The challenge
In September 2015, world leaders ratified the 2030 Agenda for Sustainable Development to serve as ‘blueprint to achieve a better and more sustainable future for all.’ But the Agenda requires enormous flows of different types of investment into sectors that support the Agenda’s 17 detailed social and economic development goals. In particular, foreign direct investment (FDI) plays a crucial role in developing countries.
However, global foreign direct investment remained flat in 2019, at $1.39 trillion, according to the United Nations Conference on Trade and Development. This performance came against the backdrop of weaker macroeconomic performance and policy uncertainty for investors, including trade tensions. During the ‘decade of action’ toward 2030, FDI flows – especially sustainable FDI flows − will need to ramp up considerably to make a marked contribution. Governments must be able to identify and remove blockages in the pipeline to allow investors to act.
Such factors as the unpredictability and opacity of regulatory frameworks, red tape and the lack of incentives to contribute as much as possible to sustainable development impede the flow of sustainable FDI to developing countries, beyond economic fundamentals like infrastructure standards, skill levels and the size and growth potential of target markets.
To deal with these challenges, 101 members of the World Trade Organization (WTO) are now discussing a multilateral framework on investment facilitation for development, aiming to ‘create a more transparent, efficient, and predictable environment for facilitating cross-border investment.’
Speaking in 2019, WTO Director-General Roberto Azevêdo said: ‘Different countries will have different needs and approaches – but it is fair to say that everyone would stand to benefit from a shared investment facilitation framework that also leaves space for members to address their particular circumstances.’
Trade negotiators and policymakers in developing countries may require assistance in the discussions: they need capacity building to enhance understanding of the issues, and they need greater engagement and information from their private sector to provide inputs.
The solution
The International Trade Centre (ITC) and the German Development Institute (Deutsches Institut für Entwicklungspolitik – DIE) have teamed up to respond to the capacity development needs. They have leveraged their unique expertise, networks and convening power to help build the knowledge capacities of representatives from developing countries, including least developed countries. The innovative project promotes public discussions of issues related to investment facilitation for development.
The project delivers three sets of complementary activities.
1. Two focus groups of global experts to marshal global perspectives:
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Commentary Group on a Multilateral Framework on Investment Facilitation for Development. This focus group consists primarily of experts from investment promotion agencies, investment service providers and the private sector, and is organized in partnership with the World Economic Forum. These experts provide ground-level insights for the drafting of the framework.
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Expert Network on a Multilateral Framework on Investment Facilitation for Development. This focus group consists of academic experts who explore legal, political and economic challenges that need addressing to move the discussions forward.
2. Capacity-building workshops for delegates from missions to the WTO showcase best practices for putting in place investment facilitation measures for development.
3. Webinars are organized to provide insights from experts and offer a platform for public dialogue.
With the project serving as a bridge between the private sector and policymakers, small and medium-sized enterprises have a channel to share their needs about policy improvements both in terms of receiving more FDI as well as investing abroad. The project also explores global best practices in promoting principles of sustainable investment, including with corporate social responsibility policies and encouraging foreign investments to adhere to international guidelines of sustainable and responsible investment to contribute more to the development of host communities.
The future
Boosting global FDI is crucial especially in light of the impact of the COVID-19 pandemic. ITC will continue to explore how to provide a space for policymakers, academics, and micro, small and medium enterprises to discuss the importance of investment facilitation for development.
