A National Study: Developing Comprehensive General and Sector-Based - PowerPoint PPT Presentation

A National Study: Developing Comprehensive General and Sector-Based Indicators for Assessing the Contribution of Foreign Direct Investment to Sustainable Development in Kyrgyzstan Nurmambet Toktomatov September 2019

OUTLINE  CHAPTER 1: AN OVERVIEW OF THE FDI SITUATION IN KYRGYZSTAN  CHAPTER 2. DEVELOPING COMPREHENSIVE GENERAL SUSTAINABLE INVESTMENT INDICATORS  CHAPTER 3. DEVELOPING SECTOR-BASED SUSTAINABLE INVESTMENT INDICATORS  CHAPTER 4: OBSTACLES TO IMPLEMENT SUSTAINABLE INVESTMENT INDICATORS  CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS

AN OVERVIEW OF THE FDI SITUATION IN KYRGYZSTAN Dynamics of FDI for last decade of 2008-2018, Kyrgyzstan (US$) 1800000 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total

What is sustainable FDI? The concept of “sustainable FDI”: “commercially viable investment that makes a maximum contribution to the economic, social and environmental development of host countries and takes place in the framework of fair governance mechanisms.”– Karl Sauvant, 2017

Measuring characteristics of FDI sustainability  Economic indicators  Environmental indicators  Social indicators  Governance indicators  Every indicator has a benchmark, at which project can be approved – B - Benchmark

General indicators of FDI sustainability Economic Level of net capital investment ; B =$10 mln 1. Level of direct payments ; B = 5% 2. Employment rate; B = 60% 3. Level of investment in infrastructure; B =10% 4. Contribution to GDP. B =0,5%* 5. * Depending on the size of the project

General indicators of FDI sustainability Environmental Level of expenditure on environmental protection; B = 1. mining - 5%, others - 1% Resource management level; B =presence 2. Pollution control level; B =2-5%* 3. Level of greenhouses gas emissions; B =0,5% 4. Rate of renewable energy use. B =40% 5. * Depending on the size of the project

General indicators of FDI sustainability Social 1. Extent of contribution to regional development; B =5-10%* 2. Adoption of international standards of responsible business conduct ; B =1% 3. Level of competitive and equal salary; B =Ave.month.wage 4. Extent of skills enhancement; B =50% 5. Extent of health coverage. B = 50%

General indicators of FDI sustainability Governance  1. Level of transparency; B =1  2. Local management ratio; B =1/3  3. Supply chain standards; B =1  4. Extent of stakeholder involvement ; B =2  5. Level of legal compliance. B =2/3

Sustainable Indicator Weigh Benchmark Assessment Social Extent of contribution to 1 5-10 % contribution 1< B, 2 =>B development t ranking regional development to the regional GDP dimension Existence of RBC 2 Presence of RBC 2 if yes, 1- if standards; standards; not; Economic Level of net capital 1 US$10 million; 1< B, 2 =>B Existence of CSR CSR is 1% of annual 1< B, 2 =>B investments programmes income of the company Level of direct payments 2 5% of the total 1< B, 2 =>B Level of competitive and 3 Not less than average 1< B, 2 =>B (tax, royalty’s) project cost; equal salary monthly salary. Employment rate 3 60% of total local 1< B, 2 =>B Equal salary for men workers of total and women. 2 if yes, 1- if engaged at the project not; Level of investment in 4 10% of the project 1< B, 2 =>B Extent of skills 4 50% of workers 1< B, 2 =>B infrastructure cost enhancement trained annually. Contribution to GDP 5 0.5% contribution to 1< B, 2 =>B Extent of public health 5 50% coverage by 1< B, 2 =>B GDP insurance coverage health insurance of all local workers; Environmental Level of expenditure on 1 Allocation of 1 % of 1< B, 2 =>B environment protection the total cost Governance Level of transparency 1 1 audit per year; 1< B, 2 =>B Resource management 2 Presence of 2 if yes, 1- if Local management 2 1/3 of the total 1< B, 2 =>B rate conservation, not. composition; composition protection or Supply chain standards rate 3 1 linkage to 1< B, 2 =>B recycling technique. international supply Pollution control rate 3 Allocation of 2-5 % 1< B, 2 =>B chain involving a of the total cost local company. Level of greenhouse gas 4 0.5% of the annual 1< B, 2 =>B Extent of stakeholder 4 2 times a year. 1< B, 2 =>B emissions emission dialogue Extent of renewable 5 40% of the project’s 1< B, 2 =>B energy use energy requirements Level of legal compliance; 5 Adhere to 1/3 of 1< B, 2 =>B is based on renewable national regulations energy by the MNE

Sectoral indicators of FDI sustainability Garment industry  1. Level of production growth; B =10%  2. Number of diversified products; B =5  3. Full-year employment; B =100%  4. Extent of marketing and product promotion ; B =4  5. Number of new markets created. B =2*

Sectoral indicators of FDI sustainability Garment industry Sustainable development Indicator Weight Benchmark Assessment dimension ranking Economic Annual apparel production 1 Annual production 1< B, 2 =>B growth growth 10%; Number of diversified 2 10 new products for all 1< B, 2 =>B products seasons introduced annually; Annual employment 3 100% of garment 1< B, 2 =>B workers work full year Extent of marketing and 4 Participation in at least 1< B, 2 =>B product promotion 4 trade fairs and exhibitions annually Number of new markets 5 Access to 2 new 1< B, 2 =>B created markets a year

Sectoral indicators of FDI sustainability Agriculture and processing Level of harvesting, including main crops; B =10% 1. Rate of livestock capita; B =10% 2. Number of greenhouses; B =10 3. Extent of drip irrigation; B =100% 4. Extent of horticulture development. B =10% 5.

Sectoral indicators of FDI sustainability Agriculture and processing Sustainable development Indicator Weight Benchmark Assessment dimension ranking Economic Level of harvesting, 1 Annual harvest 1< B, 2 =>B including main crops growth 10% Rate of livestock capita; 2 Annual livestock 1< B, 2 =>B growth 10% Number of greenhouses 3 10 units per project 1< B, 2 =>B Extent of drip irrigation 4 At least 100% 1< B, 2 =>B coverage of the arable land of the Project area Extent of horticulture 5 10% of harvest grow 1< B, 2 =>B development target horticulture

Sectoral indicators of FDI sustainability Mining Level of extraction; B =80% 1. Rate of extracts used for local utilization; B =30% 2. Rate of reinvestment; B =30% 3. Contribution to research and development; B =5-10% 4. Use of environmentally sustainable technologies; B =100% 5. Conservation and clean up after mine closure; B =presence 6. Absence of conflicts with local communities; B = 0 7. Absence of fatal accidents; B =0 8. Transparency. B =1 9.

Sectoral indicators of FDI sustainability Mining Sustainable development Indicator Weight Benchmark Assessment ranking dimension Economic Level of extraction 1 80% of declared extraction 1< B, 2 =>B Share of extracts used for local value-addition 2 30% of the total extracts 1< B, 2 =>B Rate of reinvestment 3 30% of annual profit reinvested 1< B, 2 =>B Contribution to research and development 4 5%-10% of annual profit 1< B, 2 =>B Environmental Use of environment friendly technology 1 Presence of such technology; 2 if yes, 1- if not. facilities Conservation and clean up after closure 2 Presence of such obligation. 2 if yes, 1- if not. Social Number of conflicts avoided or resolved 1 0 conflicts 1 = B, 0 < B Number of fatal accidents during extraction 2 0 accidents 1 = B, 0 < B process and other typical production Governance Transparency through full disclosure of 1 1 report once a year 1< B, 2 =>B mining operations

Sectoral indicators of FDI sustainability Tourism Number of tourists generated by an FDI project ; B =100-1000* 1. Amount of money spent per tourist as a result of FDI project; B =$1000-$5000* 2. Number of foreign invested tourism entities (hotels/guesthouses) opened 3. annually; B =1-5* Extent of tourism infrastructure development by a foreign investor; B =10 4. Amount of local earnings as a result of foreign invested projects; B =$1000/1*1 5. Level of damage to the environment from tourists flows generated by an FDI 6. project; B =$500-1000/1 Number of new jobs generated from foreign invested tourism project for 7. women and poor people; B =5-50* Extent of local community development; B = 10% 8. Level of access to resources and amenities by tourists. B =100% 9.