Investment, tax deals to give Japanese firms easy access

What you need to know:

  • Deals allow the Japanese firms to repatriate profits, safeguard their investment against government interference and open up diplomatic channels to handle disputes before seeing intervention of international bodies.

Japanese companies are set to enjoy easier access to the Kenyan market under a raft of investment and tax deals signed in Nairobi over the weekend.

The deals allow the Asian nation’s firms to repatriate profits, safeguard their investment against government interference and open up diplomatic channels to handle disputes before seeing intervention of international bodies.

The agreement for the Promotion and Protection of Investment was signed by Treasury Secretary Henry Rotich and Japanese foreign affairs minister Fumio Kishida on the sidelines of the Sixth Tokyo International Conference on African Development (TICAD VI). The two nations are also expected to sign a double tax agreement.

“The Contracting Parties will notify each other of the completion of their respective internal legal procedures required for the entry into force of this Agreement (in case of Japan, the Diet approval will be required) and this Agreement will enter into force on the thirtieth day after the date of the receipt of the latter notification,” Japan said on their Foreign Affairs website.

Under the deal disputes will be settled diplomatically or a tribunal will be appointed by the two governments. Only if a bilateral solution is not found will the Secretary-General of the Permanent Court of Arbitration at The Hague be called upon to help.

This comes even as Japan and Kenya have been holding diplomatic talks over the Mombasa Port after Cabinet Secretary for Transport James Macharia cancelled the tendering process for the concessionaire for the second Mombasa port terminal earlier in the year.

According to leaked e-mails from the Kenyan Ministry of Foreign Affairs, the Japanese Foreign Affairs minister Norio Maruyama requested to meet CS Aden Mohamed (Industrialisation) over the Mombasa Port before the TICAD conference.

Last year, representatives of Oriental Consulting Group, Overseas Coastal area development Institute appeared before the National Assembly Public Investment Committee protesting last-minute conditions added to Request for Tender (RFT) documents.

Ten days before opening of tender documents, the Treasury wrote to the Kenya Ports Authority (KPA) asking them to add provisions requiring the winner to offer 15 per cent free carrying shares to the government.

The new conditions also said that the company selected for a concession will be given the powers to determine the financing mechanism for the next phases of the project and will also be given the ‘first right of refusal’ in the planning and arrangement for the remaining phases of the project.

The new trade agreement however does not cover claims arising out of events that occurred before it comes to force.

“The two issues are not related to the deal we signed, will cover agreements on putting up the second container terminal but the issue of the concessionaire is a different matter all together,” Mr Macharia said.

He said the government was reviewing options of running the port having given KPA the mandate to run it indefinitely as they review options to have a private investor manage the Sh30 billion facility.

The new deal however, gives companies from the two countries ‘Most-Favoured Nation Status’ will make it easier to transfer labour within immigration guidelines.

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