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Columbia FDI Perspectives
Perspectives on topical foreign direct investment issues
No. 243 January 14, 2019
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Marion A. Creach ([log in to unmask])
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After a year of deliberations, the WTO’s structured discussions on a multilateral framework on investment facilitation for development took stock, on December 6, 2018, of what had been achieved so far.[1] In seven substantive meetings in 2018, delegates made significant headway in identifying the possible elements of an investment-facilitation framework (IFF) aimed at improving transparency and predictability of investment measures; streamlining and speeding up administrative procedures and requirements; and enhancing international cooperation, information sharing, the exchange of best practices, and relations with stakeholders, including dispute prevention.[2]
On average, 70 delegations attended the meetings, both sponsors and non-sponsors of the Ministerial Declaration. The result was a checklist of issues and a work program and meeting schedule for the first half of 2019, with the goal of developing the elements of a multilateral IFF for submission to the 2020 WTO Ministerial.
In further working on an IFF, delegates should reflect on five key issues to achieve a broadly acceptable outcome:
- Scope. The discussions should remain strictly focused on technical issues directly related to investment facilitation for development and continue to make it crystal clear that they will not eventually address market access, investment protection and investor-state dispute settlement. Instead of seeking an abstract definition of investment facilitation, the scope of an IFF could be defined pragmatically by identifying the specific investment-facilitation measures a framework should cover. Remaining focused on such technical issues as transparency and avoiding the most controversial issues surrounding the investment regime increases the chances of agreeing on a framework.
- Development dimension. The Ministerial Statement explicitly speaks about “investment facilitation for development.” Hence, any framework should directly address the development dimension and serve the Sustainable Development Goals. In particular, it should not only facilitate investment flows in general, but host countries should be allowed—if not supported—to give special facilitation support to “sustainable” investments, i.e., investments with certain “sustainability characteristics” that directly increase the likelihood that investments have desired impacts in host countries. Hence, the framework should contain provisions that support host countries in, e.g., establishing linkage programs that upgrade domestic firms to become potential suppliers to foreign affiliates (if the latter so choose). Linkages allow domestic firms benefit from the tangible and intangible assets of foreign affiliates, and foreign affiliates benefit from the capacities of domestic firms and shortened supply chains. Promoting best practices and exchanges of experiences are furthermore helpful. Ensuring that investment facilitation contributes directly to development is particularly important to bring more developing countries on board and, additionally, thwart the impression that “facilitation” primarily benefits investors.
- Balance. The discussions have focused so far entirely on what host countries can do to facilitate investment—and doubtlessly they are central actors. But home countries and MNEs play a role too. A number of (developed and developing) home countries support their outward investors in one way or the other. Making home country measures (e.g., financial support for outward investors’ feasibility studies) more transparent, for example, increases the effectiveness of an IFF. Similarly, many MNEs have corporate social responsibility policies; inviting them to make these better known would be of use to host countries. In distinction to most (host-country focused) investment agreements, an IFF with obligations for both host and home countries increases the chances of arriving at a consensus.
- Ground-level practical input. Investment facilitation throughout the life cycle of projects involves a myriad of practical issues familiar to investment promotion agencies (IPAs) and international investors. WTO delegates (most of whom are well-versed in trade matters but not always in investment matters) should find ways (apart from domestic stakeholder consultations) to benefit from the pragmatic experience of investment practitioners. For example, a non-governmental, neutral organization could organize a commentary group, consisting primarily of practitioners, to provide evidence-based input to ensure the relevance and effectiveness of a framework.
- Capacity building. Negotiating and implementing an IFF requires considerable resources, which most least-developed countries and many developing countries do not have. Strengthening specifically these countries’ IPAs (typically the lead investment agencies)—not only to implement a framework, but also to attract especially sustainable investment in a highly competitive world FDI market—is central for countries to benefit from any framework. (For comparison, US$300 billion were mobilized between 2006 and 2016 for the WTO’s aid-for-trade initiative, reaching 146 countries.[3]) Providing technical assistance through an IFF is particularly important for the least-developed countries, many of which are currently not participating actively in the structured discussions.
Arriving at an IFF is a considerable challenge at a time when multilateralism is under attack. However, since all countries seek to attract investment to advance economic growth and sustainable development, it ought to be possible to negotiate a framework, incrementally but with a critical mass. In doing so, care should be taken to take different concerns into account, while not overloading the negotiations. Accordingly, perhaps some issues may have to be left for a built-in agenda for future negotiations.
* The Columbia FDI Perspectives are a forum for public debate. The views expressed by the author(s) do not reflect the opinions of CCSI or Columbia University or our partners and supporters. Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed series.
** 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 wishes to thank Axel Berger, Felipe Hees and Hamid Mamdouh for their useful comments on an earlier draft and Fabien Gehl, Ahmad Ghouri and Kavaljit Singh for their helpful peer reviews.
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The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Karl P. Sauvant, ‘Five key considerations for the WTO investment-facilitation discussions, going forward,’ Columbia FDI Perspectives, No. 243, January 14, 2019. Reprinted with permission from the Columbia Center on Sustainable Investment (www.ccsi.columbia.edu).” A copy should kindly be sent to the Columbia Center on Sustainable Investment at [log in to unmask].
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For further information, including information regarding submission to the Perspectives, please contact: Columbia Center on Sustainable Investment, Marion A. Creach, [log in to unmask].
Most recent Columbia FDI Perspectives
- No 242, Matthew Stephenson and Jose Ramon Perea, “How to leverage outward FDI for development? A six-step guide for policymakers,” December 31, 2018
- No. 241, Robert W. Schwieder, “Lessons for a future advisory center on international investment law,” December 17, 2018
- No. 240, Felipe Hees, Henrique Choer Moraes, Pedro Mendonça Cavalcante, and Pedro Barreto da Rocha Paranhos, “Investment facilitation: leaving the past behind,” December 3, 2018
All previous FDI Perspectives are available at http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/.
Other relevant CCSI news and announcements
- We are accepting applications for our three upcoming executive trainings on: Extractive Industries and Sustainable Development (June 3–14, 2019), Sustainable Investments in Agriculture (June 11–21, 2019) and Investment Treaties and Arbitration for Government Officials (June 17–27, 2019). Each program is designed to equip participants with the necessary skills, analytical tools and frameworks to address relevant challenges and opportunities, and to encourage a rich dialogue about best practices from around the globe. More information about each training, including brochures and applications, is available at the links above. Applications are accepted on a rolling basis. Participants will receive a Statement of Attendance from Columbia University.
- On January 30, 2019, CCSI, the Columbia SIPA MPA in Development Practice Program, the Institute for the Study of Human Rights, RightsLink, and the Human Rights Institute will co-sponsor a discussion at Columbia Law School with Jeffrey Sachs, the Special Advisor to the UN Secretary-General on the SDGs, and Philip Alston, the UN’s Special Rapporteur on extreme poverty and human rights, on the relationship between finance, human rights, and the SDGs, including a focus on current trends toward privatization. For more information, and to register, please see our website here.
- On February 19, 2019, CCSI, the Institute for the Study of Human Rights, and the Saltzman Institute of War and Peace Studies will co-host "Is Liberalism Making the World Less Fair? Three Authors Discuss Their Recent Books on Investor vs. Human Rights in the Global Economy," at Columbia Law School. Please see our website here for more information.
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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
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