NATIONAL LAW UNIVERSITY,ODISHA
“INTERNATIONAL INVESTMENT LAW” PROJECT ON:
“INVESTMENT FACILITATION AGREEMENT AND SUSTAINABLE
DEVELOPMENT”
SEMESTER - IX
SUBMITTED TO: SUBMITTED BY:
MS. A ELUCKIAA PARUL PRIYA NAYAK
(ASST. PROFESSOR OF LAW) (2018/B.A. LL.B/074)
SOMYA AGRAWAL
(2018/[Link].B/106)
TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
INVESTMENT FACILITATION AS A TOOL TO PROMOTE SUSTAINABLE
DEVELOPMENT......................................................................................................................5
INVESTMENT FACILITATION PROPOSAL........................................................................7
NATIONAL FOCAL POINTS..............................................................................................7
SINGLE ELECTRONIC WINDOWS AND ELECTRONIC GOVERNANCE...................8
TRANSPARENCY, PUBLIC PROCEDURES, AND CORPORATE SOCIAL
RESPONSIBILITY................................................................................................................9
OBSTACLES AHEAD AND PATHS FOR DEVELOPING COUNTRIES..........................12
CONCLUSION........................................................................................................................14
BIBLIOGRAPHY....................................................................................................................16
INTRODUCTION
An investment facilitation (IF) agreement is distinct from a trade agreement in that it serves a
purpose beyond increasing trade or money flows. Rather, it focuses on addressing important
institutional determinants in countries, such as transparency, efficiency, predictability, and
consistency of administrative procedures and the policy environment. In this way, IF
measures help to establish an environment of institutional space for coordination between
stakeholder interests and domestic development policies & priorities for specific industries of
countries.
Improving nations’ institutional investment capacity is vital for sustainable development.
Creating a transparent, secure, and moderated environment for investors, governments, and
civil society would result in not just increased investment, but also, perhaps more crucially,
investment that is consistent with countries' policy objectives.
Since 2015, there has been increasing pressure on the multilateral trade system to discuss a
prospective IF deal. Members of the World Trade Organization (WTO) have repeatedly said
that trade and investment must work together to promote global development and inclusive
growth. The Russian Federation presented topics for discussion within the IF's larger
discipline in March 20171. The Friends of Investment Facilitation for Development (FIFD)
initiated an open-ended, informal discourse on investment facilitation for development in
April 2017, while China2, Brazil, and Argentina exchanged recommendations for prospective
IF features. Finally, in February 2018, Brazil circulated a draft IF agreement at the World
Trade Organization (WTO) (ICTSD 2018)3.
The pressure for an IF agreement has accelerated in recent years, coinciding with a period of
rising trade tensions and concern over the trading regime's future. As a result, while
nationalism continues to drive protective impulses and threaten the foundations of the trade
system, investment agreements, IF, and investment promotion provide a new platform for
international action.
1
Communication“from the Russian Federation, Investment Policy Discussion Group, JOB/GC/12o. World Trade
Organization. Accessed on 21st September 2o22.
2
Possible“Elements of Investment Facilitation, Communication from China, JOB/GC/123. World Trade
Organization. Accessed on 23th September 2o22
3
Possible“Elements of a WTO Instrument on Investment Facilitation, Communication from Argentina and Brazil,
JOB/GC/124. World Trade Organization. 24th September 2o22
This project provides a quick introduction of how investment facilitation measures may help
establish country-specific institutional arrangements that encourage stakeholder collaboration
and help members achieve their Sustainable Development Goals (SDGs).We explore how
these suggested IF measures might help to sustainable development by examining the
common components present in the variety of IF recommendations made by WTO members
and how they connect to some of the institutional reform targets specified by the SDGs. What
obstacles would be developing countries face in putting these in place?
INVESTMENT FACILITATION AS A TOOL
TO PROMOTE SUSTAINABLE
DEVELOPMENT
The 2030 Agenda for Sustainable Development of the United Nations (UN) gives further
impetus for a discussion on IF. According to the United Nations Conference on Trade and
Development (UNCTAD) and the Organisation for Economic Co-operation and Development
(OECD), developing countries face a $2.5 trillion annual investment gap that must be filled
by non-public sources of funding by 2030 in order to achieve the SDGs. Smarter, more
effective, and less bureaucratic investments have the ability to bridge that gap, directing
economic activity to specific areas and boosting productivity.
O’Neill et al.4 (2018) discovered that no country can meet its citizens’ fundamental demands
at a globally sustainable level of resource consumption. As a result, establishing social,
cultural, and institutional domains that aim to detach the idea of SDGs from economic
development would be a more effective reading of the SDGs. Refocused Goals should target
to achieve ‘sufficiency’ in resource consumption, improve physical and social provisioning
systems, and reduce consumption and production in order to achieve more equal human well-
being.
As a result, it is feasible to draw a clear association between IF initiatives and the promotion
of sustainable development by shifting the focus from the gap in IF to an increase in the
quality of institutions. Importantly, this association can be determined while separating GDP
growth from material resource usage and the achievement of several major SDGs. As a result,
the 2015
SDGs have the potential to create a small but critical shift in how we think about sustainable
development, emphasising the fundamental worth of inclusive institutions, regulatory
frameworks, and norms that organise human existence and society.
While the 2030 Agenda does not aim to dictate specific institutional models, it does define
principles that institutions should aspire for, based on their capabilities and flexibility.
Principles such as “Effectiveness, inclusion, and accountability” (SDG 16), “responsive,
inclusive, participatory, and representative decision-making at all levels” (target 16.7), and
4
O’Neill, Daniel W., Andrew L. Fanning, William F. Lamb, and Julia K. Steinberger. 2o18. “A Good Life for
All Within Planetary Boundaries.” Nature Sustainability 1: [Link] on 27th September
‘policy coherence’ (target 17.14) pervade most of the object-specific goals and contribute
directly and indirectly to the 2030 Agenda's overarching goals.5
The purpose of this method is to see how some economic development and industrial policy
literature resonates with the institutional proposals presented by WTO members in their IF
statements. While the SDGs aim to help to the creation of institutional arrangements based on
the pillars of transparency, shared knowledge, and coordination, they do so in such a way that
solutions can be adjusted to domestic institutional circumstances. Furthermore, a focus on
domestic and international institutional experimentation and interaction can lead to unified
visions of developmental policies that will form a long-term coalition and permanently
reorganise domestic bureaucracy, practises, and communication.
Understanding the relationship between the WTO IF and the SDGs also helps the UN in its
mandate to follow up on the SDG Agenda at the global level through the UN High-Level
Political Forum (HLPF) on Sustainable Development. Many of the same institutional
improvements sought by the IF proposals are addressed in the review of SDGs to “transform
towards sustainable and resilient societies” (SDGs 1o, 13, 16, and 17) and to “empower
people and ensure inclusiveness and equality” (SDGs 4, 8, and 10) in 2018 and 2019. This
small contribution aids to the UN review of such goals in light of investment for
development.
Looking at the SDGs from this angle, we conclude that the documents presented by FIFD, the
Mexico, Indonesia, Republic of Korea, Turkey, Australia (MIKTA) grouping, the Russian
Federation, Argentina, China, and Brazil contain significant proposals that can be
implemented to improve social, cultural, and institutional environments as desired by each
member. Specifically, we look at how the standard proposals such as (i)National focal points
(NFPs);
(ii) A single electronic window (SEW) (iii)Transparency and corporate social responsibility
(CSR) might help achieve some of the SDGs.
5
Rodrik, Dani, Arvind Subramanian, and F. Trebbi. 2004. “Institutions Rule: The Primacy of Institutions Over
Geography and Integration in Economic Development.” Journal of Economic Growth 9 (2): [Link]
on 26th September 2022
INVESTMENT FACILITATION PROPOSAL
NATIONAL FOCAL POINTS
The Chinese, Russian, Argentine, and Brazilian proposals first explored national focus points
in the framework of IF. When more than one public institution is engaged in the investment
screening process, the papers proposed establishing one or more one-stop procedures to
define the duties and responsibilities of different levels of government and various
organisations. NFPs are conceptually comparable to the enquiry points established by Article
1 of the Trade Facilitation Agreement (TFA).
An NFP would supply investors with all important information on laws, agencies, public
policies, and investment data. NFPs would also assist investors negotiate domestic
bureaucracy and avoid disagreements with member states by preventing complaints and
misconceptions. NFPs would collaborate with one another on the sharing of information,
data, capacity building, procedural requirements, and technical support, much like the
enquiry points mentioned in the TFA. NFPs can be carved out of, or modified from existing
domestic organisations.
Importantly, the concept of NFPs takes a preventive approach to investment regulation. It
moves away from the conventional adversarial form of an investment agreement, which relies
on investor-state dispute settlement (ISDS) provisions, arbitration, and dispute resolution, and
instead emphasises preventive collaboration through NFPs. This method is a reduced version
of the elements included in Brazil's Cooperation and Facilitation Investment Agreements 6, as
outlined in the Argentina and Brazil proposal. By promoting coordination and information
exchange across national agencies, the NFPs' conciliatory character would strive to match
incoming investments with members' interests.
Implementing efficient NFPs can help achieve a number of SDG goals. Investments would
react more effectively to nations’ needs if the NFP is well-articulated with domestic
institutions and operated in unison with members' policy goals. Goal 9 of the Sustainable
Development Goals, for example, aims to stimulate the development of “resilient
infrastructure, promote sustainable industrialization, and foster innovation”.
6
Sauvant, Karl P., and Howard Mann. 2017. Towards an Indicative List of FDI Sustainability Characteristics.
Geneva: International Centre for Trade and Sustainable Development (ICTSD) and World Economic Forum.
Accessed on 28th September 2022
The idea would also assist to fulfil SDG goal 17.17, which aims to improve public, public–
private, and civil society partnerships, by facilitating domestic coordination between
stakeholders from the public and private sectors. Targets 16.5, 16.6, and 16.7, for example,
urge nations to decrease bribery and corruption, establish accountable and transparent
institutions at all levels, and promote responsive, inclusive, participatory, and representative
decision-making at all levels.
SINGLE ELECTRONIC WINDOWS AND ELECTRONIC GOVERNANCE
The concept of a SEW, as well as the consolidation of electronic governance for investors,
may be traced back to early trade facilitation discussions. Though it began as a small-scale
information portal, this measure grew into one of the TFA's most ambitious goals, and some
members have been working on its implementation since the”1990s.
Members” are required to develop a single window for traders to submit and access
documents, data, and requirements, as well as to follow all phases of the importation and
exportation processes, as outlined in the TFA. The ultimate goal is to create an electronic data
centre that houses all of the information shared by traders, government agencies, entities,
bodies, financial institutions, and civil society groups. This dramatic shift necessitates
substantial investments in machinery, personnel training, administration, and maintenance.
Following the United Nations Economic Commission for Europe (UNECE) release of the
Recommendation and Guidelines on Establishing a Single Window to Enhance the Efficient
Exchange of Information Between Trade and Government (UN/CEFACT 2005), 20 countries
were studied between 2007 and 2012 for information on the implementation and operation of
these mechanisms. The category of case studies include both developing and developed
countries. Despite the high expenses, nations are at various stages of implementation, with
Senegal and Rwanda leading the way, having been involved in this initiative since the mid-
1980s.
The SEW for IF, like trade facilitation, has the potential to grow into a large-scale initiative
that extends beyond an information portal. Though many IF functions can be used with the
TFA mechanism, there are few situations where their responsibilities and attributions do not
exactly match. When it comes to aligning investor requirements with host nations' internal
development programmes, public and private enterprises, financial institutions, and civil
society groups differ greatly. A SEW, for example, would force members to adopt electronic
papers, signatures, and processes in accordance with their respective nations' capabilities.
If SEW models would vary depending on individual national and regional situations, finance,
and mandatory or optional processes and regulations, similar to trade-focused single
windows.
The SEW might serve as a transparency focal point for multinational corporations’
governance policies, ambitions, and investments, just as it could encourage sustainable FDI
as part of a country's long-term development strategy. The use of a SEW to digitalize
governance might also make it easier to manage entering items that meet specified
environmental, health, sanitary, and phytosanitary criteria. An enhanced and more efficient
system for tracing investments, pledges, and objectives, for example, would have a favourable
influence on public policy and development goals.
The adoption of such IF measures would have a direct impact on SDG targets to “build
resilient infrastructure, promote inclusive and sustainable industrialization and foster
innovation”.
These mechanisms are also directly linked to SDGs 16 and 17 to “promote peaceful and
inclusive societies for sustainable development, provide access to justice for all and build
effective, accountable and inclusive institutions at all levels” to “strengthen the means of
implementation and revitalize the global partnership for sustainable development”.
By facilitating private–public partnerships, identifying opportunities for inserting the country
in global value chains, and promoting backward and forward linkages between foreign
investors and domestic firms, the implementation of a SEW would not only improve the
regulatory framework for investment but also support the coherence of the investment and
trade regulatory framework
TRANSPARENCY, PUBLIC PROCEDURES, AND CORPORATE SOCIAL
RESPONSIBILITY
In order to transform power relations and address social, political, and economic imbalances,
it is critical to reduce tensions across institutions, strengthen them, and make them more
inclusive7. Improvements to members’ overall regulatory environment, as well as procedures
for investment applications, appeals, and review processes, would aid in harmonising,
publicising, and increasing informational access for all stakeholders.
On transparency, the publication of any development policies and measures affecting
investors should enhance impartiality, non-discrimination, and transparency. The concept is
that within
7
Unsworth, Susan. 2010. An Upside Down View of Governance. Brighton, UK: Institute of Development Studies.
Accessed on 29th September 2022
any country's internal systems, there are a plethora of measures that may be taken to promote
policy coordination and good governance. Members can also work to enhance their domestic
systems to ensure that all criteria for investment entry, creation, acquisition, and expansion
are made public and consistent with their national policy.
In general, as per SDG targets, these measures may work to encourage the mobilisation of
resources from a variety of sources in order to offer predictability and collaboration for
development and poverty-reduction initiatives in developing and least- developed countries.
One of the target mentions a stable regulatory environment is essential for developing
effective policy frameworks that react to societal needs and encourage investment in poverty-
eradication efforts. Furthermore, these ideas are related to SDG 9’s objectives in that they
seek to boost investment in infrastructure for development, technological development,
research, and innovation, as well as access to ICT. Finally, implementing the ideas to
improve the transparency and regulatory environment may help to eliminate corruption and
bribery while establishing effective, accountable, and transparent institutions at all levels.
An important aspect of the framework for an IF agreement is to encourage active
collaboration between the public and private sectors. The SDGs attempt to inspire
corporations and industry to engage in responsible business practises, such as those supported
by the United Nations Global Compact, by orchestrating this synergy8. The value of doing so
rests in establishing country-specific models to make planning, execution, and reporting of
sustainable development efforts easier, with a focus on the requirements of developing
nations, including capacity building. “Regulatory exceptions for investment should not come
at the cost of domestic long-term objectives; rather, governments and industry should work
jointly to foster linkages with small and medium-sized enterprises (SMEs) and encourage
broader corporate social responsibility in national investment policies.”9
Many of the IF plans include these concepts in order to link investors and their investments to
CSR norms and nationally determined development goals. The CSR proposals have centred
on getting investors and their investments to comply with voluntary CSR principles and
standards related to the environment, human and labour rights, engagement with the local
community,
8
See [Link] on 30th September 2022
9
Sauvant, Karl P., and Khalil Hamdani. 2015. An International Support Programme for Sustainable Investment
Facilitation E15Initiative. Geneva: International Centre for Trade and Sustainable Development (ICTSD) and
World Economic Forum. Accessed on 1st October 2022
local worker capacity building, and the formation of human capital that have been adopted by
members.
OBSTACLES AHEAD AND PATHS FOR DEVELOPING
COUNTRIES
WTO members have begun to work on domestic implementation of the TFA since it took
effect on February 22, 2017. While some of the TFA measures provide insight into what
could be in store for future IF measures, it's important to take a step back and get back to
basics when considering IF. For an investment deal to move through at the WTO, there are
still certain initial obstacles to overcome. The recurrent attempts at the WTO to promote the
IF agenda have aroused political issues, making certain members nervous. A good number of
developing nations oppose the inclusion of IF in the Doha Development Round, as well as
other Singapore Issues10. Their political priorities include agriculture and problems such as
harmonisation of rules of origin, which they see as the principal barrier for exporters from the
least developed and developing countries.
Despite this, plurilateral and bilateral progress is being made. Developing nations, for
example, have been particularly forward-thinking in fostering cooperation and IF in bilateral
agreements. Brazil reached agreements with Angola, Chile, Colombia, Malawi, Mexico,
Mozambique, and Peru in 2015. For its part, India has pushed for trade facilitation in
services, which might give useful insights inasmuch as it intersects with investment
difficulties in the Services Mode 3, notwithstanding its reluctance to engage multilateral IF
debates at the WTO. With the present plans on the table, distinguishing between services and
products may also be problematic11.
Zooming away of WTO negotiation dynamics and into TFA implementation experiences,
certain potential issues with some of the IF clauses outlined above can be foreseen. A SEW
has shown to be one of the most expensive TFA measures (followed by the deployment of a
risk management system and the introduction and widespread usage of audit-based customs).
The implementation of a trade SEW in developing nations has resulted in considerable
start-up
10
Suneja, Kirtika. 2017. “WTO: India Manages to Prevent New Deal on Ecomm, Investment Facilitation.”
Economic Times. 15 December. [Link] com/news/economy/foreign-trade/wto-india-
managesto-prevent-new-deal-on-ecomm-investment-facilitation/ articleshow/[Link]. Accessed on 3rd
October 2022
11
Hees, Felipe, Pedro Mendonça Cavalcante, and Pedro Paranhos. 2018. Key Aspects for a Multilateral
Outcome on Investment Facilitation: A Brazilian Perspective. Geneva: International Centre for Trade and
Sustainable Development (ICTSD). [Link]
investment- facilitation-a-brazilian. Accessed on 4th October 2022
expenses for government agencies in the short term, as well as the necessity for a trustworthy
lead agency and domestic political will in the long run.
For many developing nations, changing the operational procedures of domestic agencies to
integrate IF principles will be a significant issue. In many situations, members will be
required to do significant tasks in order to collect the data required to construct and educate
NFPs. In nations with limited resources, the absence of trustworthy and exact data, as well as
the complexity of the underlying issues, may prove to be difficult to overcome.
Finally, several of the above-mentioned member requirements and CSR provisions have the
ability to alter how businesses and governments interact and function within a defined
institutional framework, whether domestically, regionally, or worldwide. Creating this
synergy for private–public collaboration through an NFP and a SEW may be a difficult
administrative endeavour, requiring commitments from a wide range of state agencies and
stakeholders while managing their expectations under a complicated legal environment that is
always evolving.
CONCLUSION
The debate on the relationship between an IF agreement and sustainable development has
mostly centred on the need to enhance investment flows to fill the finance gap required to
meet the majority of the SDGs by 2030. Though it is true that IF is an essential source of
finance for the SDGs' implementation, it is much more.
The institutional approach to the SDGs has demonstrated how some of the major concepts
proposed for the IF may also be seen as guidelines to be followed when members consider
their domestic institutions and procedures. The IF recommendations defined the concepts of
openness, publicity, due process, inclusiveness, and electronic governance as the direction
members’ domestic institutions, agencies, or bodies should look towards, much like a
compass establishes the broad direction of an activity.
In this regard, the current style of the SDGs and IF recommendations provide for flexibility in
the way, time, and manner in which each nation incorporates these ideas into its domestic
systems. While the ideals of openness, public awareness, due process, inclusivity, and
technological governance are universal, the paths to accomplishing them vary.
When seen through the lens of the SDGs, the efforts on IF have the potential to allow for
more country-specific experimentation than WTO accords have hitherto allowed. This step is
critical for the installation of IF to be successful. It’s also important to make sure that these
measures function in unison with development strategies that are suited to domestic
institutional conditions. A development-friendly international trade framework allows nations
to experiment with institutional arrangements and “allows them to find their own potentially
divergent answers to the developmental obstacles they face,” according to the World Bank. 12
As a result, the international economic system should support institutional change from the
standpoint of fair economic growth rather than integration.13
Furthermore, such measures would strengthen cohesiveness within national systems, ensuring
that policy directives are communicated to all levels of agencies and organisations. Chang14
12
Rodrik, Dani. 2000. “Institutions for High-Quality Growth: What They Are and How to Aquire them.” Studies
in Comparative International Development 35 (3): 3-31.
13
Rodrik, Dani. 2001. The Global Governance of Trade As If Development Really Mattered. Background Paper.
New York: United Nations Development Programme.
14
Chang, Ha-Joon. 2011. “Industrial Policy: Can We Go Beyond an Unproductive Confrontation?” Annual World
Bank Conference on Development Economics 83-109.
explains that the ability of the state to implement policies, neutralize interest group capture,
get individuals to act in concert, and build nations and communities out of disparate groups is
dependent on the state’s ability to implement policies, neutralize interest group capture, and
maximize the role of information between states and the private sector.
The development literature has often stated that there is no one path to long-term growth. The
institutional interpretation of IF ideas here would provide much-needed developmental
flexibility, especially in light of some of the UN 2030 Agenda for Sustainable Development’s
targets.
BIBLIOGRAPHY
Chang, Ha-Joon. 2011. “Industrial Policy: Can We Go Beyond an Unproductive
Confrontation?” Annual World Bank Conference on Development Economics 83-
109.
Hees, Felipe, Pedro Mendonça Cavalcante, and Pedro Paranhos. 2018. Key
Aspects fora Multilateral Outcome on Investment Facilitation: A Brazilian
Perspective. Geneva:International Centre for Trade and
Sustainable Development (ICTSD).[Link]
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OECD. 2018. “Private Finance for Sustainable Development.” Paris: Organisation
forEconomic Co-operation and Development
(OECD).[Link]
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Steinberger. 2018. “A Good Life for All Within Planetary Boundaries.” Nature
Sustainability 1: 88-95.
Rodrik, Dani. 2000. “Institutions for High-Quality Growth: What They Are and
How to Aquire them.” Studies in Comparative International Development 35 (3):
3-31.
Rodrik, Dani. 2001. The Global Governance of Trade As If Development Really
Mattered. Background Paper. New York: United Nations Development
Programme.
Rodrik, Dani, Arvind Subramanian, and F. Trebbi. 2004. “Institutions Rule:
The Primacy of Institutions Over Geography and Integration in Economic
Development.” Journal of Economic Growth 9 (2): 131-165.
Sauvant, Karl P., and Khalil Hamdani. 2015. An International Support Programme
forSustainable Investment Facilitation E15Initiative. Geneva: International Centre
for Trade and Sustainable Development (ICTSD) and World Economic Forum.
Sauvant, Karl P., and Howard Mann. 2017. Towards an Indicative List of FDI
Sustainability Characteristics. Geneva: International Centre for Trade and
Sustainable Development (ICTSD) and World Economic Forum.
Suneja, Kirtika. 2017. “WTO: India Manages to Prevent New Deal on Ecomm,
Investment Facilitation.” Economic Times. 15
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