Putting it to Work in Developing Countries - Nathan Associates

6. INTERNATIONAL
AGREEMENTS AND
INSTITUTIONS FOR FDI
Open markets, predictability, and rule of law
contribute to a positive investment climate and
the attraction of FDI. Unilateral economic policy
liberalization at the host-country level may be
the most fruitful approach to achieving these
ends, but cooperative action on an international
scale can be reinforcing. Accordingly, efforts to
put in place international agreements that
advance liberalization measures of interest to
foreign investors have been continuous. The
impetus for these agreements has come largely
from the developed world—the major source of
FDI—but developing countries are increasingly
willing to accept these agreements as the price of
attracting foreign investment, and are negotiating
more and more of these agreements among
themselves. At the same time, several international
organizations have been created to promote
FDI flows to developing countries in
recognition of capacity constraints in many of
these economies.
INTERNATIONAL
INVESTMENT ACCORDS
In 2002, the United Nations hosted a conference
in Monterrey, Mexico on financing
development. Fifty heads of state or government,
more than 200 ministers, and leaders
from the private sector and civil society, as well
as senior representatives of all major multilateral
financial, trade, economic, and monetary organizations
reached broad agreement on a number
of issues. The resulting statement, the Monterrey
Consensus on Financing for Development,
acknowledges that developing countries must
mobilize domestic financial resources for development.
It also notes, however, that such
resources will fall short of what is needed and
that flows of private international capital, particularly
FDI, are critical to development. 1
Although significant for the consensus it represents,
the statement is hortatory and nonbinding.
No comprehensive agreement liberalizes and
governs FDI in the way that the WTO’s rules
govern trade in goods. Rather, an extensive network
of investment agreements links countries
and regulates actions affecting foreign investment.
Operating at a bilateral or a regional level,
these agreements are supplemented by aspects of
WTO agreements that address selected investment
issues.
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