Putting it to Work in Developing Countries - Nathan Associates

BUILDING CAPACITY TO PROMOTE
INVESTMENT
International public sector institutions that
build capacity in FDI promotion are varied in
form and structure (Exhibit 6-2). Their evolu­
tion correlates with the growing recognition of
the importance of FDI and investment promo-
tion in the 1980s, a period of debt crisis when
the borrowing choices of many developing
countries were severely constrained and compe­
tition for FDI was more aggressive than ever.
Comparisons of investment promotion and
industrial marketing suggested that countries
could market themselves to multinational foreign
direct investors just as large-scale suppliers
FDI will increase as a quid pro quo for adopting
investment disciplines, bilateral agendas might
broaden to address investment promotion. The
Japan–Mexico FTA contains cooperative provisions
to promote FDI, as do EU association
agreements, including through facilities of the
European Investment Bank. The extent to which
developed countries might make investment
promotion or development schemes directly
contingent on acceptable investment protections
in host countries remains to be seen.
Dispute Settlement. The rising number of dispute
settlement cases suggests increased liability
for signatories to investment accords. In
response, states could narrow the standard of
protection for investors to reduce their own risk
of litigation. In fact, some U.S. businesses have
criticized the new model BIT and recent bilateral
agreements for carving out certain industrial
sectors, for not covering existing investment, for
narrowing the definition of expropriation, and
for allowing capital controls under certain circumstances.
20 Separately, the new model BIT
and recent agreements provide for more transparency
in dispute settlement procedures and
discourage frivolous claims.
INTERNATIONAL
INSTITUTIONS AND FDI
Several international and regional institutions
are seeking to facilitate FDI flows to foster
development. They aim to (1) supplement the
financial and technical resources of developing
countries so they can pursue foreign investors
more effectively and fully realize the benefits of
inward FDI; and (2) stimulate FDI flows by
mitigating the elevated political and economic
risks in many developing countries.
Exhibit 6-2
International Institutions Building Investment Promotion Capacity
Foreign Investment Advisory Service. Founded in 1985 as a joint service of the World Bank and
IFC, FIAS advises governments on improving the climate for domestic and foreign investment.
Its conducts investment climate diagnostics, designs investment laws and IPAs, analyzes administrative
barriers, and studies industry competitiveness.
Tools and Products. Investment climate assessments; recommendations for legislative reforms;
“regulatory guillotine approach” for reform of licenses and permits; Administrative Barriers
Reform Toolkit; various business enabling environment toolkits.
International Chamber of Commerce. Based in Paris and founded in 1919, the ICC is a forum
for international businesses. Members are multinational companies and individuals in 130
countries. The ICC organizes conferences, publishes position papers, and helps resolve commercial
disputes.
Tools and Products. Business policy statements for governments and international institutions;
investor surveys with UNCTAD; international commercial arbitration.
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