Akhmetov and the Chairman of the Lower Chamber of Parliament (Majilis), Nurlan Nigmatulin, later delivering a lecture to students and teaching staff at the Eurasian National University.

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The following was originally published in Foreign Policy Journal, penned by former Governor of Abia State Orji Uzor Kalu on the notion of amnesty for Boko Haram:

French poet Victor Hugo once stated that “amnesty is as good for those who give it as for those who receive it. It has the admirable quality of bestowing mercy on both sides”. However, as much as we have witnessed steps taken by Nigerian President Goodluck Jonathan toward embracing this ideology and attempting to understand our would-be adversaries, Boko Haram, we must truly incentivize and steward talks as best we can—and perhaps on their terms—in order to bring about lasting peace and reconciliation.

Nigerians are facing many challenges, perpetual stumbling blocks hindering a smooth transition to prosperity and geopolitical competition. Yet there is none so blaringly obvious as the complacency our national leadership has emanated while our citizens routinely put their lives in jeopardy simply walking to school, attending church, or going to work. The threat of ‘domestic terrorism’ looms large and weighs heavy on our consciousness; in fact, Nobel-prize winner Wole Soyinka remarked no more than a week ago that Nigeria is on the verge of a ‘potential civil war’.

At present, we have nowhere collectively to hide or turn to but government, looking to accountable leadership to provide a lasting solution. But there are questions lingering in the air, on strategic execution rather than simple theorization.

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The following was originally published in Foreign Policy Magazine, penned by Hayley Barbour and Ed Rogers:

Last week, we learned that the Chinese government had hacked into the computers of some of Washington’s most prominent organizations — law firms, think tanks, news outlets, human rights groups, congressional offices, embassies, and federal agencies — not to steal intellectual property or unearth state secrets, but rather to find out how things get done in the nation’s capital. According to the Washington Post, hackers were “searching for the unseen forces that might explain how the administration approaches an issue … with many Chinese officials presuming that reports by think tanks or news organizations are secretly the work of government officials — much as they would be in Beijing.” In other words, it appears that Chinese hackers have a lot of time on their hands and don’t know much about Washington. There are probably instances where a massive database and a fancy algorithm can tell you what you need to know about a place, but D.C. isn’t one of them.

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Every year our law firm puts out an updated Resource Nationalism Checklist for distribution to our clients and colleagues.  Now we’ve decided to make it fully available to the public.

The list is our attempt to respond to what we see as a relatively underdeveloped marketplace of ideas when it comes to scenario planning for expropriation, unfair regulatory intervention, nationalizations, and resource nationalism events that have an impact on foreign investors in emerging markets.  The literature is abundant on the existence of political risks, but very few research houses are advancing many solutions or strategies.

There seems to be little dispute that resource nationalism is back in a big way, and it is not just limited to the developing world.  Resource nationalism is front and center, from Europe to North America.  Not all businesses are properly prepared to operate in a world in which states and parastatals are the major players in the market, while there are often dangerously naive assumptions about the protections of law in unlawful contexts.  There are many urgent questions to be addressed on a case-by-case basis, such as the connection between resource nationalism risk and the effective implementation of corporate social responsibility programmes as well as the implementation of a corporate foreign policy.

The good news is that there is a stronger than ever international legal framework for investors, particularly through Bilateral Investment Treaties (BITs) and through options for direct investor-state arbitration under ICSID, NAFTA, the Energy Charter Treaty and many other regional trade pacts as well as dozens of other avenues explored in the checklist.  As a practice area that Amsterdam & Partners LLP is well known for, I would be pleased to hear from any readers to discuss these issues in more detail.

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The following is an English translation of an article by economist Oleg Biklemishev published in Novaya Gazeta which outlines some of the main economic challenges Russia is facing headed into 2013.

Sticky Stagnation 2012

The system is not ready for development

Year 2012 is becoming economic history. After a month or two, the experts will carefully explain everything after looking into the final statistical data. In the meantime, there are several symbolic stories that seem to create an image.

The first scene: Pensions (retirement plans)

Perhaps one of the most discussed topics was the future of the pension system and savings trust. As a result, Prime Minister Dmitry Medvedev, who has blamed the calculation error on his predecessors, returned most of the money to the pension distribution feeder.

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This article originally published in Insurance Day on 11 December 2012.

The thing about measuring political risk is it is never the same tomorrow as it was today.

It seems every day there is news of major social or political upheaval that has an existential impact on both foreign investors and their insurers. From threats of a coup in Thailand to rebel invasions in the Congo to an anti-corruption trial in Brazil, every business with foreign operations finds itself tasked not only with navigating complex political issues but also coming up with its own policies to limit exposure and rapidly respond to changing conditions.

While political risk has always been a factor for investors and their insurers, in more recent years a confluence of events has led to a heightened sense of exposure. Accounting firm Ernst & Young has titled “resource nationalism” as the biggest risk facing mining companies for the second year in a row, while Eurasia Group warned investors the tenuous balance of domestic economic stability against international security would be a theme for 2012.

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An intriguing analysis has recently been published in the Moscow Times by Associate Fellow of the Russia & Eurasia Programme at Chatham House in London John Lough.

Below, John writes at length about the transformation of Rosneft in to a power-player at British Petroleum and the TNK-BP acquisition’s immediate ramifications to the Russian economy and to the global energy sphere:

…A critical factor that allowed the deal to go ahead this time was Gazprom’s demise as a national champion. Its sustained underperformance and lack of responsiveness to the rapidly changing global gas situation brought about by the shale gas revolution are confirmation of a trend that has built up over many years. Gazprom does not currently have the ability to reform itself and adapt to a more competitive environment. Its business model in Europe is coming under increasing strain, and it has so far been unable to diversify to Asian markets.

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The following opinion editorial was penned by Rt. Hon. Prime Minister Morgan Tsvangirai (MDC-T) and originally published in the Wall Street Journal Europe:

Zimbabwe’s Movement for Democratic Change recently commemorated its 13th anniversary at a ceremony in the city of Bulawayo. Contrary to popular belief, my political party had much to celebrate.

Four years ago, Zimbabwe was nearly a failed state. Hyperinflation had reached a historic peak. Freedoms were stifled at every turn. Starvation ran rampant and cholera had spread to a near-epidemic level. Schools were closed, many for an entire year. The ratio of students to textbooks was 15 to 1. Political institutions were in large part—if not totally—to blame for a lack of both vision and accountability.

We can point to the past, and the international community often does so. We’ve been told that the atrocities of 2008 continue to justify economic sanctions hindering our forward trajectory.

But in the past four years, we have taught our colleagues at home and around the world that it is possible to have a Zimbabwean government that serves the people. In that time, we have grown dynamically. Bolder, lasting reforms are on the way.

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The Moscow Times and Steel Guru have reported that Rosneft is looking to build a $700 million oil-products pipeline from Mozambique to Zimbabwe in an unprecedented effort to expand its international reach in to Africa.

The new route seeks to compete with shipments to Zimbabwe by road from neighboring South Africa that supplement supplies through an existing pipeline, which is working at full capacity, Roman Trotsenk said late last week.

Rosneft expects to obtain construction permits and conclude the necessary agreements by the end of this year, he said.

The new pipeline — from Mozambique’s port of Beira to Zimbabwe’s capital, Harare, Trotsenko said — will presumably run alongside the current 700-kilometer link.

The pipeline has been reported to potentially be extended through to Zambia, Malawi and Botswana.

The existing pipeline from Mozambique has a capacity of 130 million liters a month, which amounts to 1.3 million metric tons or 9.8 million barrels per year. Zimbabwean officials said the new line would carry up to 300 million liters a month.

Zimbabwe’s consumption of oil products is about 5 million tons per year, Trotsenko said.

The African project, Trotsenko stated, is a chance for Rosneft to win a new sales market. He didn’t elaborate.

In other news, Rosneft recently began producing oil in Venezuela as part of an international consortium.

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The blog Diverging Markets has published an interesting book review of Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor by Hugh Sinclair.  I haven’t yet read it myself, but I am bracing myself for the long-overdue hit job.

It’s never fair to extrapolate one quote or passage as being representative of a book as important as this one, but since I happened to have my laptop open as I was finishing it, I couldn’t help pulling a couple quotes. Here’s one regarding the proposition that credit may be a “human right”:

But what did Muhammad Yunus actually say about this human right? “[Credit is] also a human right, so that people can create their self-employment with that money. If they can create income for themselves, they can take care of right to food, right to shelter much more easily than government can ever do it.” If, as some have speculated, 90 percent of microfinance is directed to consumption, or loans cost 144 percent, how does this create employment or income? This is the difference between the theory and the practice of microfinance.

And here’s another a few pages later:

…the debate is not whether microfinance works, but how the inherent conflicts of interest can be managed.

I would actually consider Chapter 13 alone to be a mission statement for the entire industry.

What else is in this book…obviously a lot of uncomfortable truths, but I think the most appropriate way to continue discussing them here would be to break it down by audience types.