UNCTAD’s Investment Policy Framework for Sustainable Development (IPFSD) Towards a new generation of investment policies Joerg Weber Head, Investment Policies Branch Division on Investment and Enterprise July 10, 2012 Geneva, Switzerland 1
FDI inflows up across all major economic groupings FDI inflows by group of economies, 1990–2011 (Billions of dollars) 51% 2
National investment policies continued to be favourable to foreign investors National investment policy changes, 2000 – 2011 (Per cent of measures) 3
International investment policies see a shift from the bilateral to the regional level Trends of BITs and “other IIAs”, 1980 – 2011 (Number of treaties) 4
UNCTAD’s Investment Policy Framework for Sustainable Development helps policymakers address these challenges Structure and components of the IPFSD Core Principles "Design criteria" for investment policies and for the other IPFSD components National investment policy IIA elements: policy options guidelines Clause-by-clause options for Concrete guidance for negotiators to strengthen the policymakers on how to sustainable development formulate investment policies dimension of IIAs and regulations and on how to ensure their effectiveness 5
Core principles for investment policymaking Investment for • …overarching objective of investment policymaking … 1 sustainable development • …grounded in a country’s overall development strategy … coherent and synergetic … Policy coherence 2 • …involving all stakeholders … standards of public governance … predictable, efficient Public governance and 3 institutions and transparent procedures for investors • …regular reviews for effectiveness and relevance … Dynamic policymaking 4 Balanced rights and • …setting out rights and obligations of States and investors in the interest of development 5 obligations • …in the interest of the public good and to minimize potential negative effects Right to regulate 6 • …in line with development strategy … open, stable and predictable entry conditions … Openness to investment 7 Investment protection • …adequate protection to established investors … non-discriminatory 8 and treatment • …aligned with sustainable development goals … minimize risk of harmful competition for Investment promotion 9 and facilitation investment Corporate governance • …promote adoption of and compliance with best international practices of CSR … 10 and responsibility • …address shared investment-for-development challenges … avoid investment International cooperation 11 protectionism 6
National investment policy guidelines: how it works Sections Sub-sections Policy Guideliness 1. Investment and sustainable 1.1 development Strategic 1.1.1 strategy investment policy Investment policy should be geared priorities 2. Investment towards the realization of national regulation and sustainable development goals and 1.2 promotion grounded in a country’s development Investment policy strategy. It should set out strategic coherence for 3. Investment- priorities, including: ... productive capacity related policies building 1.1.2 - Human resource 4. Investment policy Strategic investment policy priorities may development effectiveness -Technology and know-how be effectively formalized in a published - Infrastructure document (e.g. investment strategy), - Enterprise development making explicit the intended role of private and foreign investment in the country’s sustainable development strategy and development priorities, and … 7
8 Access to land
Sustainable development features of the IPFSD’s national investment policy guidelines � Section on strategic investment priorities and investment policy coherence for productive 1 Integrating investment capacity building , including sub-sections on investment and: Human resource development, policy in development Infrastructure (including section on PPPs), Technology, Enterprise development strategy � Attention to investment policy options for the protection of sensitive industries � Sections on other policy areas geared towards overall sustainable development objectives to ensure coherence with investment policy � Specific guidelines for the design of investment-specific policies and regulations, including not 2 Incorporating sustainable only establishment and operations, treatment and protection of investments, and investment development objectives in promotion and facilitation, but also investor responsibilities investment policy � Guidance on the encouragement of responsible investment and on guaranteeing compliance with international core standards � Guidance on investment promotion and use of incentives in the interest of inclusive and sustainable development � Specific guidelines aimed at minimizing potential negative effects of investment , such as tax avoidance, anti-competitive behaviour, core labour standards, environmental impact � A sub-section on access to land, incorporating the Principles for Responsible Agricultural Investment (PRAI) 3 � Ensuring investment policy Section on investment policy effectiveness, including guidance on public governance and relevance and effectiveness institutional capacity-building � Guidance on the measurement of policy effectiveness , with reference to quantitative investment impact indicators and UNCTAD tools (FDI Attraction and Contribution Indices) 9
1 0 The IIA elements table: how it works
1 1 An excerpt from the IPFSD framework
IPFSD policy options – some examples • Carefully craft scope and definitions clause. • Structure FET as an exhaustive list of State obligations. • Distinguish legitimate regulations from regulatory takings . • Make full protection and security commensurate with a country ’ s level of development . • Limit the scope of the transfer of funds clause. • Include exceptions to protect human rights, health, labor standards, and the environment. • Consider no ISDS , or last resort ISDS jurisdiction. • Create an institutional setup that makes the IIA adaptable to changing development contexts. 1 2
Policy options to operationalize sustainable development objectives in IIAs Options Mechanisms Adjust existing/common provisions • Hortatory language through clauses that safeguard policy • Clarifications space and limit State liability. • Qualifications/limitations • Reservations/carve outs • Exclusions from coverage/exceptions • Omissions Add new provisions that balance • Investor obligations and responsibilities investor rights and responsibilities, • Institutional set-up for SD impact promote responsible investment, and • Home country measures to promote responsible strengthen home-country support investment Introduce special and differential • Lower levels of obligations treatment to calibrate the level of • Development-focused exceptions from obligations to the country’s level of obligations/commitments development • Best endeavor commitments • Asymmetric implementation timetables 1 3
IPFSD-inspired clauses in 2011 IIAs 10 Number of IPFSD Clauses 9 8 7 6 5 4 3 2 1 0 T T T T T T T T T A T T A A A A T A A l T o I I I I I I I I I I T I B B I B P T T I T I B T B B B B B B B c T B B F E F o F F F s o a a l a a n a n c a t y a y e u n k i e a u o u e a o t a n i i n e e l p t l n r r p a i n b n a i r r r c t a r s e k k s a e e P e e o a M a a u i p i r y P r r x i u N u P P i v K u u n M L p a J e m G a t - h o - T - - n - T - a e e J l a M a i t l a o f a a m E r i S e - n R - o - i L w l a i n S i a M c a e a d m b - a - - i r a a k b e i c m i i - a n h a x r n m S d - o r c t i e c b a N a I c i e s l a u i d n e K i - i d b o l r l M e g r T a b e i z A A n I d t e n u i l z a v a n f N n o - u I n p o m I u n C n u d i a C v p I e p I G A i e - c T a o e R a n d i t r g R l i P l n a n - b h a e n u a U j - a h i r z n a a l p t B c n - r a a p b e h e e e e p a r R s H z e Z C a J e C z - J d w d a A n n a e l a N i g h n a C - a a i n i B l s a o r B t s u A 2011 IIAs 1 4
IPFSD: a reference point, common language, and platform for discussion with investment stakeholders 1 5
Thank You! Visit UNCTAD websites: www.unctad.org/diae and www.unctad.org/wir www.unctad.org/fdistatistics www.unctad.org/ipfsd and follow us on twitter @unctadwif 1 6
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