Neoliberalism in Development Policies: Its Impact on Development Prospects for the Democratic Republic of Congo

Neoliberalism in Development Policies: Its Impact on Development

Prospects for the Democratic Republic of Congo

Willem Lenaerts

11395540

Supervisor: Michael Onyebuchi Eze Second reader: Choolwe Muzyamba

26th of June 2020

Master Thesis Political Science Specialization: Political Theory

Word Count: 19,733

Abstract

Since the 1980s, neoliberal policies have dominated development discourse through International Financial Institutions (IFIs) and foreign aid donors. Neoliberal development policies consist of measures including decentralization, privatization, deregulation, and liberalization of trade and Foreign Direct Investment (FDI). Under the supervision of IFIs, the Democratic Republic of Congo pursued such policies with the intention to increase development. However, despite these development efforts by IFIs, aid donors and the Congolese government through foreign aid and FDI, the DRC continues to be tormented by political instability, illegal resource extraction, and conflicts between rebel groups. Particularly, the eastern provinces of the DRC remain 'out of control' and 'under control' of many different changing entities. This research examines to what extent neoliberal tendencies in development policies have shaped development prospects in the DRC. I argue that the neoliberal policies that came to serve the DRC from the residual impact of the colonial economies further aggravated the problems it tried to cure. The Congolese state continued to reproduce internationally imposed neoliberal structures, which contributed to the furtherance of economic dependence, political instability, corruption, and a lack of socio-economic opportunities for the local population. This research does not criticize neoliberalism per se; instead, it will analyze how neoliberal policies and their relation to the Congolese state shape development prospects of the DRC.

Table of Contents

Acknowledgments………...4

Abbreviations…………...………...5

1 Introduction………...6

2 Methodology………...9

3 Theory & Literature Review………..10

3.1 Neoliberalism in Development………...11

3.1.1 Dependency………... ………..15

3.1.2 Lack of Ownership………...17

3.2 Development in Eastern DRC………...18

4 Analysis………...21

4.1 Practices of Foreign Aid and Foreign Direct Investment………...…………...21

4.1.1 Foreign Aid………...21

4.1.2 Foreign Direct Investment………...22

4.1.2.1 Neoliberal Legal Framework………...…..23

4.2 General Implications Neoliberal Discourse in Development Policies ………..………..25

4.3 Neoliberal Policies in the DRC………...…….30

4.3.1 Foreign Aid: SAPs and Decentralization Policies……….…...…31

4.3.2 Foreign Direct Investment: Mining and Investment Codes………...33

4.4 Development Prospects DRC: Neoliberal Structures Aggravating what it Tried to Cure…….35

4.4.1 Implications for Local Miners and Local Livelihoods…………..……...…36

4.4.2 Spreading the Malfunctions: Disunity & a Weakened State.………...42

4.4.2.1 Resource Curse and War Minerals……….………...43

4.4.2.2 Accountability & Corruption……….………....…45

4.4.3 Prospects………..………..……47

Acknowledgments

I would like to express my gratitude to my Professor and supervisor, Dr. Michael Onyebuchi Eze, for his enriching and lively classes, as well as his support, feedback, knowledge, and enthusiasm during the writing process of this thesis. I am also grateful for the support and help of my family during the isolated writing process in quarantine. They have provided me with a pleasant and stimulating working environment.

Abbreviations

SSA: Sub-Saharan Africa

MNC: Multinational Corporation FDI: Foreign Direct Investment DRC: Democratic Republic of Congo TNC: Transnational Corporation IMF: International Monetary Fund PWC: Post-Washington Consensus IO: International Organization

IFI: International Financial Institution BIT: Bilateral Investment Treaty

ODA: Official Development Assistance AfDB: The African Development Bank HDI: Human Development Index CPI: Corruption Perceptions Index SAP: Structural Adjustment Program

1. Introduction

For several decades, the eastern regions of the Democratic Republic of Congo (DRC) have been tormented by civil war, political instability, illegal resource extraction, and conflicts between rebel groups. Despite international and government efforts to bring stability and socio-economic development into these regions, the eastern provinces of the DRC remain 'out of control' and 'under control' of many different changing entities.

Since its independence, the DRC has not experienced significant improvements towards sustainable economic growth. On the Human Development Index (HDI) of 2019, the DRC ranks 179th of the 189 countries and continues to rank amongst the world's 'least' developed countries, with no significant improvements in the past decades (United Nations Development Programme, 2019). Moreover, the DRC has not shown any advancement in tackling corruption. The country has not improved on the annual Corruption Perceptions Index of 2019, with the DRC ranking 168 out of 180, a decreasing score since 2015 (Transparency International, 2020).

Even though a relatively peaceful transfer of power with the new president Felix Tshisekedi took place in 2018, many foreign and local armed groups continue to form worrying security threats to the DRC (Zounmenou et al., 2019). Armed groups continue to finance their operations through illegal mining and regulations in the mining sector "are either incomplete or poorly enforced in the DRC" (Zounmenou et al., 2019, p. 3). With 80% of the world's coltan reserves and vast amounts of other valuable resources such as gold, cassiterite, wolframite, and diamonds, the eastern DRC's potential wealth of natural resources is also its biggest curse. The country attracts large numbers of foreign investors and multinational corporations, all trying to grab a piece of the DRC's mineral wealth pie. Causes of the DRC's underdevelopment are mostly attributed to the corruption of state officials, a lack of sound and stable political institutions, weak regulations, perpetuating civil conflicts, and foreign influence.

Numerous external efforts have been made to lead the DRC to a way of sustainable development. Aid donor countries and International Financial Institutions (IFIs) such as the World Bank and the International Monetary Fund (IMF) have been adopting development programs to stimulate economic growth. These development policies consisted of foreign aid programs, the stimulation of foreign investments, and incentives concerning institution-building, and 'good governance'.

Many scholars have debated the effectiveness of foreign aid policies and foreign direct investment (FDI) in economic development, but research yields diverging outcomes.

Development policies by international institutions have been criticized for creating a dependency of developing countries on wealthier nations (Amin, 1972; Rodney, 1972; Moyo, 2009; Randall & Theobald, 1998, Tandon, 2008), establishing an unequal exchange between 'the core' and 'the periphery' (Amin, 1977; Robinson, 2011); and not providing developing countries enough 'ownership' of their policies (Trefon, 2011; Branch, 2011). From the 1980s onwards, development discourse became ingrained by neoliberal ideas. More specifically, development policies pursued measures of privatization, deregulation, decentralization, free-market policies, as well as favorable conditions and extensive rights for FDI. Under the guidance of IFIs such as the World Bank and the IMF, such policies were also introduced in the DRC. The reforms were made possible through foreign aid and FDI policies, as well as regulatory reforms by the Congolese government under the guidance of IFIs. These policies strengthened the position of foreign investors and multinational corporations (MNCs) in the Congolese state, often to the disadvantage of local communities and miners. Foreign investors and MNCs have had little obligations to make contributions to local development and the well-being of the local population.

This thesis will scrutinize how neoliberal policies have influenced development in the DRC, with specific regard to its eastern provinces. It will formulate an answer to the research question: "To what extent do neoliberal tendencies in development policies of foreign aid and foreign direct investment (FDI) shape development prospects in the eastern provinces of the DRC?" To formulate an answer to this question, this paper will investigate how neoliberalism manifests in international development policies and what general implications these policies have.

Furthermore, this research will scrutinize how neoliberal development policies affect development and stability in the DRC, with a focus on the eastern provinces. Based on these analyses, this paper elaborates on how neoliberal tendencies shape development prospects in the DRC. First, this thesis contains a brief methodology section, followed by a theory section and a literature review. In the theory section, this paper will discuss the dominant neoliberal paradigm in development, theories of dependency, and 'unequal exchange', as well as a segment on the recent history and current status quo of development in eastern DRC.

The analysis chapter of this paper is four-fold. First, this thesis elaborates on what foreign aid and FDI exactly constitute and how they operate. After, this paper will investigate some of the general implications neoliberal development policies have for developing countries. Third, to look at neoliberal measures in development policies more precisely, this paper uses the DRC as a case study. In this way, a closer look is taken into the effects of neoliberal development

policies in the DRC, as well as how the Congolese state reproduces neoliberal policies. Finally, neoliberal tendencies in Congolese policies will be analyzed more closely and investigated how these shape development prospects of the DRC.

This thesis will argue that the neoliberal policies that came to serve the DRC from the residual impact of the colonial economies aggravated the problems it tried to cure. The Congolese state continued to reproduce internationally imposed neoliberal structures, which contributed to the furtherance of foreign dependency, political instability, corruption, and a lack of socio-economic opportunities for the local population. In this way, a cycle perpetuates in which neoliberal development policies are repeatedly legitimized as a remedy for the problems they further aggravated in the first place. Hence, the development prospects of the DRC have been negatively affected by neoliberal tendencies in development discourse.

This paper aims at shining light on the dominant nature of the neoliberal development discourse since the 1980s and the implications this discourse has on the DRC's sustainable development prospects. In this way, it hopes to bring valuable insights into how international neoliberal development efforts have contributed to the constant cycle of underdevelopment in which the DRC is vested.

I believe it is essential to scrutinize the consequences of neoliberal policies in specific countries and territories. Much research has been conducted on the effects of past development policies regarding foreign aid and FDI. However, since the conclusions of these studies widely diverge, I believe it is vital to observe neoliberal development policies in a context-specific situation. In this way, the development prospects of a specific country can be analyzed and determined whether more radical change is needed.

The DRC is used as a case study because of its seemingly everlasting trap in underdevelopment and civil conflicts, particularly in its eastern provinces. Measures of privatization, decentralization, and liberalized trade have been pursued in many SSA countries, all stipulating a 'one way to development'. This paper attempts to bring valuable insights into how these neoliberal development policies particularly affected development in a conflict-prone country with immense potential of mineral wealth. The abundance of mineral resources in eastern DRC attracts a large number of foreign investors and MNCs, which brings significant foreign influence in potential development. Furthermore, this research also contributes to the search for finding causes or contributors to a lack of socio-economic development in the DRC despite years of massive amounts of foreign aid allocation.

Moreover, I want to stress that the DRC's misfortunes should not solely be attributed to international influence on their policies, nor should the country and its citizens be regarded as

passive in deciding their policies and future direction. On the contrary, the issues of the DRC should be regarded as a confluence of different factors, including institutionalized corruption, weak institutions, civil unrest, and foreign influence. However, this paper focuses on how policies of IFIs have contributed development in the DRC, scrutinizing the external influence on the country.

2. Methodology

The method of this paper consists of a discourse analysis, analyzing tendencies of neoliberal discourse in development politics. More specifically, this thesis will focus on the power dynamics between IFIs, donor countries, and countries receiving foreign aid and FDI. It is important not to discard power relations in development discourse since these have a major influence on the policy guidance and future direction of developing countries.

Furthermore, this paper does not intend to critique neoliberalism per se but investigates the effect of some of its characteristics on development prospects in the DRC. Development policies with practices of foreign aid and FDI have been subject to the dominant neoliberal paradigm for the past decades. Although the instability in the eastern provinces in the DRC can be attributed to many different factors, such as corruption of government officials, ongoing civil and ethnic conflicts, conflict minerals and weak institutions; this thesis will focus on the external influence on the problems in the DRC through FDI and foreign aid policies.

This does not mean that any events occurring locally in the DRC should be attributed to global trends in the world economy (Kiely, 1994). Tendencies in the development trajectory of a country should not merely be investigated by newly made ‘laws’ at the global level (Kiely, 1994). Thus, this thesis does not aim to make a wholesome conception of development prospects of the DRC but merely assesses the influence neoliberal development tendencies can have on these prospects. Not all changes in the ‘periphery’ should be attributed to ‘the core’; much of these changes also depend on its local implementation. As Kiely argues, “I do not believe that the “global” is irrelevant, and there are simply many different “localities” with their own unique development experiences”(Kiely, 1994, p. 146). ‘The local’ should not be solely explained by new global tendencies or neoliberal development policies by international institutions, but it does take a significant part in it.

In this way, it is important not to regard leaders and people in the DRC as passive citizens and not discard local implementation, but study the interaction between international policies and its local implementation and effects. It is not the case that IFIs and donor countries

do have an ultimate say in the policy directions of developing countries or that developing countries are under extreme duress to take certain external measures. In this way, while not discarding the influence of IFIs and external development policies, we should also not deny agency and responsibility of African government officials in the DRC.

Furthermore, I do not want to engage in a black and white dichotomy saying that neoliberals would regard MNCs and FDI as “progressive agents promoting even development”, while writers of the dependency school see them as agents reinforcing global inequalities”(Kiely, 1994, p. 150). It is more nuanced than that. I do not see neoliberal tendencies in FDI and foreign aid either as the savior or the curse for much of development in Africa. However, I will critique some of its general tendencies. The effectiveness of these policies depends much on context, whether a proper institutional framework is in place, and their implementation.

That is why the effect of these practices vary and should be analyzed on a case by case basis. The characteristics of this neoliberal discourse will also be presented to see similarities in discourse over the years. It takes part in a discourse of development policies through which western countries (from the millennium switch also China), and IFIs have guided third world countries in ‘a one-way to development’.

3. Theory and Literature Review

The literature review and theoretical background will look into some research conducted on development in Sub-Saharan Africa (SSA). When delving into the literature, many subjects, and themes that can be attributed to the DRC's underdevelopment arise. This theoretical framework and literature review will focus on the influence of IFIs (such as the World Bank and the IMF) on the development of SSA countries.

Before analyzing how neoliberal development discourse has affected development prospects in the DRC, the following sections will look at how development policies pursue a neoliberal discourse. Furthermore, this paper will go into some theories arguing that development policies have created a lack of ownership of their policies for developing countries, as well as a dependency and an unequal exchange between developing countries and developed countries. After, I will delve into literature on the development in eastern Congo and the influence of multinationals and foreign investment on its political climate and stability.

Much research has been conducted on the effectiveness of foreign aid, as well as on how neoliberal ideas predominantly shape development discourse since the 1980s. However, more

research is needed on what prospects this dominant neoliberal discourse of the past decades could bring in specific territories such as eastern DRC. I will look both at practices of foreign aid and FDI because I believe they are both parts of the same discourse in the neoliberal globalized world.

3.1. Neoliberalism in Development

First, it is important to note that there is not such a thing as a one-sided neoliberal discourse throughout history. In 1947, Friedrich von Hayek invited a group of intellectuals to start up the Mont Pèlerin Society, discussing the fate of classical liberalism (Plehwe, 2009). Neoliberalism became the re-assessment of liberalism of several competing schools: The Austrian school, The Chicago School, and the Freiburg school. Hence, the intellectual foundations of neoliberalism can be found in different schools of thought representing different strands of the neoliberal project. If one assumes liberalism to be intrinsically progressive, 'the new' will once become the old. Thus, the idea or concept of neoliberalism gets reinvented repeatedly. Fine & Filho (2014) state that:

There are genuine doubts sewn about its diversity in both policy and impact and, consequently, over its capacity either to define a distinctive ideology or set of policies (…). These conundrums are no less pronounced in the case of neoliberalism and development. (p. 1).

However, this thesis identifies a specific discourse originating in the 1980s with policies by IFIs such as the IMF and the World bank. After the economic crises in the 1960s and 1970s, interventionist state policies such as 'Keynesianism' or 'embedded liberalism' were fiercely criticized (Wikan, 2015, p. 3). Shifts in new economic policies and discourse were instigated by the policies of the Thatcher and Raegan administrations. This entailed liberalization of trade, liberalization of inward foreign investment, favoring laissez-faire policies, privatization, deregulation, and property rights. Moreover, this also includes the discourse of extending the economic rationale to non-economic domains (Becker, 1981). For instance, Wendy Brown (2005) argues it to be an ideology that extends and disseminates "market values to all institutions and social action" (p. 40).

Characteristics of these policies soon spread globally, being integrated into the development discourse of IFIs. Hence, from the 1980s onwards, the African continent became

the subject of free-market policies as the new development agenda. This was lead "through hegemonic discourse, by the IMF’s 'structural adjustment programs' and the formulation of a list of economic policy propositions known as the 'Washington Consensus'" (Wikan, 2015, p. 3). The Washington Consensus contains a set of neoliberal economic policies that were spread predominantly by the main Bretton Woods institutions (Aksakal, 2018, p. 364). Since the 1970s, especially the World Bank, found its way into economic policies and development projects of many developing countries (Aksakal, 2018, p. 364). Fine & Filho (2014) point to three elements that the Washington Consensus comprised:

The hegemony of mainstream economics within development theory; the predominance of the World Bank in setting the agenda for the study of development, with the Bank and the IMF imposing the standards of orthodoxy within development economics itself; and the redefinition of development from systemic transformation to a set of policies to achieve development, with limited specification of what this would be (p. 5).

These policies focused on privatization, trade liberalization, the abolition of subsidies and government intervention on the prices of goods and services, "export-led growth and open capita account of the balance of payments" (Fine & Filho, 2014, p. 5). At the end of the 1990s, the practices of the Washington Consensus were revised and criticized. Former head of the World Bank Joseph Stiglitz addressed the failure of the Washington Consensus and provided a 'new' set of policy initiatives as the Post-Washington Consensus (PWC) (Stiglitz, 2004). The PWC highlighted the implications of the imperfections of the market and institutions, Stiglitz (2004) stating:

No doubt, the Washington Consensus represented, in part, a reaction to the failures of the state in attempting to correct those of the market. But the pendulum swung too far in the other direction and for too long (p. 3).

The discourse of the PWC was more state-friendly compared to that of the Washington Consensus. However, state-intervention remained very limited, only assessed on a case-by-case basis when it would most likely provide slight economic benefits (Fine & Filho, 2014). As Fine & Filho (2014) note, the PWC "remained fundamentally pro-market, favoring a poorly examined deepening of the process of "globalization but, presumably, with a human face and

guiding hand" (p. 6). The PWC emphasized the need for different institutions in different economies and pinpointed circumstances "in which government market interventions can play useful roles" ( Aksakal, 2018, p. 364). Moreover, the PWC extended the focus to issues such as poverty, the distribution of income, "sustainable growth and deliverance of social services to the poor people" (Aksakal, 2018, p. 364). However, it still operated under the "rules of neoliberalism in order to relegitimize it within the reality of its crisis" (Aksakal, 2018, p. 364). Moreover, Fine (2009) argues that the PWC constitutes a more aggressive phase of economic imperialism in which both the economic and the social can be seen as reducible to market and institutional imperfections (p. 890). Everything regarding aid policies and their effectiveness, civil wars, underdevelopment, corrupt governments, etc. can be "explained by reference to the imperfectly coordinated pursuit of self-interest" (Fine & Filho, 2014, p. 7). The PWC provided a way to a more state-friendly development approach; however, many scholars argue that the neoliberal rationale and development paradigm stayed in place.

Since the PWC and the Millennium Development Goals, development policies employed a more inclusive and cohesive approach by not merely looking at economic development. This included the reconsideration of the role of the state, the promotion of more participation, and good governance. Hence, the discourse in aid policies seemed to have changed. For instance, Murray & Overton (2011) see this shift in the millennium change to the PWC as a change from a neoliberal paradigm to a 'neostructural paradigm'. However, they note that "neostructuralism is an extension of the neoliberal orthodoxy designed to sustain free-market capitalism politically" (Murray & Overton, 2011, p. 316). Since the millennial change, the 'neostructural paradigm' emphasized concepts such as "participation, good governance, inclusiveness, and cohesion, which certainly influenced the design of aid modalities and the general direction of the regime" (Murray & Overton, 2011, p. 317). Murray & Overton (2011) argue that no significant change has been achieved in terms of development with these new aid policies; neither did the exact goal of the policies. These goals can all be seen as means to a neoliberal end, to obtain free-market policies and open regionalism (Murray & Overton, 2011, p. 317).

After the 1980s, in which quick economic development was thought to be obtained by a set of neoliberal economic policies, neoliberal policy was believed to need "a stronger institutional basis" (Craig & Porter, 2006, p. 12). As Craig & Porter (2006) state, development policies began to be focused on the right institutional settings on all levels to form a more reliable basis for these neoliberal policies (p. 12). In this way, "institutions could be the platonic guardians of market-led reforms" (Craig & Porter, 2006, p. 12). Petras & Veltmeyer (2014)

argue that the shift to the PWC is post-neoliberal, still containing neoliberal macroeconomic policies, but now with the aim for more inclusive development and some regulations "on private economic activity" (p. 28).

Michael Goldman similarly argues that the World Bank's neoliberal project only expanded, first making its way "through the World Bank's development regimes of poverty alleviation, debt management, and structural adjustment" (Goldman, 2005, p. 9). With the shift to the PWC, its policies expanded the neoliberal project and comprised new means for global capital accumulation in the World Bank's "version of environmentally sustainable development" (Goldman, 2005, p. 9). Moreover, Goldman (2005) also states that the economic-political agenda of neoliberalism did not start only in the West and further scattered into other parts of the world. Instead, it was part of "postcolonial capitalist North-South" power relation from the beginning (p. 8).

Hence, the discourse might have changed by aiming for a more inclusive view on development besides just looking at economic development; however, the exact neoliberal ends to be achieved have remained the same. The PWC remains connected to the same conception and discourse of development as the Washington Consensus. Although the PWC already took a more critical view on the neoliberal free-market ideology and 'one-model-fits-all policies'; the PWC still promotes development as a financial market-led result of "more or less narrow, and sometimes shifting but unambiguously 'correct' policies imposed from above and under external guidance" (Fine & Filho, 2014, p. 9).

Both the Washington Consensus and PWC are part of the same ideational hegemony provided by IFIs to promote development in the third world. This neoliberal rationale of development institutions translates into foreign aid by imposed policy conditions recipient governments need to fulfill to receive foreign aid. For instance, this can include opening their markets for international trade, privatization, and liberalization of inward foreign investment. Regarding FDI, this neoliberal discourse promotes favorable investment climates for foreign investors and providing extensive rights to foreign investors in order for them 'to boost' economic investment in underdeveloped nations. As Wikan (2015) notes, "economic neoliberalism supports FDI for largely the same reasons they support international trade; to ensure individual freedom and increasing choices and options in business conduction" (p. 5).

3.1.1.

These neoliberal tendencies in development policies create possibilities for western intervention by donor countries and IFIs such as the IMF and the World Bank through international trade, investment, and the practices of foreign aid. Economist Dambisa Moyo is one of the fierce opponents of foreign aid practices. In her book, Dead Aid Moyo uncovers the myths of foreign aid alleviating poverty and causing economic development. Moyo (2009) argues that aid is "no longer part of the potential solution, it is part of the problem – in fact aid is the problem" for much of SSA countries' underdevelopment (p. 55). According to Moyo (2009), aid fosters a dependency relation between aid donors and recipients. As aid was meant to be a small injection of capital to foreign countries, it became a continuing donor. Furthermore, aid facilitates corruption, and corruption fosters corruption, which creates a vicious cycle of aid (Moyo, 2009, p. 57). One that, according to Moyo (2009):

chokes off desperately needed investment, instills a culture of dependency, and facilitates rampant and systematic corruption, all with deleterious consequences for growth. The cycle that, in fact, perpetuates underdevelopment, and guarantees economic failure in the poorest aid-dependent countries (p. 57).

Moreover, this aid-dependency model results in African countries, not being managed by Africans; hence, perhaps, not to their advantage (Moyo, 2009, p. 71 ). Another aid critic, Jonathan Glennie (2010), argues that aid and its dependency on foreign donors have "undermined the development of the basic institutions needed to govern and the vital link of accountability between state and citizen" (p. 6).

Besides critiques on aid practices, some empirical research has found positive effects of aid on economic development. For instance, research of Burnside & Dollar (2000) found that foreign aid policies have had "a positive impact on growth in developing countries with good fiscal, monetary, and trade policies but has little effect in the presence of poor policies" (p. 847). Moreover, others have also found positive relationships between aid and economic growth (Asteriou, 2009; Durbarry, Gemmell & Greenaway, 1998; Headey, 2008; Karras, 2006).

The debate on foreign aid is more nuanced than a divide between 'pro-aid' authors and 'anti-aid' authors. Aid has proven its effectiveness in certain countries under certain conditions, which does not mean that for others, it can foster dependency and keep a country in an

underdevelopment cycle. George Caffentzis (2002) argues that if in a period with an expansion in FDI and trade, African economies still perform below par, "one can only declare that its ruling economic policy is to blame" (p. 93). This specifically when such neoliberal policies hold their legitimacy based on claiming to "reduce debt, increase FDI and export shares" (Caffentzis, 2002, p. 93).

Many have argued how these policies cause dependency and guide African countries in a specific way of 'development' that weakens their economies. Dependency theorists argue that one of the main reasons for Africa's underdevelopment is "the result of the incorporation of the Third World economies into the capitalist world system which is dominated by the West and North America "(Randall & Theobald 1998, p. 120).

Samir Amin (1972), argues that African countries' political economies became distorted by its integration in the capitalist world economy (Amin, 1972). In this way, a dependency of Africa is created on an external center that controls the entire structures of power as well as the organization of production in Africa (Amin, 1972). It sustains an inequality between the core and the periphery, between developed and underdeveloped nations. Underdeveloped states have a "sectorial inequality of productivities, disarticulation, and domination" (Amin, 1976, p. 381). This inequality produces a system of unequal exchange between developed and less developed countries.

Hence, peripherical countries are stuck in inequality in return to labor in the world capitalist system, which leads to unequal exchange. Moreover, these less developed countries operate in a system in which they are trapped only to produce raw materials. For further processes, materials are exported. This combined system of extraverted development and unequal exchange make sure that growth in the periphery will not be able to encourage higher productivity (Amin, 1976). This fosters a continuing circle of unequal development. As Robinson (2011) notes, "unequal exchange is the main means whereby capitalism reproduces inequalities". It takes part in an international division of labor created by wealthy nations, in which less developed countries are subordinated and exploited (Robinson, 2011). As Robinson (2011) states:

Development in poor countries in this context tends to be a 'development of underdevelopment'. They undergo economic growth but in ways that do not contribute to long-term development. Their surpluses are expropriated by rich countries, rather than used locally. Today, the primary means of surplus-extraction include structural adjustment and debt repayment.

This raises questions on whether such a system allows less developed countries to take their future direction into their own hands to obtain long-term development. Also, it poses the question of whether these trends show substantial differences with exploitation by rich countries of their colonies during the colonial period.

In a similar tradition, critics have argued that the policies of International Organizations (IOs) continue to sustain neocolonial relations by exploiting developing countries for resources (Smith, 2018, p. 2). It makes resources being extracted out of developing countries, being exported to wealthy nations, leading to the detriment of the developing countries and enrichment of wealthy nations. However, Emeh argues such theories should no longer be tenable, and stresses that "the major culprits of the destruction of Africa today, are Africans themselves" (Emeh, 2013, p. 121). This can be attributed to the corruption of African leaders and officials "and their bans of sycophant, president does-no-wrong minions" (Emeh, 2013, p. 121).

3.1.2.

In line with dependency theories, scholars have argued that development policies have directly and indirectly deprived developing countries to take ownership of their policies. Reardon et al. (2012) have analyzed the institutional, situational, "economic and political aspects of aid effectiveness" and are skeptical of whether "the modern conceptualization of aid can ever be expected to pull the DRC out of poverty" (p. 70). Furthermore, they found that the DRC lacks ownership in its own strategies, which "causes aid to benefit ineffective endeavors and therefore harms the DRC by fueling corruption and criminal extraction of mineral resources" (Reardon et al., 2012, p. 70). One of the reasons is donor countries not taking into account the needs and context in which the DRC resides (Reardon et al., 2012, p. 70). The DRC seems to have a lack of ownership of its policies, which can be attributed to weak institutions and IFIs directing their policies. Without taking into account these malfunctions, aid policies will keep on failing and fueling dependence.

Moreover, it is difficult for African countries like the DRC to acquire ownership in their future aims and development policies if they have little say in its creation in the first place (Trefon, 2011). Ownership of one's policies can only be made if a country can create its own objectives and decide its future direction (Trefon, 2011). This does not only count for foreign aid policies with conditionalities, but also for foreign direct investment (FDI), leaving major

capital and natural resources controlled by foreign MNCs.

Adam Branch (2011) argues that Western intervention can "impose its own epistemological categories – the human stripped of agency, subject to unaccountable, arbitrary power, seeking an external savior – on the situations it occurs" (p. 6). Such intervention can become a means through which "Western imagination of Africa attempts to impose itself upon Africa, a tendency that can end up intensifying or even creating the very conditions invoked to justify intervention in the first place" (Branch, 2011, p. 6). Before elaborating on the interference by neoliberal development policies in the analysis chapter, this paper will give a short overview of the current development situation in eastern DRC.

3.2. Development Eastern DRC

Since the end of the Second Congo War, the DRC has not been able to create lasting political stability and increase development in its eastern provinces. Subsequently, in 2004, the Kivu Conflict emerged, located mainly in North and South Kivu, and is still ongoing in the present. For several decades, the eastern regions of the DRC have been in the midst of civil war, conflicts of rebel groups, starvation, mass murders, and rape. Despite international and government efforts to bring socio-economic development into these regions, the Kivu provinces continue to be 'out of control' and 'under control' of many different changing entities. This could be attributed to what Paul Collier (2007) refers to as 'the conflict trap'. In his book 'The Bottom Billion', Collier provides several 'development traps', explaining why some countries still fall behind in economic development (Collier, 2007). The DRC is one of the countries likely to be stuck in the 'conflict trap'. Countries find themselves often relapsing into conflict after a war, which causes repeating civil conflicts. Collier (2003) states that conflicts "weaken the economy and leaves a legacy of atrocities" (p. 4). Organizations and leaders in these conflicts appear "that have invested in skills and equipment that are only useful for violence" (Collier, 2003, p. 4). In this way, the longer such conflicts remain, the more likely it becomes more players benefit from this unrest, which will make it perpetuate even longer (Collier, 2003).

Furthermore, the Kivu provinces contain the majority of the DRC's minerals containing coltan, gold, cassiterite, wolframite, and diamonds. The exploitation of 'conflict minerals' is one of the reasons why these regions are stuck in such a 'conflict trap'. After the Second Congo War and with the creation of the Mining Code (2002) under Joseph Kabila, the DRC succeeded

in attracting more foreign investors and multinational corporations again. The 2002 DRC Mining Code was based on a draft prepared by the World Bank (André-Dumont, 2013). The Mining Code (2002) and the 2003 Mining regulation "introduced a clear and liberal mining regime in the DRC, based on an objective and transparent granting of mining titles and a so-called 'exhaustive' tax and customs regime offering considerable tax reductions and exemptions" (André-Dumont, 2013).

Moreover, this Mining Code (2002) provided incentives and stability for foreign private investors "and has played a large part in the mining boom that the DRC has enjoyed since 2008 (André-Dumont, 2013). However, this mining code, supporting foreign large-scale industrials miners, also brought local artisanal miners in a troublesome position (Geenen, Fahey & Mukotanyi, 2013). The code declared the Congolese land state-owned, upon which the Congolese government was able to grant long-term licenses to large scale mining corporations to exploit certain areas. This introduces a conflict between artisanal miners who had the traditional right under customary law of specific areas as opposed to the large industrial companies granted exploitation rights under new national law (Geenen & Claessens 2013, p. 8). While artisanal miners claimed the traditional right to access land, large-scale companies stress the fact that they have acquired permits and concessions under Congolese state law (Geenen & Claessens, 2013). The large-scale actors seem to have the upper hand in these bargains because of the formal legal framework, cutting edge technologies, and greater financial resources (Geenen & Claessens, 2013). In this way, many artisanal miners are displaced from some of the areas "where the soils and rocks have the highest gold concentrations" (Geenen, Fahey & Mukotanyi, 2013, p. 5).

Furthermore, much of this formal legal framework is not always practically implemented and very stringent since many still try to hold their legitimacy of ownership on customary law. In 2018, the Mining Code (2002) was revised to improve the mining sector's legal framework and provide greater benefits for local communities and the Congolese state (Speight & Dorin, 2018). This is an attempt by the state to receive more benefits from foreign investors and decrease the freedom of investors and large mining companies under state law. However, it is still a question if the revision of the 2002 Mining Code in 2018 (the New Mining Code) will bring positive effects on development since it also depends on the implementation, enforcement, and compliance of these rules by MNCs and the Congolese authorities.

Political stability and living conditions for the local population did not significantly improve in the last years. Rebel groups in the eastern regions of the DRC continue to hold the country in the grip of civil unrest and extreme violence. It is important to look into how the

development prospects of these regions are shaped by a neoliberal development discourse that is present since the 1980s and has not undergone any significant changes. This not only raises questions regarding the future of mining and mineral exploration/exploitation in the eastern provinces of the DRC but also more generally whose 'development' such neoliberal policies exactly serve. Is the 'good governance' and favorable investor conditions the World Bank and Congolese government introduce also 'good governance' for the artisanal miners as it is for foreign investors? Hence, questions raise what conditions IFIs promote under the 'development' ideal; whose development is it serving? It is crucial to investigate how specific regions are affected by the neoliberal practices and what prospects for development they offer. Reardon et al. (2012) have investigated aid effectiveness in the DRC and the reasons behind the lack of effectiveness. Theodore Trefon has investigated why state-building in the DRC has not worked so far and argues why development aid has not always developed.

Moreover, Geenen, Fahey & Mukotanyi (2013) have focused on what prospects the mining industry in the DRC faces. This thesis attempts to investigate to what extent neoliberalism has played a role in development in the DRC. I will look into which prospects the dominant neoliberal discourse encompassing practices such as FDI and foreign aid has offered the eastern provinces in the DRC. Research until now has not looked into how current development policies by IFIs and donor countries shape the prospects of eastern Congo's development and how this is linked to the dominant neoliberal discourse of the past decades. It is essential to investigate these specifics to gain insights into the future development of eastern Congo, which is full of potential wealth, and scrutinize the role external actors play in the future direction of its development. The malfunctions of the Congolese state are not merely the derivative of its international relations and dependency on developed countries. However, "while external structure offers opportunities and imposes constraints, agent-rulers, strongmen, external actors-interact with one another to pursue their own interests" (Reno 1999, p. 19).

Hence, while many of its policies are still guided or pushed into a specific direction by external actors, many actors pursue their exclusive self-interests and sustain disunity in the Congolese state. Since its independence, the DRC continues to be stuck in a 'conflict trap'. The country has not seen many improvements in creating unity, political stability, decrease corruption, and socio-economic opportunities for the local population. The analysis chapter will shine a light on to what extent neoliberal tendencies in development policies have affected these malfunctions of the Congolese state.

4. Analysis

The analysis chapter of this paper is four-fold. First, this paper elaborates on what foreign aid and FDI exactly constitute. Regarding FDI, I will take a closer look into the legal framework in which it operates, as well as its implications for foreign investors and the local population. After this general outline of the nature of practices of foreign aid and FDI, this paper will investigate some of the general implications neoliberal development policies have for developing countries. Third, to analyze neoliberal measures in development policies in more detail, this paper uses the DRC as a case study. In this way, a closer look will be taken into how neoliberal development policies interact with domestic policies as well as how the Congolese state reproduces neoliberal policies of IFIs. Finally, neoliberal tendencies in Congolese policies will be analyzed more closely and investigated how these shape development prospects of the DRC. Here, I will argue that neoliberal structures in the DRC have aggravated what it wanted to cure by fostering a weakened state, corruption, a lack of accountability, ownership, and socio-economic opportunities for the local population.

4.1. Practices of Foreign Aid & Foreign Direct Investment

The neoliberal tendencies in development on which I elaborated in the theory section are put into practice through practices of foreign aid and FDI.

4.1.1.

Foreign aid practices entail different kinds of aid, including charitable aid, emergency aid, and development aid. This paper deals primarily with forms of multilateral and bilateral development aid, to which I will more generally refer as ‘foreign aid’. Bilateral aid consists of payments from a donor country to developing countries, while multilateral aid is granted by IFIs such as the World Bank. Donor countries contribute aid to these multilateral institutions, which in turn distribute aid amongst developing countries.

Development aid contains several strategic values for donor countries. For instance, improved economic development and living conditions in developing countries can increase global security outcomes and economic growth. Besides, development aid also brings strategic value in directing foreign policies that could be advantageous for donor nations. For instance, this can be done through neoliberal aid conditionalities demanding favorable conditions for foreign investors, urging for the facilitation of trade, deregulation policies, and opening their markets.

Furthermore, both IFIs or individual donor countries mostly provide aid through concessions, loans, or grants. The vast majority of foreign aid is given through governments or IFIs as ‘official development assistance’ (ODA). Remaining sources of foreign aid consist of private organizations such as NGOs, development charities, or foundations. In more recent years, large parts of the amount of ODA comprises ‘aid for trade’. This is used as concessional loans or grants for trade-based programs to help build trade capacity infrastructure, etc. ‘Aid for Trade’ rose substantially from 2005 onwards and is employed mainly in low-income countries helping them to promote both exports and imports, providing conditions that make them most effective (OECD, 2013).

However, as this paper will discuss in the following sections, these continuing efforts of foreign aid programs have not brought any significant benefits to the development of the DRC. Foreign aid policies in the DRC have consisted of Structural Adjustment Programs (SAPs) in the 1980s and decentralization measures in the 2000s. However, these policies have spread the malfunctions of the Congolese state rather than improved them. Because of previous failures of development efforts and reforms involving IFIs such as the World Bank, questions should be raised on the legitimacy of these institutions and their policies. In the following chapters, I will elaborate on neoliberal measures through foreign aid in the DRC more specifically. First, the next section describes the nature and general tendencies of FDI, as well as the legal framework in which it operates.

4.1.2.

Foreign Direct Investment (FDI) takes place when a company based in one country constructs a new factory or plant, or buys an existing one, in another country (Oatley, 2015, p. 161). A multinational corporation (MNC) is obtained by a national corporation making an FDI (Oatley, 2015, p. 161). Hence, FDI constitutes the practice of investments by a company in another company abroad. This can be, for instance, MNCs having facilities abroad over which they exert control. In most cases, at least a 10% ownership stake is required to establish a foreign direct investment establishing a controlling interest. FDI makes it possible for MNCs to gain control over many activities and territories abroad. It provides them access to foreign markets, lower labor costs, and access to raw materials.

However, possible disadvantages of FDI are that foreign investors are often granted extensive protection under international or national law to the disadvantage of local companies and the local population. This makes it possible for MNCs to gain much power and influence

over foreign regions, which can lead to the detriment of local actors. Neoliberal measures support FDI since it goes hand in hand with the discourse of privatization, deregulation, and open-markets. In this way, to protect individual freedom and extend business opportunities, economic neoliberalism encourages FDI like it supports international trade (Hartwell, 2001; Wikan, 2015). The presence of MNCs and a major increase in FDI seems to accompany the decline of Keynesianism (Wikan, 2015; Chase-Dunn, Kawano & Brewer, 2000). Hence, coinciding with the golden age of neoliberal policies, FDI increased in the 1980s, continuing this trend in the 1990s and 2000s.

4.1.2.1. Neoliberal Legal Framework

Neoliberalism supports large FDI inflows, and also played a significant role in shaping its regulations. Together with the rise of FDI and the presence of MNCs, increasing international investment laws such as Bilateral Investment Treaties (BITs) were signed to ensure the protection of the interests of foreign investors. Much of FDI today operates under BITs (treaties signed between the FDI receiving nation and ‘sending’ country), or under the domestic investment regulations of the receiving nation. This section focuses on the role of BITs; later, I will go into some of the domestic regulations of the DRC.

BITs often protect foreign investors without sufficiently taking into account the effect of these investors on local communities. One of the provisions included in many BITs is the dispute settlement provision between the foreign investor and the host state. This provision provides the consent of the host state “to investor-initiated, binding, and exclusive arbitration before the International Centre for the Settlement of Investment Disputes (ICSID) or other international arbitral facilities” (Yackee, 2005, p. 221). This provides the opportunity for a foreign investor as a private party to bring a direct claim under international law, being able to challenge the host state, thereby “enjoying the same level of locus standi” (Prieto-Rios, 2015, p. 71). In this way, the ability of the host state to set its own conditions and limits on foreign investors is inhibited when a BIT is signed (Neumayer, Nunnenkamp & Roy, 2016).

Furthermore, these BITs and cases introduced to international dispute settlement bodies have become a tool for foreign investors to attack host countries when they are not fulfilling investors’ demands and acting in their interests (Loungani & Razin, 2001). Hence, foreign investors are provided with the means to attack foreign policies directly. The cases brought forward are mostly concerning communities that have been directly affected by FDI (Prieto-Rios, 2015, p. 72). The problem here is that local communities are often not granted

participation in the legal processes as interested parties (Prieto-Rios, 2015, p. 72). Consequently, local communities in the host state are often not heard, while foreign investors are granted extensive protection (Prieto-Rios, 2015, p. 72).

Concluding such BITs puts much risk on host nations, while investors are often not obliged to make contributions to the development and welfare of local communities (Kollamparambil, 2016, p. 2). In this way, host states give up a large part of their sovereignty to investors. As Elkins, Guzman & Simmons (2006) state: [They are] “trading sovereignty for credibility” (p. 822-823). So, why should developing countries sign these BITs? Having described the extensive rights for foreign investors and its potentially detrimental effect on local communities, signing BITs with such stringent conditions seems not to be in the best interest of host states. However, BITs are signed to attract more FDI to the country, believing that FDI would be beneficial to the countries’ development (Neumayer, Nunnenkamp & Roy, 2016; Van Harten, 2010).

The danger of signing BITs is that developing countries compete against each other in concluding BITs with favorable investor conditions in order to attract more FDI to their country (Guzman, 1998, pp. 666-668; Neumayer, Nunnenkamp & Roy, 2016, p. 178). This is because if one country signs BITs with stringent conditions for foreign investors, it threatens FDI being potentially diverted away from that country (Neumayer, Nunnenkamp & Roy, 2016, p. 178). Neumayer, Nunnenkamp & Roy (2016) see this as “a self-reinforcing or contagious process” between countries to bring FDI to their country (p. 204). In this way, foreign investors are largely protected under BITs, which provides them with indirect influence in policy decisions of the host state, limiting its sovereignty.

This neoliberal framework in which FDI operates encourages the freedom and protection of foreign investors and minimizes state intervention. It opens the door for foreign investors to blindly pursue their interests and exert significant power over foreign territories to the detriment of local actors and communities. Furthermore, this framework opens the door to inhibit opportunities for local entrepreneurs in favor of MNCs. It facilitates a dependency relationship on foreign investors as well as threatens the interests of local people in favor of foreign interests. In this way, it opens the door for continuing foreign policy influence.

So far, the analysis chapter has discussed how foreign aid and FDI operate and briefly pointed at the role of neoliberalism in these development policies. In the next section, this research will elaborate on which general implications neoliberal development policies can have. Thereafter, I will analyze these policies with specific regard to the DRC. FDI could potentially be very beneficial for a countries’ economic development; however, I will

scrutinize its specific effects with regards to the DRC. Hence, after the section on the general implications of neoliberal discourse in development policies, this paper will analyze to what extent neoliberal tendencies in development policies shape development prospects in the DRC.

4.2. General Implications of Neoliberal Discourse in Development Policies

While research concerning the effects of foreign aid and FDI diverge, the question arises whether it could bring sustainable development to the African continent instead of being short-term solutions to the most pressing problems. Having described how FDI and foreign aid operate, this paper will now analyze some of the development implications of neoliberal development policies. In the 2000s, development policies shifted from the Washington consensus to the Post Washington Consensus (PWC), encompassing a more state-friendly approach and a focus on ‘good governance’ and a proper institutional build-up for developing countries. In the following part, this paper will elaborate on the shift from the Washington consensus to the PWC. I will argue that despite this shift, development policies are goals to a neoliberal end, which still threatens to foster foreign dependency, a lack of ownership, and a loss of accountability.

Neoliberal development policies starting in the 1980s, focused on ‘trickle-down economics’, enabling the free market and free enterprise, reducing public expenditure for social services, privatization, and decreasing government regulation of all activities that could reduce profits. Moreover, concepts of ‘the public good’ and ‘community’ were replaced by ‘individual responsibility’ and ‘freedom’. Foucault (2008) scrutinizes the shift to neoliberalism in his Birth

of Biopolitics:

Here, laissez-faire is turned into a do-not laisser-faire government, in the name of a law of the market, which will enable each of its activities to be measured and assessed. Laissez-faire is thus turned round, and the market is no longer a principle of government’s self-limitation; it is a principle turned against it. It is a sort of permanent economic tribunal confronting government (p. 247)

The neoliberal global market almost becomes ‘the state’; the market became tribunal that confronts the government in each intervention. Hence, since the 1980s, market reforms have

been regarded as essential for the economic revival of developing countries (Manzetti, 2009). Free-markets would best bring about individual liberty and democracy. Reducing the role of the state, according to free-market proponents, would bring about political and economic individual rights (Manzetti, 2009, p. 1). Democracy and free-markets go side-by-side; therefore, if a developing country “wanted to become part of the democratic capitalist system, market reforms were in order” (Manzetti, 2009, p. 1).

Much criticism has arisen on the neoliberal development policies that started in the 1980s. For instance, Stiglitz (1998) argues that the three pillars of the Washington consensus (fiscal austerity, privatization, and market liberalization) “became ends in themselves, rather than means to more equitable and sustainable growth”( p. 4). They became ‘one-model fits all’ policies, without adequately being adapted to local circumstances. Furthermore, one of the problems, when developing countries pursue these policies, is that “privatizations have to be equitable and transparent to avoid breeding corruption; in turn, this requires that appropriate legal structures and market institutions be formed before privatizing” (Ferri, 2003, p. 2). If such international policies are pursued without considering the specific context of a country and the right institutional build-up, it can have detrimental effects (Ferri, 2003). Hence, the policies of the Washington consensus were criticized for not bringing much improvement since the building of proper institutions should happen prior to these policies.

Moreover, besides requirements for the right institutional build-up, other state conditions need to be present for neoliberal policies to potentially yield positive outcomes on development. For instance, a social consensus in the nation to pursue such a transformation of policies should also be present (Stiglitz, 2004). The problem inhibiting the successful implementation of many of these measures is the absence of a social consensus, which potentially brings disunity and civil unrest. If a social consensus is not present on the adoption of these policies, they will not be successful. Many of these issues and conditions on the successful implementation of neoliberal policies have been scrutinized, and since the millennial change, development policies have increasingly focused on improving institutional set-ups and ‘good governance’.

As noted in the theory and literature review chapter, this shift can be seen as a change from the Washington consensus to the PWC. However, still not much has changed regarding the neoliberal goal in development policies. The shift to an approach aiming at a more reliable institutional basis is a means to extend neoliberal economic policies (Craig & Porter, 2006, p. 12; Murray & Overton, 2011). In this way, the neoliberal goals aimed at free-market, deregulation, and privatization stay the same, only now a focus on the institutional settings and

‘good governance’ have to be put in place to pursue these goals. Hence, no real shift in development discourse has taken place; the means changed, but the neoliberal goals remain the same. Despite a new focus on institutional settings and ‘good governance’, neoliberal development policies are still able to foster a foreign dependency and lack of policy ownership for developing countries. This alone already by IFIs and donor countries determining what ‘good governance’ and ‘the right institutional settings’ are.

Both foreign aid and FDI policies since the 1980s are subject to these neoliberal goals. Conditionalities attached to the donation of foreign aid often include measures in line with neoliberal policies. As earlier noted, Moyo fiercely criticized the practices of foreign aid for inducing a dependency of developing countries on developed nations and proposes a gradual permanent shut off of foreign aid. Furthermore, she argues that aid policies are detrimental because it also enhances corruption in developing nations (Moyo, 2009). Instead, she proposes shifting the focus on, among others: increased trade, further integration of developing countries into the global market, and an increase in FDI (Moyo, 2009).

However, these solutions focus on the same neoliberal ends, which will not erase dependency; it merely shifts the focus of sources on which Sub-Saharan African countries are dependent. This is, not only through conditional loans but also by granting increasing protection and influence to foreign investors and MNCs in SSA countries. Increased protection and liberalization for MNCs can create a dependency on external resource extractors, taking control over much of the resource extraction in a country, and becoming the ‘economic motors’ of a particular region.

This often impedes local companies from taking control of their own resources and economic policies. Furthermore, another issue that arises with capital investment in developing countries is that “capital is tending to go more towards developed countries than developing countries” (Malpass, 2020). Also, capital flows towards larger companies instead of smaller ones, contributing to an overall inequality of wealth and keeping developing countries in underdevelopment. As earlier described, the legal framework in which FDI operates (e.g.: BITs) contributes to favorable investor conditions, often without taking into account the needs of local communities. Without clear restrictions on the freedom of foreign investors, these structures take part in sustaining a dependency on external resource extractors, which often inhibits opportunities for local entrepreneurs. Thus, shifting from aid policies to an increase in market integration and FDI can create a similar dependency relationship on foreign countries and investors. Even when ‘good governance’ reforms and ‘proper’ institution-building precede, neoliberal measures can sustain foreign dependency.

In this way, neoliberal development policies also impede African nations to take ownership of their policies. Power relations are not addressed sufficiently in foreign aid and FDI policies since policies are still primarily guided by developed nations. These policies sustain a relationship in which the developing countries are rather “policy-takers than policy-makers” (Murray & Overton, 2011, p. 317). Even when development policies, like with the PWC, first focus on institution-building and good governance, donor countries and IFIs still propose what ‘proper’ institutions are, or what ‘good governance’ exactly is. It already creates a foreign dependency on a particular view of what ‘good governance’ and building ‘the right’ institutions include.

Furthermore, FDI regulated under BITs or national codes with favorable investor conditions in a developing country can significantly reduce the power of the host state. In this neoliberal world order, the state is weakened “in its relation to capital to the point of generating a powerful new actor in the world economy”: the Multinational Corporation (MNC). MNCs are predominantly in the service of a “transnational capitalist class that has no allegiance to the nation-state nor is beholden to it” (Petras & Veltmeyer, 2014, p. 6). By policies of liberalization, privatization, and deregulation MNCs can gain power over vast resource-rich territories under increasing protection of BITs or national liberalized investment and mining codes.

While mining companies and foreign investors gain large profits of the extraction of these primary commodities, SSA governments become increasingly dependent on FDI and the extraction of these natural resources by MNCs. Governments become dependent on the revenues that are derived from obtained resource rents (Petras &Veltmeyer, 2014). Hence, dependency and a lack of ownership of national governments and local communities are fostered, which also reduces accountability between the citizens and the state. More specifically, when a state and its officials can obtain a significant share in the revenues from the international community (foreign aid, but also through MNCs), they are less accountable to the population and have fewer incentives to sustain popular legitimacy (Moss, Pettersson & Van de Walle, 2006). Hence, this can bring fewer incentives to invest in ‘proper’ public institutions (e.g.: in which local people have a voice) (Moss, Pettersson & Van de Walle, 2006). Moss, Pettersson & Van de Walle note that an ‘aid-institutions’ paradox, in which high levels of aid can have negative consequences for local institutions, is a serious concern (Moss, Pettersson & Van de Walle, 2006). However, not only large amounts of aid allocation can form a threat to the accountability between the state and citizens.

The extensive rights and increasing protection of MNCs and foreign investors also poses a threat to accountability. Consequently, power and control over certain territories and resources become more scattered, and accountability between the state and its citizens decreases. Manzetti (2009) concluded from statistical analyses of several case studies (Argentina, Chile, and Russia), that when accountability is weak, “patterns of corruption, collusion, and patronage work to undermine the intended aims of market reform”. Furthermore, when power is divided into different entities over a country, it brings a threat to social coherence and political instability in a state. MNCs have become the largest players in world trade, “reaching such a level that many of them have budgets that exceed some nation’s GDPs” (Calatayud, Candelas & Fernández, 2008). Consequently, the power and ability of an individual nation-state to have control over the rules of the economic system are declining (Calatayud, Candelas & Fernández, 2008). It forms a problem when host nations are not able to administer their own national laws to the MNCs operating on their land, when IFIs guide their laws in favor of MNCs or when home countries do not want to draw boundaries or regulate “the activities or the MNCs under their jurisdiction” (Calatayud, Candelas & Fernández, 2008).

Consequently, earlier total state power is replaced by an economy in which MNCs play an increasingly important and decisive role in globalization (Calatayud, Candelas & Fernández, 2008). Calatayud, Candelas, and Fernández also point to the problem this raises for Human Rights compliance in developing and non-democratic countries (Calatayud, Candelas & Fernández, 2008). In this way, economic freedom of foreign investors and MNCs takes precedence over a ‘common good’, over state interventions for a broader social and public interest, or over collective trade unions under which social rights and local communities are protected (Whyte & Wiegrätz, 2016). Instead, the market is seen as the common good. These policies are often likely to induce further inequality. Moreover, often social consensus and proper institutions within developing countries are lacking to pursue such policies, which raises questions on their legitimacy. It should be noted that the harms or effectiveness of such neoliberal policies depend largely on its implementation, harmonization, and the interaction of states with IFIs. A state can still choose not to adopt such neoliberal policies or can choose to implement them in a way they prefer. However, one (neoliberal) model for development is directed by the international community, without any incentives for states and their officials to do it differently and adopt their own distinct policies. These neoliberal policies should be assessed on a case-by-case basis since implementation, enforcement, and outcomes widely diverge between countries.