Investment for Development

Country Reports 

The researchers of the selected seven countries have prepared country research reports on investment regimes of their respective countries. The terms of references (TORs) of these reports and the latest versions of the reports are available in the website.

Assessment of investment policies in  

Input: This report should draw on secondary sources

Output: A reader-friendly, non-technical document, for distribution to stakeholders and to set the scene for the deeper research in Report B, in particular helping to identify case studies.

1.       Brief overview of macroeconomic context for the last 10 years

•          Market size and growth rate

•          Macro stability (inflation, interest rates etc

•          Infrastructure

•          Technology and skill levels

•          Investment flows (domestic and foreign; inward and outward; greenfield and M&A; country of 
     origin or destination; sector-wise breakdown)

•          Capital and current accounts balance,  etc.

2.       Overview of main policy trends for the last 10+ years

•          Parameters/priorities of the national development strategy/poverty reduction strategy

•          Trade policy including any regional trade arrangements, membership of the WTO

•          Capital controls

•          Privatisation/regulation

•          Broad parameters of competition law, labour and environmental regulation

•          Fiscal regime for foreign investors and their investments

•          Intellectual property rights regime

3.       Investment Policy Audit

For all policies, report should specify when the measure was introduced, whether there is any difference in the treatment of national and foreign investors; differences across sectors etc.

•        Registration: What is the process for registering a foreign investment? Have any efforts been 
   made to streamline this process? How are foreign investors and investments defined for the 
   purposes of registration?

•        Rights to entry and establishment: Limits on type of investment (portfolio v. direct), size of 
   holdings, extent of ownership, JV requirement, sector-wise restrictions etc.

•        Investor protection, guarantees (e.g rates of return), insurance provisions

•        Dispute settlement mechanisms

•        Restrictions on outward capital flows (repatriation of profits etc)

•        Bilateral/regional agreements on investment, transfer pricing, double taxation treaties

•        Investment facilitation institutions/initiatives

•        Incentives (e.g. reduced income tax rates; tax holidays; exemptions from import duties/duty   
   drawbacks; accelerated depreciation rates; investment allowances; specific deductions from 
   gross earnings for income-tax; deductions from social security contributions; grants; loans and  
   loan guarantees. Are these targeted? Rules-based incentives such as labour or environmental 
   standards etc.)

•        Requirements (e.g. local content requirements; export requirements/limitation; import 
   balancing/limitation; foreign exchange limitation etc.)

4.       Policy-making process for investment issues.

This section should be more discursive, highlighting problems and potential areas for improvement.

•       What are the national policy objectives/targets for investment?

•       To what extent are these purely economic objectives and how far are they affected by social and political objectives?

•       Which Ministry(ies)/agencies/other quasi-governmental bodies participate in the decision-making process?

•       How much independence to sub-national layers of government (state, region, municipality etc.) have on investment issues?

•       Is it a priority topic? Have any high-level government officials/politicians taken a particular interest in investment issues?

•       To what extent have any recent policy changes been pushed by donors/intergovernmental organisations rather than domestic actors?

•       Are civil society stakeholders involved/consulted in the policy-making process?

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Synthesis Report A

The report should seek to answer three key questions:

I.                     How successful have the countries in the study been in attracting FDI?

II.                   What are the policies that have influenced their level of success?

III.                  Can any general tentative policy recommendations be made on the basis of this?

1/ Short introduction to global production strategies: why might a MNC want to invest in a foreign country? Market/resource/efficiency-seeking. What are the latest insights into firms global strategies (e.g. are they less rational and more ad hoc than had earlier been thought?) [Nothing too technical] Broad macro characteristics of the project countries, presented in comparative graphs. Given the characteristics of our project countries, how much FDI would we expect them to attract? For what reasons?    

2/ Comparative success in attracting FDI

Do the countries meet these expectations?

Comparative graphs showing the FDI stock/flow for each of the countries; FDI as a share of GDP; as a share of world trade.

Some comparison with other countries in the region/world, e.g. China, E. and SE Asia, success stories in Africa, Argentina?

When differences in size, dynamism and outward orientation of the economies are held constant, are there still major differences in the amounts of FDI that these countries attract An attempt will be made to identify key drivers of FDI in each project nation. The report will also explore if the determinants are significant

3/ Role of FDI in the economy

Does FDI play a major role in these economies?

Comparative graphs of:

Proportion of FDI in domestic capital formation

FDI in the capital account (debt/aid/portfolio)

FDI flows as a proportion of changes in value added in the manufacturing sector?

Foreign-owned companies share in value addition; sales; employment; exports; concentration in particular sectors (as far as the information is available in the reports and annexes)

First conclusions on the overall importance of FDI in the economy.

4/ Place of FDI in the country’s economic policy.

Is it a particular focus?

Is there a distinct FDI policy or does it form part of a national investment policy? To what extent has FDI policy changed in recent years?

Very broadly, has liberalisation been correlated with a rise in FDI? Does the literature back the proposition that liberalisation leads to greater FDI flows?  

5/ What specific policies have been used by project countries? How do these compare to other investment regimes around the world? Including some consideration of policies other than FDI policy per se.

In this report, there will not be a detailed assessment of the effectiveness of policy; nor will there be an assessment of the impact of FDI on the economy. These will be reflected in Report B and the Report B synthesis.  

On the whole the report should be reader friendly, it should not be too technical. It must be comprehensible and interesting to laymen.

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1. Graph or chart showing responses to question [3?] on the sectors in which FDI is thought to have had the most impact. Top five answers. 

2. Assessment of the overall impact of FDI using Q5
3. Ways in which FDI is believed to have a positive impact using Q4&5
4. Ways in which FDI is believed to have a negative impact using Q4&5

         i   Sector data over time (10 years): sales, exports, total capital, working capital, employment, prices, (given inflation and exchange rate fluctuations), market concentration, average size of firms, the sectors' share in the GDP and total exports & imports.

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