Not all foreign investment harmful to the environment

Sunday, February 23, 2014    

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Jamaica is among small developing countries which, understandably, are always very sensitive about foreign direct investment (FDI), especially when they are multinational corporations whose sales dwarf their GDP.

FDI involves ownership and control of firms, activities and assets including land. This is different from portfolio investment which is participation in ownership of less than 51 per cent, ie without control. FDI is accepted as necessary to the economic growth of developing countries because the more investment that they can mobilise from abroad raises the level of gross investment above that which is financed from national savings.

Concerns have been expressed about the outflow of profits, the amount of tax paid, the loss of control over key decisions about resource allocation and whether foreign investors' operations are harmful to long-term development prospects. Both because of reality and perception, considerable resentment can build up, in the government and in the populace at large, towards foreign investors.

One of these several controversial issues is how to strike a balance between the regulation of foreign investors to prevent their operations from doing permanent damage to our natural environment, while allowing them to maximise their efficiency and profitability.

In Jamaica, the much discussed topic is how to proceed with the development of a logistics hub in which Goat Islands would be an integral location, with some arguing that using Goat Islands would destroy a unique natural environment. The Government has all but dismissed this, saying there is nothing unique about the flora and fauna in that location.

Those worried about the natural environment, having lost the debate on whether there should be any development there or that it should remain pristine, have raised the spectre of Chinese investors ruthlessly constructing without any concern about the harmful impact on the environment.

Several myths have to be dismissed, starting with the recognition that all development and all economic activity have some impact on the environment and these need not always be harmful. Sometimes development actually protects the environment.

Every industry has some cost to the environment; for example, the red mud lakes are the cost of the alumina and bauxite industry. Government regulation, building codes and monitoring should seek to minimise the potential damage. Regrettably, this has not been a strong point of successive governments.

Poor supervision and inadequate enforcement can be costly; for example, sand mining in river beds and clearing land by burning which has deforested valuable watershed areas.

It must also be noted that many local businesses exercise no more care than foreign enterprises. Some locals have been just as rapacious and destructive to the natural environment as the foreign firms that they are wont to lambast. Certainly, some firms are better corporate citizens than others, but whole nationalities can't be branded as bad. All investors -- American, Chinese, Trinidadian or Jamaican -- must be made to operate in a manner which facilitates development with the minimum adverse impact on the natural environment.





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