Trade Negotiations Insights • Volume 7 • Number 4 • May 2008
Learning from success: strategic investment regulation in Botswana
In some countries, foreign investment has led to human rights violations and environmental degradation, and has generated very little wealth for host countries. This is particularly true in the case of mining.
Botswana is a notably different case, having managed to turn its diamond resources into development. For 30 years, it was the fastest-growing economy in the world and per capita GDP rose from US$70 in 1966 to $5,900 in 2007.7 Although poverty and AIDS remain major challenges, Botswana is now among the most prosperous countries in sub-Saharan Africa and the first country in the world to have graduated from ‘least developed’ status.
Effective regulation was central to this success. In the 1970s, Botswana renegotiated contracts with foreign mining companies, contrary to the prescriptions of international institutions, which argued that this would drive away future investors. The government gained a 50% ownership in Debswana, the country’s largest diamond company. It ploughed the revenues from this holding back into public investment.