Investment Facilitation for Development: A New Route to Global Investment Governance

Author
Axel Berger, Sebastian Gsell, Zoryana Olekseyuk
Content Type
Special Report
Institution
German Development Institute (DIE)
Abstract
While global investment needs are enormous in order to bolster the implementation of the 2030 Agenda for Sustainable Development, developing countries are often excluded from global foreign direct investment (FDI) flows. Beyond economic fundamentals like market size, infra¬structure and labour, the impediments to FDI in developing countries relate to the predictability, transparency and ease of the regulatory environment. In contrast, tax incentives and international investment agreements (IIAs) have been found to be less important (World Bank, 2018). To harness the advantages of FDI, it is critical that governments have policies and regulations in place that help to attract and retain FDI and enhance its contribution to sustainable development. The 2030 Agenda and the Addis Ababa Action Agenda, thus, call for appropriate international frameworks to support investments in developing countries. In this context, the Joint Ministerial Statement on Investment Facilitation for Development adopted at the 11th Ministerial Conference of the World Trade Organization (WTO) in December 2017 called for the start of “structured discussions with the aim of developing a multilateral framework on investment facilitation”. Investment facilitation refers to a set of practical measures concerned with improving the transparency and predict¬ability of investment frameworks, streamlining procedures related to foreign investors, and enhancing coordination and cooperation between stakeholders, such as host and home country government, foreign investors and domestic corporations, as well as societal actors. Despite the deadlock in the WTO’s 17-year-old Doha Round negotiations, the structured discussions on investment facilitation, which have been under way since March 2018, show that the members of the WTO take a strong interest in using the WTO as a platform to negotiate new international rules at the interface of trade and investment. In contrast to previous attempts by developed countries to establish multilateral rules for investment, the structured discussions are mainly driven by emerging and developing countries. Most of them have evolved over the past years into FDI host and home countries reflecting the changing geography of economic power in the world. Their increased role has led to a shift of policy agendas, focusing on practical measures to promote FDI in developing countries while excluding contentious issues such as investment liberali¬sation and protection, and investor–state dispute settlement (ISDS). This policy brief provides an overview of the emerging policy debate about investment facilitation. We highlight that four key challenges need to be tackled in order to negotiate an investment facilitation framework (IFF) in the WTO that supports sustainable development.
Topic
Development, World Trade Organization, Sustainable Development Goals, Investment
Political Geography
Germany, Global Focus