Protectionist legislation and its impact on a country’s economy

I was startled to read an article published in the BD Africa of 12th August 2014 by l(online version at
http://www.businessdailyafrica.com/Opinion-and-Analysis/Abolish-restrictions-on-ownership-of-firms-by-foreign-investors-/-/539548/2416964/-/iglecdz/-/index.html)
Mr Miano’s views can be summarised by his closing sentence:”Legal restrictions are just another form of unnecessary red tape. They inhibit the flow of foreign direct investments”. I disagree with learned counsel.
Legal restrictions for foreigners in any country serve the obvious function of promoting and encouraging what is ‘home-grown’. There are arguments for and against such protectionist policies, but I am yet to see evidence proving that FDI is directly significantly reduced by virtue of such restrictions especially when these are not wholesale restrictions (100%) in a capitalist economy.
Particularly in an emerging economy such as Kenya’s, legal restrictions in a number of sectors serve this capacity building objective, without which the country’s economy could be driven by foreigners and creating a level of unhealthy dependence on foreign capital in-flows.
Protectionist policies also encourage transparency in that activities of foreigners in the country are known by their local partners. Otherwise, foreigners would be able to set up operations in-country and carry out operations oblivious of and notwithstanding the local customs and practices, assuming they do comply with legislation. The secrecy that wholly foreign owned enterprises would create and encourage would not be in the country’s interests, more so in those sectors of the economy that are critical.
Kenya’s mining laws, quoted by Mr Miano, provide for local ownership in this nascent industry which would be open to all sorts of abuses by foreigners were they given a free hand to carry out their operations in such a sensitive multi-billion industry. In parts of Kenya where oil and minerals have been discovered, communities living around these areas have been suspicious of the activities of the exploration/mining companies, with some concluding that the companies are mining and shipping offshore the precious minerals under their nose! I believe part of the suspicion has been as a result of Kenya’s petroleum exploration industry not requiring that exploration companies be partners with locals or government entities such as NOCK. In other countries, it is common for the exploration companies to be required to partner with the countries National Oil Corporation thereby protecting the government and therefore the mwananchi’s interests; enabling Kenyans have their eyes in the exploration activities.
In terms of land ownership, Kenya’s constitution requires companies owning freehold land to be 100% owned by Kenyan citizens. As land is one of the four factors of production-and the only exhaustible one- and in Kenya’s case is limited to 584,000 square kilometers, it is rather sensible (and only just to the mwananchi) to preserve this factor of production to its citizens.
The famed capitalist economy of the US has practiced protectionist policies through the years. The US- Upland Cotton case brought to world’s attention the extent to which the US was subsidising its local cotton, showing how the US government had offered subsidies exceeding $4 billion to its cotton farmers when the value of U.S. cotton production was $3 billion . The US is known to have quotas on importation of agricultural products, protecting its local industries, and US farmers. Yet another example is in the area of intellectual property. It is well known within copyright circles that the US joined the Berne Convention only in the wake of its potential losses if other countries did not recognise US copyright in the then emerging software industry. Well, that and the realisation that it needed to seat at the high table at GATT.
Even after US’ signing of Berne and its ‘national treament’ protection requirement, the US still discriminates against foreign copyright owners because in the US, copyright owners are required to register with the copyright office in order to have protection of statutory damages, which most foreigners do not know of (and do not generally expect), otherwise, they are only entitled to actual damages and profits.
In the footsteps of the father of laissez faire, emerging capitalist economies ought to embrace some level of protectionism as it is absolutely essential for the country’s economy. I highly doubt this in itself significantly discourages foreign inflows to the country; On the contrary, in risky ventures where foreign investors would not be willing to invest 100% themselves, foreign participation is essential in boosting investor confidence.