Investment Facilitation: An Action Menu

Mobilizing investment and maximizing its positive contribution to growth and sustainable development is a priority for most countries. Concerted efforts are required to boost cross-border investment, within the context of an overall policy framework aimed at maximizing the benefits of such investment for host countries and minimizing any negative side effects.

Numerous initiatives aimed at stimulating investment exist that try directly to affect the risk-return ratio for investors. Such initiatives may try to lower risks by providing guarantees, by sharing risks or by offering certain protections. Or they may try to increase potential investor returns through incentives.

In the most common international instruments for investment promotion, relatively little attention is being paid to ground-level obstacles to investment, such as a lack of transparency on legal or administrative requirements faced by investors, lack of efficiency in the operating environment, and other factors causing high costs of doing business.

Addressing such barriers to investment could provide a real boost to both cross-border and domestic investment, complementing direct stimulus instruments (guarantees, incentives), and reinforcing trade facilitation efforts – given that 80% of trade is driven by the international production networks dependent on investments from multinational firms.

Investment facilitation initiatives could, in fact, mirror many elements common in trade facilitation. They could include improvements in transparency and information available to investors; they could work towards efficient and effective administrative procedures for investors; they could enhance the consistency and predictability of the policy environment for investors through consultation procedures; they could increase accountability and effectiveness of government officials and mitigate investment disputes through ombudspersons; they could include cross-border coordination and collaboration initiatives such as regional investment compacts or links between outward and inward investment promotion agencies; and they could include technical cooperation and other specific support mechanisms for investment.

The Action Menu proposed here for discussion is based on UNCTAD's Investment Policy Framework – which proposed action on Investment Facilitation in its first edition in 2012 – and rich experiences and practices of investment promotion and facilitation efforts worldwide over the past decades.

The Action Menu proposes 10 action lines with a series of options for investment policymakers to adapt and adopt for national and international policy needs: the package includes actions that countries can choose to implement unilaterally, and options that can guide international collaboration or that can be incorporated in international investment agreements. The Action Menu should be read in the broader context of UNCTAD's Investment Policy Framework for Sustainable Development.

The proposed Action Menu is preliminary research and does not represent the official views of UNCTAD member States or the UNCTAD Secretariat. Comments and ideas will be invaluable to the further development of the Action Menu.

Please submit your feedback to Mr. James Zhan, Director of the Investment and Enterprise Division at UNCTAD via DIAEinfo@unctad.org.

Download the preliminary UNCTAD Discussion Note (Version 2):

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For action 4, a clear commitment to developing marketing materials, such as sector value propositions, would be valuable.

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The review of the UNCTAD investment tool kit was refreshing as it was functional from the perspective of IPAs. It effectively outlined the action points IPAs must take and laid out for them the ground they need to cover in order to become the leaders they should within their governments.

WAIPA would be even more pleased to see an elaboration of the aspect of bureaucratic discretion and discrimination. In our experience, this is perhaps the single most impending issue to free flow of investment. So more information on this would be good so governments cannot just be cautious about how they bureaucratically create blocks but be able to identify the discriminatory behavior.

In the action about improving efficiency, perhaps we could also look into using existing legal framework between countries such as Bilateral Investment Treaties (BITs) positively. Often engagements are in parallel to some positive concessions that these BITs may have. Under the same point it is the visa regimes that sometimes create the biggest hurdles, especially when the general populous contain some degree of paranoia about foreign investors and foreigners. There is very little coordination and linkage between the priorities of the Investment agency and the foreign policy agency. This leads to all sorts of investment obstacles.

In the action about proactive investment promotion, we feel IPAs must create a robust media strategy. This helps to create an integrated engagement with what is a pillar of the state and one that can be used as an ally to further IPAs causes and aims.

Additionally, at WAIPA we feel that there is a need for an action point to denote the spillover effects of MNEs. Many studies reveal that technology transfer (or technology spillovers) from Multinational Enterprises (MNEs) to local companies generally exist through vertical and especially backward linkages. That means technology transfers/spillovers tend to exist in supplier-buyer relationships. That`s why, Investment Promotion Agencies can play a significant role in the promotion of such kinds of spillover effects. They can create and implement sector-specific and even company-specific strategies and action plans to identify bottlenecks that prevent such kinds of spillovers and to facilitate and promote such kinds of channels.

Aftercare is a very crucial part of investment promotion; in fact it is perhaps the most important because it makes the difference between a short-term investor and one that is long term. Rather than creating new organizations that act as additional bureaucratic bodies, we believe that the efficiency of IPA’s must be increased to serve multiple purposes. We feel that this should gain more prominence in the action points.

IPA’s can also act as ombudspersons; can gather feedback and design policy; they can correct data from the field and plough it back into the investment framework; they can promote accessibility and transparency and most importantly provide one-stop shop services. We believe that with a traditional bureaucratic approach it will not be possible to decrease cost-of-doing-business due to lack of transparency and lack of efficiency. Investors need to feel welcome and to be understood and only the people from business sector will be able to facilitate the issues they face. Therefore the multi-purpose and multi-pronged approach of IPAs could also be part of the action points.

IPA’s are ideally to be formed by professionals from the field but in reality, due bureaucracy, IPAs are being pushed out of the game – this should change and IPAs should gain more power. IPAs have enough potential but with more financial, administrative support and with modern legal structure giving them the right to act as a real investment authority, they can call the shots. For them to gain more power and control over their governments, action points linked to their financial independence could also be an important addition in the tool kit.

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S T R A T E G Y. Create smart, long-term investment promotion strategy. Do not concentrate all efforts on offering ad-hoc investor facilitation services. Work on building a clear, deep-rooted investment promotion strategy, choose preferential sectors, and concentrate on selected countries of origin. Do not expect that birds fly into the mouth ready-roasted. Be proactive. Design (and if necessary periodically review) the strategy based on your country’s economic-social-educational-cultural environment. Believe in it; allocate abundant human and financial capital. Follow the strategy.

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