While analysts warn the global investment slowdown will have repercussions for the global economy, UNCTAD has updated its advice on investment facilitation, helping countries to make it easier for investors to establish or expand their investments, as well as conduct their day-to-day business.
The advice will also benefit those countries which will need financial support to implement the Sustainable Development Goals. Developing countries, for example, face an annual SDG-investment gap of $2.5 trillion, UNCTAD reported.
“Our Global Action Menu for Investment Facilitation is set to establish itself as an important instrument for governments worldwide for their national and international policy needs,” James Zhan, director of UNCTAD’s investment and enterprise division, said.
“Although facilitating investment is crucial for growth and sustainable development, to date, national and international investment policies have not paid it enough attention,” he added.
At the national level, for example, many countries have set up policy schemes to promote foreign investment. But while companies will likely be more tempted to invest in developing countries when the process of investing is easier, the period 2010-2015 saw just 23% of new investment promotion and facilitation policies around the world relate to investment facilitation per se.
Companies trying to invest in a developing country may encounter difficulties such as poor information, complicated bureaucracies and a low-level of expertise regarding their needs.
At the international level, concrete facilitation actions in the existing 3,300-plus international investment agreements are either absent or weak.
The report also said economic slowdown in the advanced economies is the biggest drag on global growth, but developing countries are now caught in the downdraft.
10 Action Lines
Responding to this, UNCTAD has released an update to a 10-part “action menu” that helps governments to be more transparent and provide better administrative procedures and other support mechanisms to make investing easier.
The menu was first released in January 2016 and has subsequently been enhanced by feedback from government officials and experts.
The menu is comprised of the following 10 action lines, which encourage governments to:
1. Promote accessibility and transparency in the formulation of investment policies and regulations and procedures relevant to investors
2. Enhance predictability and consistency in the application of investment policies
3. Improve the efficiency of investment administrative procedures
4. Build constructive stakeholder relationships in investment policy practice
5. Designate a lead agency, focal point or investment facilitator with a mandate
6. Establish monitoring and review mechanisms for investment facilitation
7. Enhance international cooperation on investment facilitation
8. Strengthen investment facilitation efforts in developing-country partners, through support and technical assistance
9. Enhance investment policy and proactive investment attraction in developing-country partners, through capacity-building, and
10. Complement investment facilitation by enhancing international cooperation for investment promotion for development, including through provisions in IIAs.
India, China to Escape
Expanding domestic markets and enough forex reserves in India and China may shield them from the “worst of the adverse external environment”, the UNCTAD Report 2016 said, PTI reported.
India is growing faster than China as it has managed the downside risks of the post crisis period better than other emerging economies, the report said.
“Size can provide somewhat of a buffer against strong head winds from the global economy,” it said, adding that “the two largest developing economies, China and India, may escape the worst of the adverse external environment due to their expanding domestic markets and a combination of sufficient foreign reserves and an effective use of their policy space.”
In large Asian countries investment shares have remained at relatively high levels over the past 40 years.
“Investment declined in those countries during the 1997-1998 crisis, but has gradually recovered in most of these countries, stabilizing at 25-30% of the GDP, and this helps explain the solid GDP growth performance of these economies,” it said.
However, in India private investments which were stronger earlier, have now shown signs of weakening, along with the emerging debt servicing difficulties, the report pointed out.
“Public investment has yet to take off, exposing infrastructure gaps that could hinder future growth,” it said.
