Transcript Andrew Keili- CEMMATS, Sierra Leone

UTILIZING A MODIFIED FDI FRAMEWORK
FOR IMPLEMENTING CDM PROJECTS IN
SIERRA LEONE
ANDREW K.KEILI
EXECUTIVE DIRECTOR
CEMMATS GROUP LTD., SIERRA LEONE
BACKGROUND
 The CDM should meet emission commitments and
engender sustainable development in developing countries.
 Cost considerations and institutional settings are important
in attracting CDM investors
 Existing channels handling Foreign Direct Investment
(FDI) matters in developing countries could be made to
handle CDM matters as FDI and CDM are interlinked
 Africa has seen a pronounced decline in flow of FDI since
1990. Although Africa’s share of CDM will be small and
implementation costs are likely to be high and often not
competitive, FDI experience should offer useful lessons for
implementing CDM projects.
OBJECTIVE OF PRESENTATION
To analyse the FDI process and procedures
for Sierra Leone and determine the extent
to which the framework can be
strengthened to meet CDM institutional
needs especially those relating to the DNA
THE SIERRA LEONE ECONOMY
Sierra Leone is recovering from a ten-year rebel war
which has hampered economic growth.
  The economy is based on the exploitation of natural
resources, notably agricultural, marine and mineral
resources.
  Public sector influence is pervasive in economic
activity
  High debt servicing affects public investment
  The GDP in 2002 was $829 million with a per capita
GDP figure of $160
THE SIERRA LEONE ECONOMY  The % contribution to the GDP by sector are:
Agriculture (44.1), Industry (24.4) and services (27.1).
The breakdown for the industrial sector by sub sector
is: Mining and quarrying (13.6), Manufacturing and
handicrafts (6.2), Electricity and water supply (1.8) and
Construction (2.8).
  Private sector investment rose to 1.7 % of GDP in
2002 from 1.3% of GDP in 2001. Private investment is
projected to rise to 4.7% of GDP in 2003
CONSTRAINTS TO ECONOMIC GROWTH
The sparse coverage, unreliability and extremely high costs of
services provided by state utilities and transportation problems
constitute huge barriers to sustainable economic growth. Constraints
to economic growth include:
 
Access to capital
 
Legal impediments
 
Unyielding bureaucracy
  A financial system largely insensitive to the business
community
 
Lack of support services (mainly infrastructure services)
 
Poor macroeconomic environment
 
Attitudinal problems (the foremost being corruption).
There is however now a realization that these factors ought to be
addressed. There is also a much greater awareness in government
of factors influencing investment in a country.
FDI IN SIERRA LEONE
FDI is a wide area and aspects of it are handled
by various Ministries. FDI inflows to Sierra
Leone were small at $4.9m and $4.0m
respectively in 2000 and 2001. Corresponding
figures for South Africa were $887.9 and
$6052.7 and Ghana $114.9 and $89.3.
ROLE OF GOVERNMENT MINISTRIES AND
AGENCIES IN
INVESTMENT MATTERS
An examination of the functions of three key Ministries is
relevant in assessing the link between FDI and CDM in
Sierra Leone.

The Ministry of Finance develops and manages
macroeconomic, financial, monetary and fiscal policies. It
handles privatization issues and granting, controlling and
monitoring financial concessions given to various
investors
 The Ministry of Lands, country planning and the
environment develops appropriate policies and
programmes for Lands, Forestry, Town and Country
Planning and the environment. It develops national
environmental policy and maintains relations with
international organizations dealing with environmental
issues.
ROLE OF GOVERNMENT MINISTRIES AND
AGENCIES IN
INVESTMENT MATTERS
• The Ministry of Trade and Industry develops policies
and programmes to stimulate local and export trade
and enhance investment and economic growth. Its
mandate covers private sector development, National
Bureau of Standards, promotion of new enterprises and
investment and industrial development and research.

Other technical ministries are also involved in
investment matters relating to their areas of expertise
eg. the Ministries of Mineral Resources, Energy and
Power, Marine Resources and Transport and
Communications
TRADE AND INDUSTRY MINISTRY IN THE AVANTGARDE FOR ATTRACTING INVESTMENTS
Investment matters had been within the purview of
various ministries, who took the lead in investment
matters in their own areas. The Trade and Industry
Ministryis now in the avant-garde, liaising extensively
with the various Ministries. The new Investment Code
dwells heavily on the “one stop shop” concept and the
Trade and Industry Ministry will play an even more
central role in investment matters. The Ministry is being
restructured to be able to effectively perform its myriad
functions in trade, industry and investment matters. Its
responsibility for the enhancement of investment, private
sector development, industrial development and research
INVESTMENT DOCUMENTATION
• Investment code
Draft code covers the following:

Priority sectors for investment
  Qualifying enterprises for incentives

Establishment and registration of enterprises

Investment facilitating and advisor groups

General and specific incentives

Other issues like repatriation of profits, research
and training, foreign exchange regulations and
settlement of disputes.
•
INVESTMENT DOCUMENTATION
• SLEDIC publications
• The main issues addressed in this publications are:

Investment climate and priorities

Guarantees to investors

Market access

Major investment opportunities
  Registration and Investment approval process

Major areas for interest and potential projects
• Information bulletins from various Ministries
• These include Tourism, Mineral Resources etc.
• Chamber of Commerce
• Miscellaneous documents and general information
ASSISTANCE TO INVESTORS
An investment Facilitating Committee (IFC)
under the Ministry of Trade and Industry will assist
investors in obtaining permits, licenses and certificates
of clearance, serve as a general source of information to
investors and help in identifying joint venture partners
in Sierra Leone.

SLEDIC provides basic information on the
investment climate in Sierra Leone, detailed
information on investment rules and procedures,
investment opportunities, financing and offers
assistance in arranging visits.
 
ASSISTANCE TO INVESTORS
 
Various Acts and regulations deal with different
types of investments that are available directly at the
Government Bookshop or through SLEDIC

Local technical and financial consultancies are
also available to provide specialist advice to investors.

Technical information can also be garnered
directly from the line Ministries
• Chamber of Commerce offers miscellaneous types of
assistance
EVALUATION AND QUALIFICATION
CRITERIA FOR INVESTMENT
PROJECTS
Presently, line Ministries may evaluate specific projects
dealing with their Ministries using technical, financial
and economic criteria. Major projects are ratified by
the cabinet. The Trade and Industry Ministry intends
to develop evaluation criteria for projects in concert
with various line Ministries. Evaluation procedures
can be discerned from the qualifying criteria for
various projects outlined in the Investment Code or
specific regulations relating to a particular industry.
Criteria for qualification vary by the type of industry.
Financial resources of the investor and qualifications
and experience in the particular field are usually of
paramount importance. There is now a requirement
for most industries to carry out an EIA study.
PROCEDURE FOR ESTABLISHMENT AND
REGISTRATION OF ENTERPRISES
1.Investor submits application form to SLEDIC. Information
provided on name of enterprise, whether company/other
business enterprise,nationality of applicant, products/services,
location, structure of enterprise, investment details
2.SLEDIC provides opinion on application,acknowledges
receipt, establishes investor file, submits file to Investment
Facilitating Committee.(IFC). Within 14 days of end stage 1
3. IFC accepts or rejects application and informs candidate. If
approval given IFC gives details of assistance it could provide
candidate. Within 5 days of end of stage 2.
4. IFC may assist investor with getting working permits,
licences, certificates, clearances, provide general assistance
Composition of Investment Facility
Committee(IFC)
 The Managing Director of
SLEDIC or his representative
who shall be the Chairman
 The Commissioner of Income
Tax or his representative
 The Administrator and
Registrar-General or his
representative
 The General Manager, National
Tourist Board or his
representative
 The General Manager, Ports
Authority or his representative
 The Directror of Surveys and
Lands or his representative
 The Comptroller of Customs
and Excise or his representative
 The Director of Standards
Bureau or his representative
 The Head of Trade Division of
the Ministry of Trade and
Industry or his representative
 The Director of Industries of his
representative, and
 The Commissioner of Labour or
his representative;
MONITORING
 General monitoring during the operational
phase of a project is often carried out by the
allied line Ministry.
The Ministry of Trade and Industry is however
endeavouring to build up its capacity to enable
it monitor projects
SETTLEMENT OF DISPUTES
Enterprises are guaranteed full protection and
security. The matter of settlement of disputes could be
handled in specific agreements. The procedures for
settlement of disputes as outlined in the investment
code are as follows:
• 
Mutual negotiation so as to reach an amicable settlement.
 
When mutual negotiations fail, arbitration could be by
following procedures related to either:
 The United Nations Commission on International Trade
Law and the settlement of disputes of The WTO
 The framework of any applicable bilateral or multilateral
agreement on investment protection.
 Any other national or international machinery for the
settlement of investment disputes agreed to by the parties
CONFIDENTIALITY
The section in the Investment Code on official secrecy
reads thus:
Any person who, in the course of his official duties in
the administration of this Act, has possession of or
control over any document or information obtained
under this Act and who transfers or communicates such
document or information or any part of it to any other
person to whom he or she is not authorized to transfer
or communicate it by any enactment or by the
Committee, commits an offence and is liable on
conviction to a fine not exceeding Le3,000,000
(US$1200) or to imprisonment for a term not exceeding
two years or both such fine and imprisonment”
PROMOTION OF FDI
 
Various Ministries may make sales pitches abroad
on an ad hoc basis to attract FDI to areas in their
Ministries.
  The Investment Advisory Council is responsible for
making and approving recommendations for increasing
Sierra Leone’s effectiveness, promoting the country’s
image etc.
  The Trade and Industry Ministry also sends Trade
Attaches to various Diplomatic Missions.
 SLEDIC arranges trade fairs and trade missions,
the development and promotion of Sierra Leone’s
exports and serves as a forum for dialogue
ENVIRONMENTAL REGULATIONS
Environmental Protection Act (National Environmental
Protection Act, 2000) passed

All medium scale and large scale companies
should prepare EIAs and obtain an environmental
license before starting operations.

A National Environmental Protection Board
reviews national and sectoral environmental policies,
EIAs, advises the Minister and undertakes special
studies and research for environmental protection.
  The Director of the Environment is responsible for
the promotion of goals and strategies, monitoring,
setting of standards, education and training,
coordination of national policies and the provision of
environmental data and information.
PROJECTS REQUIRING
ENVIRONMENTAL IMPACT
ASSESSMENT LICENSES
Projects whose activities involve or include the
following:
Substantial changes in renewable resource use

Substantial changes in farming and fisheries

Exploitation of hydraulic resources

Infrastructure (e.g. roads, airports, railways)

Industrial activities (e.g petro-chemical plants)

Extractive industries (e.g. mining, oil and gas)

Waste management and disposal

Housing construction and development schemes
  Entertainment places, motor garages, welding shops
Importation of second hand vehicles
PROCEDURES FOR APPROVING EIAs
The procedures are illustrated in Fig.2.
EIAs are approved by the Environmental
Board. Screening and scoping stages
precede the carrying out of EIAs. Most
major industries are required to carry out
EIAs.
THE EIA PROCESS
1.Submission of EIA screening form
2.Screening. Environmental approval Class B or C granted or full EIA
required. Max duration 20 days
3.Scoping TOR developed. Max duration 20 days
4. Environmental Impact study. Duration depends on developer
5. Draft environmental Impact statement submitted
6. Review of Draft Environmental Impact statement. Max duration 30 days
7.Decision making. If rejected, go to stage 1. If approved go to Public hearing
8. Conditions incorporated and Environmental Impact statement formalised
9.Environmental approval granted. Decision making – max 15 days
10. Implementation
11.Environmental audits
SPECIFIC ASPECTS TO BE TAKEN INTO
CONSIDERATION IN APPROVING
PROJECTS










The Environmental Act states that an EIA shall contain a true
statement and description of –

The location of the project and its surroundings

The principle, concept and purpose of the project

Direct or indirect effects of the project on the environment

The social, economic and cultural effects that the project is
likely to have on people and society
 Communities, interest parties and ministries consulted
 Any actions or measures which may avoid, prevent, change,
mitigate or remedy the likely effect on people and society

Any alternatives to the proposed project

Natural resources in the locality to be used in the project

The plans for decommissioning of the project
 Any other information necessary for review of project impact
ENVIRONMENTAL MONITORING
Monitoring is done by the Director of the Environment.
EIAs address independent monitoring. Companies may
nominate independent groups to periodically monitor
aspects of environmental management plans. The
Director of the Environment may:
  Request project information or documentation
  Enter, inspect and search project premises,vessels,
vehicles or facilities

Perform tests and take samples of any substances
relating to possible offences
  Seize documents, items, toxic or hazardous
substances that are in breach of provisions in the Act.
 Arrest suspects who could have committed an offence
PENALTIES FOR NON COMPLIANCE WITH
ENVIRONMENTAL PROVISIONS
Section 37 of the Environmental Protection Act, 2000 states thus:
“Where any offence has been committed by a company or by a
member of a partnership, firm or business, every Director,
Manager, Secretary or other officer of that company directly
connected with the project or any other member of the partnership
or other person connected with the management of such firm or
business shall be liable for such offence unless he proves to the
satisfaction of the court that
a) he used all due diligence to secure compliance with the Act; and
b) such offence was committed without his knowledge, consent or
connivance.
Contravening provisions of the Act relating to toxic or hazardous
wastes and banned chemicals and substances makes the defaulter
liable on conviction to a fine of up to exceeding two million leones
(US$800) or to a term of imprisonment of up to two years or both
USING THE FDI FRAMEWORK FOR
CDM
• In many ways, eligible projects under the CDM
compare well with priority projects for investments in
Sierra Leone. The Project cycle for the CDM includes
the following:

Project design and formulation

National approval

Validation/registration

Project financing

Monitoring

Verification/certification and issuance of CERs
USING THE FDI FRAMEWORK FOR CDM






The first 5 stages in CDM project cycle are similar to FDI’s

The National Approval is similar to the approval given
within the ambit of the Investment Facilitating Committee

The structure of information required for the project design
document of the CDM is the same as that required for FDI

For validation and registration a designated operational
entity will review the project design document. These would
typically be private companies. A validation exercise by outside
experts could also accompany many FDI related projects.

Monitoring, verification and certification functions are
carried out as required by EIAs or by specific requirements of
particular industries.

As with FDI projects, the technical review of projects can
often involve the ministries and bureaus of the relevant sector

The legal framework required for FDI would also apply to
CDM
LEGAL FRAMEWORK
Business related legislation has not kept pace with
developments in the business sector.

The judicial process is largely slow and selfdefeating. The judiciary lacks the ability and resources
to enforce the law judiciously
  Though not comprehensive there are various laws
and regulations that relate to investing in Sierra Leone.
Domestic laws include environmental assessment and
planning laws, laws in relation to foreign investment,
tax and financing laws, foreign investment laws,
contractual laws and employment laws.
 
LEGAL FRAMEWORK

There are various regulations relating to foreign ownership,
exchange controls, inward investments, currency accounts,
repatriation of capital and earnings
  There are various Acts dealing with investment issues. Specific
industries also have Acts regulating their operations.
  The government is aware of the need for appropriate legal
institutions with accompanying legislation to protect investments
and enforce contracts. The Law Reform Commission and the
Privatisation Commission will look into such issues.
•
CONCLUSION ON DNA
 
Placing the DNA Authority under the ambit of SLEDIC within
the Ministry of Trade and Industry will be a good idea
 
SLEDIC will spearhead the “one stop shop” concept its
Investment Facilitating Unit will be the first port of call of
investors.

Its link with the Ministry of Trade and Industry whilst having
some degree of autonomy and flexibility makes it ideally suited to
perform tasks required by the DNA.

It is feasible to recruit a mixed public and private sector
experience within SLEDIC.

The Trade and Industry sections of the Ministry will provide
support as will the technical arms of other Ministries.

SLEDIC however needs to be revamped equipped and staffed to
perform the DNA functions
 
Monitoring functions can be handled by the Standards
Bureau, line Ministries and the environment by the Environmental
Directorate as applicable
GENERAL CONCLUDING STATEMENT
ON SIERRA LEONE
The DNA can certainly be placed within the ambit of SLEDIC.
There will however be need to address many of the factors
militating against investing in Sierra Leone. Problems with access
to capital, legal impediments, unyielding bureaucracy, the seeming
insensitivity of the financial system to the business community,
poor infrastructure and poor macroeconomic environment would
need to be seriously addressed. The various good governance
programmes, the renewed commitment to accountability in the
public service, implementing the various donor programmes for
infrastructure and attempts to revamp the legal system will all
help in making Sierra Leone attractive for doing business and for
implementation of CDM projects
THANK YOU!
ANDREW K.KEILI
EXECUTIVE DIRECTOR
CEMMATS GROUP LTD.
DELCO HOUSE
12 LIGHTFOOT BOSTON STREET
FREETOWN
SIERRA LEONE
TEL: 232 22 228702
FAX: 232 22 229848
[email protected]