*Karl P. Sauvant, PhD*
*Resident Senior Fellow*
*Columbia Center on Sustainable Investment**
Columbia Law School - The Earth Institute, Columbia University
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* Formerly the Vale Columbia Center on Sustainable international Investment.
“The negotiations of the United Nations Code of Conduct on
Transnational Corporations: Experience and lessons learned” and K. P.
Sauvant and F. Ortino, *Improving the International Investment Law and
Policy Regime: Options for the Future are* available at
http://www.works.bepress.com/karl_sauvant/.
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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 151 July 6, 2015
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Alexander Weaver ([log in to unmask])
*We need an international support programme for sustainable
investment facilitation*
<http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=014afa53b5&e=dd153d6a25>
by
Karl P. Sauvant*
Transitioning to a carbon-free world economy and meeting the Sustainable
Development Goals by 2030 requires, annually, trillions of dollars. Massive
private investment, including foreign direct investment (FDI), has to be
mobilized for this purpose. However, developing countries, especially the
least developed countries, simply lack the capacity to compete successfully
in the highly competitive FDI world market to obtain the required funds.
They need assistance – not only to obtain *more* FDI but *sustainable* FDI.
What is needed, therefore, is an international support program for
sustainable investment facilitation. It would focus on practical ways of
encouraging sustainable FDI flows to developing countries: commercially
viable investment that makes a maximum contribution to the economic, social
and environmental development of host countries and takes place in the
context of fair governance mechanisms, as defined by host countries and
reflected for instance in their incentive programs.
There is of course the challenge to define FDI’s sustainability
characteristics. An international organization or a non-governmental
organization (NGO) could establish a working group to prepare, in a
multi-stakeholder process, an indicative list of FDI sustainability
characteristics. Individual governments seeking to attract sustainable FDI
(including, e.g., CO2-neutral foreign affiliates) could draw on it for
guidance purposes. A “sustainable FDI” definition is also needed for
investor-state disputes, as arbitral tribunals consider – as they should –
an investment’s development impact when adjudicating claims and, therefore,
need evaluation criteria. The same applies as more international investment
agreements make reference to “sustainable development” or “sustainable
investments”.1 Such a working group could also identify mechanisms to
encourage specifically sustainable investment flows.
A FDI support program would complement the World Trade Organization
(WTO)-led Aid-for-Trade Initiative and the WTO Trade Facilitation
Agreement. In a world of global value chains, these two instruments address
one side of the equation, trade, while a FDI support program would address
the other side of the equation, investment. Analogue to the WTO efforts, a
FDI support program would be entirely technical in nature, focussing on
practical actions to encourage sustainable investment flows to developing
countries. For example:
- *Host countries* could make comprehensive information available on
their regulatory environment directly bearing on *incoming* FDI.
- *Home countries* could make comprehensive information available on
their support for *outgoing* FDI, e.g., information services and
financial and fiscal incentives.
- *Multinational enterprises* could make comprehensive information
available on their corporate social responsibility programs and instruments
they observe regarding FDI.
Investment promotion agencies (IPAs) could be the FDI support-program’s
focal points, coordinating with the national committees on trade
facilitation once established under the Trade Facilitation Agreement.
Within a country’s long-term development strategy, IPAs could undertake
various activities to attract sustainable FDI. They could:
- Improve the regulatory framework for investment.
- Establish time-limited and simplified procedures for obtaining
permits, licenses etc.
- Identify and eliminate unintended barriers to sustainable FDI flows.
- Engage in policy advocacy (part of which could relate to promoting the
coherence of the investment and trade regulatory frameworks).
- Render after-investment services.
- Facilitate private-public partnerships.
- Identify opportunities for inserting the country in global value
chains and targeting these.
- Develop risk-minimizing mechanisms to attract infrastructure
investment.
- Help prevent conflicts between investors and host countries and, if
conflicts arise, resolve them before they reach the international level.
- Promote backward and forward linkages between foreign investors and
domestic firms.
- And – very important – find ways and means to increase the
sustainable development impact of FDI in host countries.
Finally, as for the WTO trade instruments, donor countries could support
IPA capacity building in developing countries, to help implement the FDI
support program.
One option to create such a program is to extend the Aid-for-Trade
Initiative to cover investment. The initial emphasis could be on investment
in services, given the WTO’s General Agreement on Trade in Services (and
that services account for nearly two-thirds of the world’s FDI stock).
Alternatively, this Initiative could be complemented with a separate
Aid-for-Investment Initiative.
Another option is to expand the Trade Facilitation Agreement to cover
sustainable investment. A subsidiary body of the Committee on Trade
Facilitation could provide the platform to consult on the operation of what
would be a sustainable investment module within the Trade Facilitation
Agreement.
A third option is for all governments to launch a Sustainable Investment
Facilitation Understanding. The WTO could work on such an Understanding as
part of a post-Doha agenda, but it could begin in another international
organization with experience in FDI matters, especially UNCTAD, or the OECD
or World Bank. Or leading outward FDI countries could launch a plurilateral
initiative, mandated by the G20. (The top ten outward FDI economies, which
include four emerging markets, accounted for four-fifths of world FDI
outflows in 2014.)
Every of these options require careful study and consultations, which could
be organized by any of the organizations just mentioned or a credible NGO.
This proposal’s key premise is the importance – and urgency – of creating
favorable conditions for sustainable FDI flows to meet future investment
needs. Governments must muster the political will to put an international
support program for sustainable investment facilitation in place.
______________________________________________________________
* Karl P. Sauvant ([log in to unmask]) is Resident Senior Fellow at the
Columbia Center on Sustainable Investment, a joint center of Columbia Law
School and the Earth Institute at Columbia University. The author is
grateful to Rudolf Adlung, Abdel-Hamid Mamdouh and Gerry Mattios for their
helpful peer reviews. This *Perspective* draws on Karl P. Sauvant and
Khalil Hamdani, “An international support programme for sustainable
investment facilitation”, a Think Piece, forthcoming, prepared for the E15
Task Force on Investment Policy (at www.e15initiative.org/
<http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=48a9ec03e0&e=dd153d6a25>.
*The views expressed by the author of this Perspective do not necessarily
reflect the opinions of Columbia University or its partners and supporters.
Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed series.*
[1]See, the 2015 Norway model bilateral investment agreement, at
https://www.regjeringen.no/contentassets/e47326b61f424d4c9c3d470896492623/draft-model-agreement-english.pdf
<http://columbia.us6.list-manage1.com/track/click?u=ab15cc1d53&id=fadcc9e56d&e=dd153d6a25>
.
*The material in this Perspective may be reprinted if accompanied
by the following acknowledgment: “Karl P. Sauvant, ‘We need an
international support programme for sustainable investment facilitation,’
Columbia FDI Perspectives, No. 151, July 6, 2015. Reprinted with permission
from the Columbia Center on Sustainable Investment (www.ccsi.columbia.edu
<http://www.ccsi.columbia.edu>).” A copy should kindly be sent to the
Columbia Center on Sustainable Investment at [log in to unmask]
<[log in to unmask]>. *
For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Alex Weaver, [log in to unmask]
*Most recent Columbia FDI Perspectives*
<http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=1cf97e0e87&e=dd153d6a25>
- No. 150, Thomas Jost, “FDI in Russia in Difficult Times,” June 22,
2015.
- No. 149, John P. Gaffney, “When is investor-state dispute settlement
appropriate to resolve investment disputes? An idea for a rule-of-law
ratings mechanism,” June 8, 2015.
- No. 148, In Hyeock Lee, Shige Makino and Eunsuk Hong, “Outward FDI
does not necessarily cost domestic employment of MNEs at home: Evidence
from Japanese MNEs,” May 25, 2015.
*All previous FDI Perspectives are available at *
*http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/*
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*. *
*Other relevant CCSI news and announcements*
- *On July 9, 2015*, CCSI, the Sabin Center for Climate Change Law
<http://columbia.us6.list-manage1.com/track/click?u=ab15cc1d53&id=f71ac8afdd&e=dd153d6a25>,
and the UN Sustainable Development Solutions Network
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will
co-sponsor,” A Safe Future for Fossil Fuel Investments in a
Carbon-Constrained World?,” a panel discussion including Jeffrey Sachs,
Director, Earth Institute at Columbia University, and Ken Cohen, Vice
President, Public and Government Affairs, ExxonMobil, among others. The
purpose of this panel is to exchange views and ideas from all stakeholders
involved in the divestment and engagement discussions, to think critically
about their implications, and to explore their potential effectiveness. The
aim is to give guidance on a framework for constructive engagement between
responsible investors and the fossil fuel industry and allow both investors
and the industry to play their part in securing our common future.
*Registration
is free, but required*. *Please register **here
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- *In June, 2015*, CCSI and the Global Economic Governance Programme at
Oxford University launched a new online forum on New Thinking on Investment
Treaties, a series of short presentations by academics, practitioners, and
civil society on key topics in international investment law. *All
presentations will be posted at noon EST* *here
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Please subscribe to the channel and visit our website for updates*. *For
more information and for the schedule of speakers, please visit our
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.
- CCSI, the African Legal Support Facility, the African Minerals
Development Centre Centre, and the New Partnership for Africa’s
Development are now accepting applications to attend an interactive
workshop on useful tools, resources and technical support available to
assist African host governments to better plan, prepare for, negotiate,
monitor, and implement large-scale investment projects. The workshop will
take participants through sessions focusing on each stage of a large-scale
investment in the extractive industries, agriculture and forestry, or
infrastructure using the Negotiation Support Portal
<http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=8569283abe&e=dd153d6a25>,
an online tool designed specifically for host country governments
navigating all stages of the investment process. The Workshop will take
place on* 21-22 September 2015 *in Pretoria, South Africa. *To apply,
and for further information, please click here
<http://columbia.us6.list-manage2.com/track/click?u=ab15cc1d53&id=edd2f2fbad&e=dd153d6a25>.*
Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
Ph: (212) 854-0689
Fax: (212) 854-7946
*Copyright © 2015 Columbia Center on Sustainable Investment
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