Columbia International Affairs Online: Policy Briefs

CIAO DATE: 06/2014

Government-held equity in foreign investment projects: Good for host countries?

Louis T. Wells

February 2014

Columbia Center on Sustainable Investment


A recent Perspective concluded that, in countries given to sudden shifts in policy, “a host country government equity stake in a project may decrease project risk by giving the state a reason not to demand a renegotiation." An investor may benefit, but does the host country? In my experience, rarely. Various host governments have long insisted on equity in extractive projects. Liberia obtained 50% “free” equity in the 1953 agreement that led to the LAMCO iron ore mine, waiving income taxes in exchange. Today, many African and Asian governments demand small shares in mining projects – free or, sometimes, paid for – and likely surrender something to compensate.