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No. 01, December 2001 CUTS
Centre
for Competition,
Investment
and Economic Regulation
Jaipur, India |
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The
Investment for Development (IFD) project The
Launch Meeting 13th-14th December 2001 Country
reports: investment policy and performance Some
Critical Investment Issues FDI:
boon or bane for the LDCs? International
investment agreements Monograph:
Making Investment Work Briefing
paper: Why America’s Nightmare is the World’s too (forthcoming)
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Editors note
CUTS Centre for International Trade, Economics and Environment is proud to present the inaugural issue of IFD-Enews, the quarterly e-newsletter of a new project “Investment for Development” (IFD). In IFD-Enews, we will regularly update our readers about the progress of the project and provide a few pieces of news or articles on current investment issues.
There is a growing realisation among the developing countries and transition economies that foreign aid sources are drying up and there is a shortage of domestic capital. Thus they are recognising the need to attract higher FDI more than ever before. For this purpose, these countries are engaged in several exercises, including the design of comprehensive policy frameworks to create an enabling environment.
There are widespread negative perceptions among developing countries regarding FDI specifically regarding activities of Transnational Corporations (TNCs). Members of consumer organisations, civil society and media are demanding imposition of mandatory codes of conduct on TNCs to protect interests of stakeholders. In recent times many instances of TNCs indulging in unfair and illegal practices have come forth. Coca Cola, the world’s largest soft drink manufacturer and distributor has come under publicity fire a couple of times in the last few years. The latest controversy surrounding the multinational giant is its business practices in India with local bottlers. The bottlers allege that the company initially showed interest in joint ventures with the bottlers but later on insisted on acquiring the bottling plants. Coke forced some bottlers to sell their plants to the company, some others to close down their plants and other tricks to virtually wipe out the local bottlers. Clear policies, monitoring of TNC behaviour and effective regulatory regimes are essential to prevent such incidents.
We will strive to highlight such significant and burning issues in each edition of IFD Enews. If you have any queries, comments and suggestions please write to us. If you are aware of people interested in this area please ask them to write to us for subscription. The
Investment for Development (IFD) project
The
project
The “Investment for Development” project aims to create awareness and build capacity on investment regimes and international investment issues in developing and transition economies. The project is supported by DFID, UK and is being conducted by CUTS with the collaboration of UNCTAD. There are two aspects to the project: fact finding and advocacy work.
Seven countries have been selected for the project to cover a range in terms of size, level of development, macroeconomic characteristics, geographical location, investment policy and performance. These are Bangladesh, Brazil, Hungary, India, Tanzania, South Africa and Zambia. The aim of the project is to identify polices by conducting comparative studies on investment picture in these countries that will help them to attract, use and retain FDI to meet their development objectives. Click the link to visit IFD web pages on CUTS website http://www.cuts-international.org/ifd-indx.htm
Project
planning
CUTS, partner organisations, the core researchers and others will carry out project activities. In order to co-ordinate the activities of all these groups and to ensure that deadlines are met, a detailed project-planning document has been prepared. The ‘Operational Strategy Note’ (OSN) delineates the objectives and management of the project and the timetable, which has to be followed by all involved. It also talks about the structure and contents of the outputs.
These outputs include research reports from the seven countries, synthesis reports giving a comparative analysis of the data, seminars and meetings at national, regional and international levels. At the completion of the project an advocacy document will be produced and a final meeting will be held in Geneva in 2003 in collaboration with the UNCTAD. The advocacy document could be helpful in the negotiations on international investment agreements. Click here to get Operational Strategy Note (OSN)
The
Launch Meeting 13th-14th December 2001
The IFD Launch Meeting brought together all those who will be working on the two-year project along with international experts to debate current investment issues and discuss future project activities. Practitioners and experts such as Arvind Mayaram, Secretary, Ministry of Industries, Rajasthan and Vice-President of the World Association of Investment Promotion Agencies (WAIPA); Suman Bery, Director General, National Council of Applied Economic Research, India and Hans Christiansen, Principal Economist, OECD addressed the audience on design and implementation of effective policies that will “make investment work” for developing countries.
DFID was represented by Vicki Harris, head of the Private Sector Policy Department and Roger Nellist while UNCTAD was represented by Khalil Hamdani, who also spoke on the role of civil society in international investment rule-making.
An informal preparatory meeting involving the partners of the project from the seven countries was held on 12th December and another meeting attended by the advisors of the project was held on 15th December. The launch meeting and the two informal meetings were held at Jaipur, the home of CUTS. Click the link to get Event Report of the Launch Meeting Outputs
Country reports: investment policy and performanceThe researchers in each of the seven countries are preparing two reports. The first report (Report A) is a study of national investment policy performance in the selected countries. The second report (Report B) will consider investment performance in certain sectors of the countries in much more detail and generate specific policy recommendations. The partners have already completed a draft of Report A. The reports discuss the general macroeconomic scenario in the countries, provide an overview of the main policy trends in the last few years, a review of investment policies and an assessment of policy and the policy-making process, including the role of civil society. Click the link to get The draft country reports of seven partner countries Printed newsletterA quarterly newsletter, “Investment for Development,” will be published by CUTS-CITEE covering developments relating to investment policy and experience. The first issue of the newsletter for the month of November has already been published. Please let us know by email if you would like to be added to our mailing list. E-mail us at ifd_cuts@rediffmail.com Some Critical Investment Issues
FDI:
boon or bane for the LDCs?
FDI is increasingly being seen as a vehicle of higher income growth, increasing employment, economic development and modernisation. However there could be some negative effects of FDI and even some of the expected benefits may turn out to be elusive. So countries have to be careful in their policy design to target sectors in which FDI can bring the most benefits to the host economy. Governments also have an extremely important role in creating a stable and transparent policy environment so that the private sector can operate efficiently, raising productivity in the economy as a whole. Click the links to get presentations Benefits and Costs of FDI for Development: An ongoing OECD project: Hans Christiansen Can Developing Countries use Foreign Investment to move up the Development Ladder?: Suman Bery
The
importance of perceptions
FDI in many countries is viewed with scepticism if not outright opposition. One ongoing area of controversy is the gas sector in Bangladesh. Foreign investors are pushing for the Bangladeshi government to allow exports of the country’s huge natural gas reserves to large regional markets, in particular India. However, the public is strongly opposed to allowing exports unless the country’s own energy requirements are guaranteed. This tension has the potential to undermine all Bangladesh’s recent efforts to attract foreign direct investment as part of its national development strategy. http://www.nation-online.com/200112/07/n1120708.htm http://bangladesh-web.com/news/sep/06/dv4n679.htm
Many of the concerns of civil society groups with regard to investment are justified. Multinational companies in recent decades have indulged in global cartels and other anti-competitive practices, damaged the environment and interfered in the political systems of host countries. Furthermore, labour representatives, for example, often raise the concern that FDI leads to a reduction in employment and that productivity gains come at the expense of workers who lose their jobs. Some enforceable global codes of conduct to regulate the behaviour of the TNCs are required to ensure that the developing countries reap the benefits of FDI. Click the link to get presentation Investment for Development: Allan Asher International investment agreementsThe Doha Declaration mandates WTO members to start negotiations on investment at the WTO after the Fifth Ministerial Conference. The EU is driving the inclusion of investment in the WTO Agenda, but many developing countries, on the other hand, hold deep reservations about broadening the WTO’s agenda to include investment. They believe that the agreement will not lead to an increase in inflows, or that the agreement will be used as a tool to prise open vulnerable sectors to access by large foreign firms. They are also concerned about the limited negotiating capacity of their Geneva delegations. Participants at the Launch Meeting engaged in a lively debate on this topic. The presentations below put forward some of the arguments. Click the links to get presentations International Investment Agreements in WTO: B Bhattacharyya Why
Developing Countries Should Support an International Investment Agreement
at the WTO http://www-heva.wto-inisterial.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm Doha Declaration, WTO
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