WTO-SPECIAL: Does Foreign Equal Cheaper, Better, More?

By IPS Correspondents Reprint | | Print |

Joyce Mulama

NAIROBI, Dec 3 2005 (IPS) - “Look at how we live here: the garbage heaps, the sewers, the polythene bags with human waste littered all over the area! There is no adequate running water. This is harmful for our children and us,” complains James Isaye, a resident of Kibera.

This slum, located in the Kenyan capital, Nairobi, is said to be Africa’s largest – housing approximately 700,000 people. It is a world away from the air-conditioned conference rooms in which the General Agreement on Trade in Services (GATS) was thrashed out – and a good many people in Kibera would probably be hard put to say exactly what GATS is.

Yet, this agreement may hold out some hope for jumpstarting service provision in the settlement, and others like it.

GATS entered into force a decade ago in World Trade Organisation (WTO) member states, which include Kenya. It governs the international trade in all services – bar certain public and air transport services – and allows for liberalisation across a variety of sectors, banking, transport and tourism to name a few.

Proponents of the agreement say this results in a number of benefits, not least services which are cheaper and more efficient. Developed countries are now seeking greater access to the service markets in poorer countries.

Such words are probably music to the ears of Isaye, who works for the Kenya National Slum People’s Organisation, a group that lobbies for better living conditions in informal settlements.

“If the government is incompetent, I would rather they employ services of private companies, foreign or not, to clean this mess,” he told IPS.

However Elijah Manyara, deputy director at the Ministry of Trade and Industry, cautions that Kenya’s legal framework needs to be bolstered to ensure that foreign companies – already active in the country – treat consumers fairly.

“Even though there is a competitive policy, I do not think it is strong enough. There is a need to strengthen it and put it into practice,” he told IPS. “This policy, together with the creation of an autonomous body to address overshooting of prices of services…may remedy the situation.”

Angela Wauye of the non-governmental organisation Action Aid-Kenya puts the argument in even stronger terms.

“The law of the jungle rules here…As a result, the public has to put up with exorbitant prices with no law to back them,” she told IPS.

“Liberalisation must be done with the poor in mind. There is no pointing having basic services that will remain out of reach for the poor people. The cost of the services must be affordable to the common man.”

Laban Onditi, a vice national chairman of the Kenya National Chamber of Commerce, would also like to see a more stringent tax regime put in place for foreign entrepreneurs. In a bid to attract more investment from abroad, government has introduced a 15-year tax holiday for investors – something he believes is simply too generous.

Official statistics indicate that the service sector presently accounts for 55 percent of the country’s gross domestic product, with transport, tourism and telecommunications playing a particularly important role. According to the WTO, the service sector is also “the largest and fastest-growing sector of the world economy, providing more than 60 percent of global output…”

GATS gives WTO member countries the option to pick and choose which services they would like to liberalise, and the extent to which these services should be opened to foreign competition.

For instance, “We have not opened up the water sector to foreign companies, and no one can crucify us. This is the flexibility of GATS,” Manyara notes.

However, campaigners have expressed the fear that developed countries will use the upcoming WTO ministerial meeting to push poorer states further down the path of service liberalisation than they would like to go – this in exchange for agricultural concessions.

Developing countries have long argued that their farmers are put at a severe disadvantage by the tariffs and subsidies that wealthy countries use to support their own agricultural producers.

The WTO meeting is scheduled to be held in Hong Kong from Dec. 13 to 18.