International commitments on sustainable investment aligned with the FDI Qualities Recommendation can only influence sustainable investment to the extent that these commitments are implemented at the domestic level. Based on a methodological framework, the chapter provides guidance on three pillars for effective domestic implementation: institutional co-operation mechanisms envisaged under international investment agreements (IIAs), the support of international organisations in IIA implementation, and the broader role of development co-operation to facilitating domestic reform processes in alignment with IIAs commitments.
Strengthening Sustainable Investment through International Investment Agreements
Abstract
This chapter examines the topic of the domestic implementation of commitments on sustainable investment aligned with the principles of the FDI Qualities Recommendation (FDIQR), as recently included in some international investment agreements (IIAs). Implementation is the process by which policies get translated into action (Bodansky, 2010[1]). International law usually leaves states flexible to determine how to best comply with their international commitments in accordance with their own legal system. Often, implementation relies on a mix of measures, including of legislative and administrative nature, and co-ordination with different state and non-state actors, at the central and local level.
It is important to recall that IIAs can address sustainable development-related issues in different ways. A first avenue considers sustainable development in the context of traditional IIA provisions, such as expropriation or fair and equitable treatment. Another avenue – which is the focus of the current research – seeks to ensure increased alignment between treaty provisions and the principles of the FDIQR, with a view to strengthening the domestic policy climate for sustainable investment.
This last category of new FDIQR-aligned international commitments raises specific challenges in terms of domestic implementation. To address such challenges, the following sections set out a methodological framework that can support the effective implementation of such type of commitments at the domestic level.
4.1.1. Implementation of IIA commitments: changing context and challenges
Traditional IIAs mainly provide a set of benefits for certain foreign investors, providing compensation for adverse unlawful action that the host state could perform in connection with the investment. Such provisions are characterised by three main features, with significant consequences for their implementation:
They include broad treaty commitments, as they require the host state to either afford the investor a certain general treatment (e.g. fair and equitable treatment) or to refrain from harming general investors rights associated with the investment (e.g. non-discrimination, expropriation).
They give rise to benefits for a specific category of beneficiaries. Even when included in a multilateral treaty, the benefits envisaged under the applicable IIA are owed by the host state only to investors from the home state.
They rely on a unique enforcement approach. If substantive protections are breached, the investor can seek compensation through the specific adjudicatory mechanism associated with IIAs, including through investor-state dispute settlement (ISDS).
Traditional IIAs have been subject to increasing criticism, due, among other things, to concerns associated with ISDS and the asymmetry between host states and investors’ rights and obligations (Gordon and Pohl, 2015[2]). An analysis of the critiques associated with the IIA and ISDS regime is beyond the scope of the current research. The comparison with the traditional “protection-based” structure of IIAs, however, is useful to illustrate the specific characteristic and challenges associated with new FDIQR-aligned commitments on sustainable investment, which rest on different features:
They include “targeted” treaty commitments. The FDIQR-aligned commitments on sustainable development specifically call on the host state to adopt a wide range of measures that can harness sustainable investment by improving the domestic investment climate (e.g. establish inter-agency co-operation mechanisms, undertake impact assessment processes, adopt investment promotion and facilitation measures).
They give rise to benefits that are not limited to a specific category of beneficiaries. While they can be included in a bilateral IIA, the benefits that they may entail in terms of improvements in the host state’s investment climate may ultimately create positive effects for all foreign investors, regardless of whether their home state is a party to the underlying IIA, as well as for domestic investors.
They rely on a compliance approach. Because of the widespread benefits they can produce, the most appropriate remedy in case of breach of new FDIQR-aligned commitments on sustainable investment is not compensation, but rather ensuring that the host state adopts the required measure. This shifts the focus from sanctioning potential non-compliance to ensuring that treaty commitments are properly implemented in the first place.
The starting point is the consideration that parties bear the primary responsibility for the domestic implementation of their new FDIQR-aligned international commitments. To this end, they may rely on a wide range of co-ordination measures and mechanisms to further guide their implementation efforts. Instruments such as the performance of self-assessments, the establishment of co-ordination mechanisms, and the definition of domestic strategies and policies can all support states in identifying suitable implementation measures in line with their domestic legislative and administrative systems. These are all particularly suitable to implement FDIQR-aligned international commitments, as evidenced in recent examples linked to domestic practices for the implementation of the WTO Investment Facilitation for Development (IFD) Agreement or the Investment Protocol to the African Continental Free Trade Agreement (AfCFTA) (Box 4.1).
By themselves, however, domestic measures and efforts may not be enough. Challenges arise, in particular, for developing countries and least developed countries (LDCs) which may be ultimately unable to comply with their FDIQR-aligned international commitments due to lack of capacity or financial resources. In this situation and given the different premises on which the new FDIQR-aligned international commitments on sustainable investment rest, the need arises to develop a dedicated methodological framework seeking to facilitate their domestic implementation.
4.1.2. Developing a dedicated methodological framework for the domestic implementation of new FDIQR-aligned commitments on sustainable investment
While the challenges in implementing FDIQR-aligned IIA commitments on sustainable investment are well noted, the development of potential solutions has received little attention so far. There are, however, other areas of international law where the topic of the domestic implementation of international commitments has emerged. Among others, international environmental law provides examples of obligations that share several features with IIA commitments on sustainable investment. Notably, some international environmental law instruments provide for positive commitments requiring states to adopt all necessary measures to prevent environmental damage. Such commitments do not necessarily look at specific categories of beneficiaries, creating positive consequences for multiple beneficiaries affected by global or transboundary environmental issues. Because of the specific goods and values that they protect, focus is placed on facilitating compliance, rather than sanctioning non-compliance.
Several commentators have examined the question of compliance with international environmental commitments (Dupuy and Viñuales, 2018[3]). Through their analysis, they have contributed to the identification of three main tools that can support effective implementation. First, reporting and monitoring mechanisms can facilitate information sharing and the identification of best practices. They allow states to provide information on the measures that they have adopted to implement their treaty commitments and to reflect on the suitability of the policy tools on which they have relied. Second, the provision of technical assistance, including in the form of capacity building, can empower states by providing them with the skills and knowledge required to implement their treaty commitments in an effective manner. Lastly, financial assistance can further support implementation by providing states with the necessary resources.
Ecuador’s self-assessment for the implementation of the WTO IFD Agreement
To support the implementation of WTO IFD Agreement commitments, the WTO Secretariat developed a standardised self-assessment guide to support members in determining the extent to which their domestic legal and policy frameworks are already aligned with treaty commitments. Several IFD Agreement members have already started implementing self-assessments at the domestic level.
Between June and October 2023, Ecuador conducted its IFD self-assessment identifying both the degree to which it was already complying with commitments under the IFD Agreement and areas where further action was instead necessary (e.g. on the simplification of administrative procedures related to investment). The results were consolidated into a national draft needs assessment that was then validated by representatives of different government institutions with competence on investment matters. The validated needs assessment will serve to guide domestic efforts to implement WTO IFD commitments, identifying areas where additional technical assistance and capacity building are needed.
Ecuador is not the only country resorting to self-assessment to facilitate the implementation of the WTO IFD Agreement domestically. Members of the Organization of Eastern Caribbean States (OECS) as well as the Lao People’s Democratic Republic have also engaged in similar exercises.
The role of National Implementation Committees (NIC) in supporting AfCFTA implementation
In the 2018 Assembly of the Heads of States and Government of the African Union, state parties to the AfCFTA committed to the establishment of national committees to support the meaningful implementation of AfCFTA provisions. Since then, several African countries have set up national implementation committees (NICs), including Côte d’Ivoire, Ghana, Kenya, Nigeria and Rwanda. NICs perform a wide range of crucial functions, that include, depending on the context: (i) developing plans and strategies for AfCFTA implementation; (ii) advise and lobby government around policy reform necessary for proper implementation of AfCFTA commitments and domestic incorporation of AfCFTA legal instruments; (iii) report on, monitor and evaluate policies and projects to support AfCFTA implementation; and (iv) ensure effective stakeholder co-ordination, including between governmental entities, private sector, civil society, and the donor community. Provided with these functions, NICs may prove effective in guiding domestic efforts for the implementation of the Investment Protocol to the AfCFTA and related FDIQR-aligned international commitments.
Applied to the implementation of international commitments to facilitate sustainable investment, these three tools may be used by different actors at different stages of the process leading to the adoption and implementation of the underlying IIA. It is possible to identify three different, but complementary, implementation mechanisms:
1. Treaty-based mechanisms: IIAs often establish institutional co-operation mechanisms composed of representatives of the parties, with the mandate to address any matter that may arise in the implementation of the agreement. In certain cases, such mechanisms can be provided with specific powers linked to information sharing and facilitating the provision of technical and financial support. State parties to the IIA can rely on such mechanisms in their implementation efforts once the IIA is in place.
2. Support from international organisations: Following the conclusion of the relevant IIA, international organisations can support state parties in their efforts to comply with their treaty commitments. International organisations can provide dedicated technical assistance, harnessing sophisticated tools and processes that they have developed to identify potential gaps in implementation and guide domestic reform efforts. They can also foster the sharing of best practices in implementation, thus allowing for the identification of the policy tools and approaches that best allow achieving the objectives of the underlying IIA.
3. Development co-operation and international partnerships: Even prior to the negotiation of an IIA, states may rely on development co-operation and mobilise support for strategic partnerships aimed at improving their overall investment climate. Such partnerships can support information exchange efforts, as well as the performance, in co-operation with international organisations, of technical assistance and capacity building programmes contributing to the effective implementation of commitments arising out of existing or future IIAs.
The interaction among the three identified mechanisms can support the development of a methodological framework guiding domestic implementation of international commitments to facilitate sustainable investment, supporting domestic implementation initiatives undertaken at the domestic level. Figure 4.1 illustrates the different implementation mechanisms, the tools they can harness, and the phase of IIA implementation during which they can be used.
Source: OECD.
The sections below provide an overview on how each mechanism is addressed in the context of the IIA sample. Future research could also contribute to identifying and analysing concrete examples of how such mechanisms have been used in practice and the extent to which they have contributed to effective treaty implementation.
IIAs often provide for the establishment of mechanisms with powers to facilitate implementation. The functioning of such bodies, including the specific tools and functions entrusted to them, largely depends on the state parties’ arrangement, as set out in the underlying IIA. This section examines treaty-based mechanisms established in a sample of nine IIAs (IIA sample), already subject to the stocktaking exercise carried out in Chapter 2.
With one exception, all the treaties in the IIA sample set up implementation mechanisms (Figure 4.2), often in the form of joint committees or – in one instance – joint implementation teams (Singapore-Australia GEA, Annex 1, para 15). More complex agreements, such as free trade agreements (FTAs), often establish multiple implementation bodies, each with oversight over specific areas or topics. The EU-New Zealand FTA first sets up a Trade Committee, as the main body tasked with oversight on achieving the agreement’s objectives. It also creates specialised committees with a mandate over the implementation of specific chapters, including, among others, a Committee on Trade and Sustainable Development (Article 24.4, para 1). Similarly, the Chile-Canada FTA establishes a specialised Trade and Gender Committee guiding the implementation of its Gender Chapter (Article Nbis-04).
The institutional arrangements under the Investment Protocol to the AfCFTA are particularly noteworthy. The Protocol first provides for the establishment of a Committee on Investment to facilitate implementation (Article 41). At the same time, it also sets up a Pan-African Trade and Investment Agency (the Agency) with the mandate to “assist State parties, their investment promotion agencies, and their private sector through mobilising financial resources, fostering business development, and providing technical and other support for the promotion and facilitation of investment”. The Agency is also tasked with supporting states in “building their capacity in the formulation and implementation of investment policies” as well as “facilitating co-ordination, interaction and dialogue” among relevant national stakeholders involved in the investment process (Article 42, paras 3-4). By doing so, the Agency becomes the main body for the effective implementation of the AfCFTA Investment Protocol.
Most IIAs within the sample provide for the establishment of national focal points or contact points. These bodies are essentially aimed at facilitating the exchange of information between the parties (e.g. Chile-Singapore-New Zealand DEPA, Article 12.6) or at providing investment-related information to investors of one party (e.g. Brazil-Morocco CFIA, Article 15; EU-Angola SIFA, Article 22; WTO IFD Agreement, Article 22). Such information exchange can also contribute to facilitating implementation.
Note: This figure maps the different types of institutional co-operation mechanisms established by the nine IIAs included in the IIA sample. It shows that joint committees are the most common institutional co-operation mechanism envisaged in the IIA sample.
Source: OECD, based on the review of the IIA sample.
4.2.1. Composition of institutional co-operation mechanisms
The FDIQR principles recognise that an increased engagement with stakeholders, including private sector, trade unions and civil society organisations (CSOs), is essential to enhance the impact of investment on sustainable development (OECD, 2022[8]). The same considerations apply when analysing the implementation of IIA commitments on sustainable investment, due to the broader impacts they may have on society as a whole.
Institutional co-operation mechanisms under the IIA sample are mostly composed of representatives of the parties. In limited cases, however, additional arrangements are put in place to ensure the involvement of non-party stakeholders in the implementation process. The EU-New Zealand FTA provides that each party must designate a domestic advisory group, which will provide advice on implementation-related issues (Article 26.6, para 1). The group must include a “balanced representation” of independent civil society members, business and employers’ organisations, and trade unions operating in areas of relevance for the FTA. The EU-Angola SIFA provides for the organisation of a civil society dialogue for the purpose of discussing implementation. The dialogue must also involve a balanced representation of civil society members, business organisations and trade unions (Article 46). Even in the absence of specific multi-stakeholder arrangements, however, the integration of broader civil society organisations, business and employees’ concerns in the implementation process may be ensured through committees’ power to consult with CSOs and private sector members on specific questions submitted for discussion (e.g. Brazil-Morocco CFIA, Article 14.4, letter d).
4.2.2. Main functions of institutional co-operation mechanisms
The mechanisms established under treaties within the IIA sample include a set of functions relevant for domestic implementation (Figure 4.3): They are provided with general implementation oversight functions and tasked with facilitating the implementation of the underlying IIAs. In certain instances, facilitation can occur through reliance on specific tools and mechanism such as reporting and technical and financial assistance. They can also perform functions associated with the management of potential non-compliance with treaty provisions. Depending on the underlying treaty, all these functions can be regulated with different degrees of specificity.
Note: This figure provides an overview of the main functions performed by treaty-based institutional co-operation mechanisms in connection with the implementation of international commitments. Other functions may be provided in the relevant IIA but are not specifically considered in this analysis.
Source: OECD, based on the review of the IIA sample.
General oversight and facilitation of implementation functions
Institutional co-operation mechanisms within the IIA sample are all provided with general supervisory powers over the implementation of the underlying agreement (e.g. Chile-Singapore-New Zealand DEPA, Article 12.2; Singapore-Australia GEA, Annex 1, para 15; Brazil-Morocco CFIA, letter (c); EU-Angola SIFA, Article 44.1, letter (b); EU-New Zealand FTA Article 24.2, para 1, letter (b); Chile-Canada FTA, Article N-01). There are, however, two exceptions. First, the Agency established under the Investment Protocol to the AfCFTA does not have oversight powers, but only facilitation ones. As for the Committee on Investment under the same Investment Protocol, its specific powers will be decided by the Council of Ministers to the AfCFTA at a later stage (Article 41, para 2). The WTO IFD Agreement, instead, provides that the Committee on Investment Facilitation “shall review the operation and implementation of this Agreement four years from its entry into force, and periodically thereafter” (Article 39.7). Compared to other IIAs, therefore, the oversight functions of the WTO IFD Agreement Committee are time-bound and subject to more narrow boundaries.
In addition to oversight functions, most institutional co-operation mechanisms under the IIA sample also exercise general facilitation functions (e.g. Chile-Singapore-New Zealand DEPA, Article 12.2; Brazil-Morocco CFIA, Article 14.4, letter (c); EU-Angola SIFA, Article 44.1, letter (b); EU-New Zealand FTA Article 24.2, para 1, letter (b)). While the Committee on Investment Facilitation under the WTO IFD Agreement is not expressly assigned general facilitation functions, the specific powers and tools it can exercise essentially allow it to perform a facilitation role as well. Looking at the Chile-Canada FTA framework, the Free Trade Commission is also not provided with explicit facilitation functions, which are instead delegated to the specialised committees. Thus, the Trade and Gender Committee is expressly tasked with determining, organising and facilitating the co-operation activities identified under the Trade and Gender Chapter to align trade, investment and gender objectives (Article Nbis04, para 2).
Facilitating implementation through agenda setting, reporting and information sharing
In addition to general oversight and facilitation functions, IIAs can also provide for specific facilitation-related tools and instruments. At a higher level, facilitation of implementation can be pursued through activities of policy and agenda setting, with the parties jointly agreeing on avenues, activities and programmes that can help achieve the objectives of the underlying treaty (e.g. Chile-Singapore-New Zealand DEPA, Article 12; Brazil-Morocco CFIA, Article 21).
Reporting requirements are also recognised as one of the main tools that can support the implementation of international commitments. They require states to share with the relevant institutional co-operation mechanism information on the measures that they have adopted in the implementation of their international commitments. By doing so, they can support monitoring efforts and allow for the identification of potential implementation gaps or challenges. A specific reporting requirement in the IIA sample only appears in the Chile-Singapore-New Zealand DEPA, with other treaties opting for a more general approach (Table 4.1). A notable provision is set out in the WTO IFD Agreement. This requires the Committee on Investment Facilitation to prepare an annual report on investment facilitation measures taken to implement the agreement, “based, inter alia, on information notified by Member/Parties or otherwise authorised by them” (Article 39.5). This provision effectively requires states to share information on implementation with the Committee, without amounting to a proper reporting obligation.
Source: OECD, based on the review of the IIA sample.
Information exchange requirements seek to foster the sharing of experiences and best practices among state parties, contributing to the identification of the most appropriate tools, measures, and practices for implementation. Such requirements are only envisaged in a small number of IIA sample treaties (Table 4.2).
Source: OECD, based on the review of the IIA sample.
Facilitating implementation through financial assistance, technical assistance, and capacity building
Financial support and technical assistance, including in the form of capacity building, are key tools to support state parties’ implementation efforts. Institutional co-operation mechanisms under the IIA sample do not directly provide for this kind of support, which is mostly entrusted to development co-operation initiatives and to international organisations, but they do play a monitoring role over how such support is provided to state parties.
References to financial assistance are scarce in the IIA sample. This finds only a brief mention in the Chile-Singapore-New Zealand DEPA, where states commit themselves to “providing, within the limits of their own capacities and through their own channels, the appropriate resources, including financial resources” for the implementation of the agreement (Article 12.5). Mobilising financial assistance is also one of the many tasks of the Agency established under the Investment Protocol to the AfCFTA, which “shall assist State Parties ... through mobilising financial resources” to support initiatives for investment promotion and facilitation (Article 42, para 3). Lastly, the WTO IFD Agreement envisages the possibility to establish an Investment Facilitation Facility to assist parties that are either developing or least developed countries (LDCs) in implementing the treaty’s provisions. It is not clear, however, if such a Facility would be able to support beneficiary states through financial assistance.
Technical assistance and capacity building receive more specific attention. The Investment Protocol to the AfCFTA explicitly recognises the role of the Agency in providing technical and other support for promotion and facilitation activities in state parties (Article 42, para 3). The obligation remains at a quite high-level, as the specific modalities for support and co-operation are not defined in the treaty itself. The Investment Protocol also sets out an obligation for state parties to support the provision of technical assistance and capacity building, in co-operation with the Agency, the AfCFTA Secretariat and existing Regional Economic Communities (Article 43). The technical assistance and capacity building initiatives considered under this provision are those made available in the context of development co-operation efforts.
The EU-Angola SIFA also addresses technical assistance and capacity building initiatives implemented in a broader development co-operation context, while also envisaging a specific role for the Committee on Investment Facilitation in this area. The Committee is identified as the forum where parties can exchange information and review progress on the technical assistance and capacity building initiatives provided in the implementation of the agreement and, more importantly, identify the needs that should guide the identification of relevant initiatives (Article 42, para 4). A similar role is entrusted to the Committee on Investment Facilitation under the WTO IFD Agreement. The treaty first recognises that technical assistance and capacity building should be provided to support developing countries and LDCs in their implementation efforts (Article 27, para 2). At the same time, the Committee represents the forum for state parties to review progress in the provision of support, to identify instances where such support is not adequate, and to share experiences and information on ongoing assistance, including success stories and lessons learned (Article 35.4, letters (b) and (c)). On this basis, beneficiary and donor countries alike are required to submit to the Committee information on technical assistance and capacity building initiatives undertaken to support treaty implementation (Article 36.3 and Article 36.4).
Managing instances of non-compliance
Treaty-based co-operation mechanisms can also contribute to managing instances of potential non-compliance with the commitments under the treaty. Such a function is grounded in the consideration that, in certain cases, lack of compliance might be due not to an unwillingness to comply, but rather to an inability to do so, either for lack of capacity or resources. In this situation, the provision of financial or technical assistance might support the state in returning into a state of compliance with the underlying commitment (Bodansky, 2010[1]). The management of non-compliance function is not specifically envisaged in IIA sample treaties, but the broader functions with which institutional co-operation mechanisms are entrusted can indirectly contribute to this objective. In general, treaties within the IIA sample grant to such mechanisms the power to intervene to solve potential issues arising from, or any matter related to, implementation, which could be interpretatively understood to include management of instances of non-compliance (e.g. Brazil-Morocco CFIA, Article 19, para 1 letter (e); EU-New Zealand FTA, Article 19.15, para 2, letter (c) and Article 24.4, para 6, letter (b); Chile-Canada FTA, Article N-01, para 2, letter (c)).
The Committee on Investment Facilitation under the EU-Angola SIFA includes among its functions that of seeking “ways and methods of preventing or solving problems that may arise in areas covered by the agreement” (Article 44, para 1). This problem-solving function could be well understood as referring to the resolution of instances of non-compliance with treaty commitments. In this context, the Committee may also be able to rely on its power to issue recommendations (Article 45, para 2). It could be possible for the Committee to recommend a specific course of action to deal with the potential non-compliance, such as the identification of technical assistance and capacity building initiatives to support the non-complying party. The WTO IFD Agreement similarly encourages the parties to raise before the Committee on Investment Facilitation any questions relating to issues on the implementation and application of the treaty (Article 39.8) and recognises the key role that the Committee plays in facilitating the prompt development of “mutually satisfactory solutions” (Article 39.9). The WTO IFD Agreement is also notable in that it seeks to prevent potential non-compliance by member parties by providing for a differential implementation regime for developing countries and LDCs (Box 4.2). Notably, it explicitly links implementation with necessary capacity and resources, with the consequence that a country lacking capacity will not be required to implement relevant treaty provisions until that capacity has been acquired.
4.2.3. Implications for domestic implementation
Institutional co-operation mechanisms offer a first avenue for the parties to support the domestic implementation of new FDIQR-aligned commitments on sustainable investment. By harnessing policy and agenda-setting functions, treaty-based mechanisms can support the identification of measures and actions that the parties could consider adopting in the implementation of IIA commitments. They could also perform a monitoring function over implementation, identifying challenges and bottlenecks and recommending potential avenues to address them. Furthermore, they could promote the development of synergies with international organisations and facilitate development co-operation linkages, also with a view to obtaining support for domestic implementation of treaty commitments on sustainable investment.
The possibility for institutional co-operation mechanisms to perform such role, however, rests on a series of key conditions. In particular, it is not sufficient for the IIA to provide for the establishment of such a mechanism, but it needs to be sufficiently anchored within domestic strategies and administrations over the long term. Parties must involve the relevant administrations and follow up on implementation at central and local levels. Parties must also have the political will to use it, as well as ensure that the mechanism is properly funded. Also in this case, the role of development co-operation in supporting institutional co-operation mechanisms could be further explored.
The WTO IFD Agreement includes special and differential treatment (SDT) provisions (Section V of the Agreement) seeking to facilitate developing countries and LDCs in their efforts to implement treaty commitments. Developing countries and LDCs are expected to implement the commitments of the WTO IFD Agreement only when they have acquired the necessary capacity to do so. Until then, they can benefit from more flexible deadlines and receive technical assistance and support for capacity building, with a view to strengthening their implementation abilities.
Developing countries and LDCs can classify their commitments into three categories based on a self-designation process. For each category, different implementation timeframes apply, with Category B commitments being subject to a transitional period where no implementation is required and Category C commitments being subject to the provision of assistance and capacity building support. States facing difficulties in meeting implementation deadlines can request extensions. To this end, they must inform the Committee on Investment Facilitation of the new dates for implementation and provide a justification for the delay, specifying the need for further assistance, the existence of unforeseen circumstances, and obstacles in finding support.
In case of unforeseen circumstances that prevent implementation or when an extension of implementation deadline is not possible, states can rely on the support provided by a group of independent experts, which will issue recommendations proposing the actions that the Committee may adopt to assist members in complying.
Source: WTO IFD Agreement, Articles 27 ff.
State parties to an existing IIA can request the support of international organisations to assist the domestic implementation of FDIQR-aligned commitments on sustainable investment. International organisations can rely on a combination of technical assistance and capacity building measures to identify gaps in IIA implementation and guide domestic reform efforts in alignment with treaty commitments. Treaties in the IIA sample also recognise the importance of co-operating with international organisations. Notably, the WTO IFD Agreement calls for increased collaboration and co-ordination with international organisations in the provision of technical assistance and capacity building to developing countries and LDCs (Article 36.5 and Article 36.6).
Several organisations have developed specialised tools and methodologies to review and improve domestic investment frameworks. The World Bank Group supports the development of FDI Strategies and Investment Roadmaps, improvements of policy effectiveness, promotion of good practices and the strengthening of investor confidence (World Bank Group, 2022[9]). UNCTAD carries out country reviews to provide strategic advice to governments on how to attract and benefit from foreign direct investment (FDI) (UNCTAD, 2008[10]) The OECD also relies on several tools to support investment climate reforms in beneficiary countries. A first instrument is the Investment Policy Review (IPR), a country-specific report that benchmarks the local investment and business climate against the principles of the OECD Policy Framework for Investment, 2015 Edition (PFI) (OECD, 2015[11]). The PFI, last updated in 2015, takes a whole-of-government approach to investment climate reform and is the most comprehensive and systematic multilateral-backed instrument for improving investment conditions ever developed. It is a non-prescriptive, flexible instrument, that emphasises policy coherence and results in policy advice that is tailored to both the domestic and international context.
IPRs are developed by the OECD in partnership with the government of the beneficiary country. They evaluate progress and priorities for actions in 12 policy areas covered by the PFI. All IPRs include chapters on the entry, regulation and protection of investment, investment promotion and facilitation, and responsible business conduct. Other policy areas (e.g. competition, trade, tax, corporate governance, human resource development, finance, infrastructure, public governance and channelling investment into areas that promote green growth) can be also included, depending on the wishes and priorities of the government undertaking the review. To date, IPRs have been used by over 40 states, at varying levels of development and across all continents, as a tool for assessing investment and business climates, and for designing reforms to improve them. Recently published IPRs include Egypt, Indonesia, Thailand, and Viet Nam, with ongoing reviews in Bangladesh, Morocco and Uzbekistan and planned reviews in Guatemala, Moldova and Zambia.
More recently, the OECD launched a new methodological instrument, based on the FDIQR and related Policy Toolkit, to complement the PFI-based analysis of the IPRs. The FDI Qualities Reviews provide tailored policy advice to the beneficiary government on how to strengthen the impact of FDI on four sustainability-related areas: (i) productivity and innovation; (ii) jobs and skills development, including for local SMEs; (iii) gender equality; and (iv) decarbonisation. The areas of focus are chosen in agreement with the government, in alignment with national development objectives and priorities. The FDI Qualities Reviews complement the IPR analysis by providing governments with detailed guidance on how to influence and improve the quality of investment, going beyond investment climate reform. They include evidence-based analysis of FDI’s impact on the selected sustainability areas and of how existing strategies, policies and institutions can support investment contributing to the identified priorities. They also set out policy recommendations to align investment and sustainable development objectives. To date, FDI Qualities Reviews have been undertaken, in general or for specific sustainable areas, with Austria, Croatia, Chile, Ireland, Jordan, and Tunisia. Additional FDI Qualities Reviews are ongoing in Canada, Egypt, and Viet Nam.
The processes for the implementation of tools and methodologies designed to improve domestic investment frameworks varies across organisations. Looking specifically at IPRs and FDI Qualities reviews, their process follows a set of standardised steps, broadly divided into three phases (Figure 4.4).
Source: OECD adapted from the description of FDI Qualities Review and IPR process.
4.3.1. Developing the IPRs and FDI Qualities Review reports
The first step consists of the preparation of the IPR/FDI Qualities Review process, which includes co-ordination with relevant stakeholders and the implementation of fact-finding missions. The OECD then prepares the relevant report through activities of data gathering and analysis. Consultations are also undertaken with interested stakeholders within the public and the private sector, for the purpose of validating findings and recommendation. Such a process has recently been implemented in Croatia, with the publication of the FDI Qualities Review of Croatia in November 2023 (Box 4.3).
Between April 2022 and December 2023, with the financial assistance of the European Union, the OECD developed an FDI Qualities Review to support the government of Croatia in advancing its strategic framework for promoting and facilitating private investments.
Preparatory phase: Co-ordination and fact-finding activities
July 2022. The OECD and the Croatian Ministry of Economy and Sustainable Development (MESD), as lead government agency, establish an inter-institutional Working Group, whose mandate includes facilitating policy dialogue among public and private sector stakeholders, ensuring information exchange, and co-ordinating intermediate and final outputs.
September 2022. An OECD team of experts conducts a fact-finding mission to Croatia, where it meets with government representatives at the central and local level, as well as representatives of the private sector and international organisations, to identify and discuss the main challenges and opportunities for private investment in Croatia.
Data collection and analysis: Preparation and validation of the FDI Qualities Review report
October 2022-January 2023. The OECD drafts the FDI Qualities report, based on a desk-based analysis of Croatia’s business and investment climate and available information on investment promotion policies, surveys addressed to relevant institutional actors, and meetings with the MESD.
January 2023. The OECD submits a first version of the FDI Qualities Review report to the MESD. The report: (i) assesses how FDI contributes to productivity and innovation, job quality and skills development, decarbonisation, and regional development in Croatia; (ii) examines the institutional and policy framework for investment promotion and facilitation at national and subnational levels; (iii) analyses Croatia’s investment incentives regime; and (iv) sets out potential areas for institutional and policy reform to improve Croatia’s investment climate and strengthen benefits of FDI.
May 2023. The OECD presents preliminary findings and recommendations of the FDI Qualities Review report in four consultation workshops with public and private sector stakeholders, organised in collaboration with the MESD. The FDI Qualities Reviews report is updated based on comments received.
November 2023. The OECD officially publishes the FDI Qualities Reviews of Croatia during a public event organised in co-operation with the MESD and the European Union. The event gathered more than 120 participants, including government representatives at the local and central level, members of the private sector and EU delegates.
Source: OECD data; (OECD, 2023[12])
4.3.2. Implementing the IPR and FDI Qualities Review recommendations
The process for an IPR or FDI Qualities Review does not stop with the publication of the relevant report. It can also include active support in the follow-up phase, with the provision of technical assistance in implementing relevant recommendations and adopting measures to improve the national investment climate. The support can extend to assisting in drafting coherent and integrated national policies, strategies or action plans related to sustainable investment, as well as of investment-related laws and regulations, with a view to ensuring proper consideration to sustainable development concerns. It can also include the provision of capacity building to support the implementation of recommendations, such as developing capacity for the IPA operations. More recently, the OECD has provided technical assistance in the follow up to the FDI Qualities Reviews of Croatia and Jordan, for example (Box 4.4).
Supporting the review of the draft Investment Promotion Act of Croatia
The OECD provided technical advice and targeted feedback on the draft amendments to the Act on Investment Promotion prepared by the MESD. The OECD’s technical input focused on recommendations to revise legal provisions related to the use of financial incentives to support the green transition. Additional recommendations were also provided on aspects related to defining the types of eligible investment projects and the specific criteria that should apply. This feedback helped to further align the draft amendments with the recommendations of the FDI Qualities Review of Croatia.
Providing technical advice on the draft Investment Environment Law of Jordan
In June 2022, the OECD launched the FDI Qualities Review of Jordan. The report analysed, among other things, the impact of the 2014 Investment Law of Jordan on jobs and skills development, highlighting the importance of aligning policy objectives on investment and employment in the context of ongoing law reform processes. On this basis, in the follow-up to the publication of the report, the OECD was invited to provide comments to the draft of the new investment law and further streamline investment and sustainability objectives, including in the area of jobs creation and skills development. Jordan’s new Investment Environment Law entered into force in September 2022, contributing to align the domestic investment climate with sustainability objectives.
Source: (OECD, 2022[13]; OECD, 2023[12]).
4.3.3. Evaluating the effectiveness of the IPR and FDI Qualities Review process
OECD reviews of investment policies are sometimes evaluated ex post. Evaluations are of key importance to assess whether the support received from international organisations is effectively leading to an improved investment climate in the beneficiary states. Independent evaluations have highlighted the effectiveness of the IPRs implemented by the OECD in support of ASEAN member states (Box 4.5). Among the success factors, the adoption of a whole of government and a modular approach to investment climate assessment were mentioned. In addition, independent evaluations also noted how the analysis and recommendations emerging from the IPR process were key in facilitating exchanges of best practices and lessons learned, fostering a better understanding of investment policy tools and approaches (ASEAN, 2020[14]).
Between 2013 and 2018, the OECD undertook IPRs in six ASEAN countries: Malaysia, Myanmar, the Philippines, Lao PDR, Viet Nam, and Cambodia. The IPRs were undertaken under the umbrella of the ASEAN-Australia-New Zealand FTA (AANZFTA) Economic Cooperation Support Programme (AECSP), with a view to strengthening ASEAN’s investment climate and operationalising the commitments arising under the AANZFTA. The AECSP conducted a thorough evaluation of the IPR process to assess to what extent it had achieved the desired objectives, highlighting that the IPR process:
Improved investment reform governance by providing a platform for continuous dialogue among stakeholders and guiding efforts to strengthen national policies and public institutions.
Increased the transparency in developing investment policies, providing information and clarity to policymakers from different ministries and agencies and improving engagement with the private sector.
Strengthened partnership with development partners and improved on-the-ground co-ordination to ensure support in implementing the recommendations included in the IPR.
Increased stakeholders’ understanding of the latest developments and best practices on investment in ASEAN member states.
The evaluation noted how, in several cases, the policy recommendations included in the IPRs led to the adoption of legislative or institutional reforms, as well as the implementation of new measures. In this context, it highlighted how the IPRs provided an objective view of necessary reforms and contributed to the implementation of solutions in accordance with international best practices and domestic objectives.
Source: (ASEAN, 2020[14]).
4.3.4. Implications for domestic implementation
Benchmarking tools and methodologies developed by international organisations can play a key role in supporting the domestic implementation of FDIQR-aligned commitments on sustainable development. They can support the parties in the identification of implementation gaps in implementation and recommend potential measures that states could put in place at the domestic level in compliance with their international commitments. International organisations can also support state parties through the provision of dedicated technical assistance and capacity building to facilitate implementation, including by harnessing resources available under development co-operation.
Looking at the instruments and methodologies developed specifically by the OECD, the IPR and FDI Qualities Review processes offer a flexible instrument that address many of the elements already included FDIQ-aligned international commitments on sustainable investment, making them particularly suitable to support domestic implementation.
Development co-operation is a key resource to mobilise FDI. Especially in developing countries and LDCs, it can help reduce barriers to investment and lower risk perceptions that prevent these countries from harnessing FDI, including by supporting effective investment climate reforms at the domestic level. The FDIQR also recognises the importance of development co-operation through the following two dedicated principles:
FDIQR principle 5.a, Technical assistance and capacity building: Identify ways that financial and technical assistance can support the implementation of the FDIQR to enhance the impact of FDI on sustainable development.
FDIQR principle 5.b, Development co-operation: Promote alignment of donors’ assistance with national priorities related to sustainable investment in accordance with relevant international standards, including through the mapping of such assistance, and the identification of potential support gaps or opportunities to replicate or scale-up existing assistance.
To support the implementation of such principles, the OECD developed the FDI Qualities Guide for Development Cooperation (the Guide), which provides specific guidance to donors and other development co-operation actors on strengthening the role of development co-operation in mobilising FDI and enhancing its positive impacts in developing countries (OECD, 2022[15]). The Guide provides examples of technical and financial solutions that can enhance the impact of FDI on sustainable development and sets out principles that can guide donors in designing, implementing, and monitoring FDI-related assistance.
Beyond broad support on FDI mobilisation, development co-operation can be harnessed for the implementation of specific FDIQR-aligned IIA commitments on sustainable investment. Donor resources could be used to support international organisations in providing technical assistance and capacity building to national institutions in implementing domestic reform processes seeking to strengthen the investment climate in alignment with international commitments.
4.4.1. Development co-operation for the implementation of IIA commitments
Treaties within the IIA sample include references to the role that development co-operation can play in their implementation. The Investment Protocol to the AfCFTA provides for a specific obligation of state parties to “support the provision of technical assistance, capacity building and co-operation” to promote and facilitate investment under the agreement and, for this purpose, to co-ordinate with the Agency and the AfCFTA Secretariat (Article 43). Under the EU-Angola SIFA, the parties “recognise the importance of technical assistance and capacity-building and commit to co-operate on strengthening the investment climate in Angola” and supporting the implementation of the agreement. Notably, the agreement explicitly recognises that the assistance should be undertaken within the framework of the EU’s development co-operation initiatives and partnerships (Article 42).
A different understanding of development co-operation – as flowing from “donor” treaty parties to “beneficiary” treaty parties – permeates instead the WTO IFD Agreement. Donor countries party to the treaty commit to “facilitate the provision of technical assistance and support” to beneficiary parties to assist them in their implementation efforts, either through bilateral arrangements or through the channel of international organisations (Article 35.1). The agreement also identifies examples of what technical assistance and capacity building may entail, including strengthening the capacity of governmental authorities to maximise positive impacts of investment and building capacity for the preparation of feasibility studies for investment projects (Article 35.5).
There are several ways in which development co-operation can support IIA implementation, whether in the context of existing strategic partnerships or otherwise. It could, for example:
Support domestic reform efforts, in line with international treaty commitments and the results of needs assessment processes carried out by international organisations. This can entail, for example, technical support and capacity building in developing policies that can foster the positive impacts of FDI. It can also extend to the provision of financial and budget support, to ensure policy continuity and the achievement of the sustainable investment objectives pursued through domestic reform efforts.
Facilitate the design of legal frameworks aligned with sustainable development objectives, in line with IIA requirements. Technical support can be directed towards developing new laws or regulations that may be required pursuant to relevant treaty commitments and building the capacity of relevant institutions to implement relevant legislation.
Assist a treaty party in meeting cross-border regulatory requirements on investment applicable in the other treaty party. A typical example is that of taxonomy regulations on sustainable investment, such as the one first adopted in the European Union. Without adequate support, partner developing countries and LDCs may struggle to find the resources and technical and institutional capacity to comply with relevant standards.
Contribute to the further development of monitoring and evaluation processes seeking to measure the impacts of FDI on sustainable development, which is crucial in determining the effectiveness of state initiatives on sustainable investment. It can also support efforts to harmonise environmental, social and governance (ESG) frameworks, contributing to the development of comparable and clear ESG standards. In both cases, the support could entail, for example, the provision of technical assistance in developing metrics and indicators, data collection efforts, and establishing monitoring systems, as well as exchanges of best practices in the area.
Contribute to operationalising programmes and initiatives in line with the FDIQR principles, for example on investment promotion and facilitation. This can entail, among other things, the provision of funding for specific skills development programmes or other initiatives linking foreign investors with local employees or building the capacity of the local workforce in specific sustainability-related areas (e.g. decarbonisation, gender equality). Financial support could also be directed towards the establishment and implementation of suppliers development programmes, to build the capacity of domestic firms to become partners and suppliers of foreign investors. Development co-operation could also help build the capacity of investment promotion agencies to prioritise investment against specific sustainability criteria and delivering services to businesses in a way that maximises the positive contribution of investment to sustainable development.
More broadly, development co-operation can support developing countries and LDCs in negotiating IIAs aligned with sustainable development objectives. Developing countries and LDCs face significant challenges when it comes to IIA negotiation, often linked to lack or insufficiency of human, financial and technical resources to properly engage in the negotiation process (OECD, 2022[15]). Technical assistance from donor countries, including in the form of capacity building, can help developing countries negotiate agreements that reflect national priorities and objectives on sustainable investment and that already incorporate tools and mechanisms to support their own implementation at the domestic level, including through the establishment of institutional co-operation mechanisms.
4.4.2. Principles guiding development co-operation for IIA implementation
To be truly effective, development co-operation must be deployed in accordance with clear prioritisation strategies, considering also the specific country contexts and objectives (OECD, 2022[15]). The FDI Qualities Guide for Development Cooperation sets out six key principles that can help strengthen the effectiveness of development co-operation in enhancing the impacts of FDI on sustainable development. While these principles are general in nature, they may become relevant also for the delivery of development co-operation initiatives for the implementation of IIAs.
The Guide sets out the following principles:
1. Assessing and understanding the impacts of FDI on sustainable development in a given context. The Guide recognises that, to effectively design and implement support measures to enhance sustainable investment, it is essential to examine the relationship between FDI and sustainable development in the specific country context. The assessment of the impacts of FDI on sustainable development is especially important in the context of IIA implementation, as it can support the identification of the priorities and objectives to be achieved through development co-operation initiatives.
2. Ensuring alignment with national priorities. The Guide recognises that development co-operation initiatives on investment and sustainable development should be informed and aligned with countries’ national priorities. The same principle finds explicit recognition in recent IIAs on investment facilitation for sustainable development. The EU-Angola SIFA, for example, clarifies that technical assistance and capacity building initiatives are to be carried out in the context of the EU’s development co-operation framework, and that relevant requests for assistance should be aligned with identified needs and domestic investment reform priorities (Article 42, para 2). When looking at IIA implementation, this principle entails that potential development co-operation initiatives should be tailored to the specific country context, aligned with specific sustainable investment priorities, and should take into account ongoing reform efforts, with a view to avoid duplications and inconsistencies.
3. Ensuring co-ordination and coherence among the development co-operation community. Building on the 2005 Paris Declaration on Aid Effectiveness, this principle recognises that several development co-operation partners may provide investment-related support in a given country, potentially leading to overlap and duplication of activities and inconsistencies in reform efforts, prejudicing the effectiveness of development co-operation. The importance of inter-agency and donor co-ordination in development co-operation is recognised also in the WTO IFD Agreement, which stresses the importance of promoting co-ordination between member states and other relevant institutions “to ensure maximum effectiveness of and results from” the envisaged assistance (Article 35.3, letter (d)).
4. Identifying trade-offs and complementarities and managing risks. Development actors should consider trade-offs and complementarities that may exist between the support modalities to which they have recourse, as well as between the specific sustainable development objectives that they are seeking to pursue. Development co-operation partners should also try to identify and manage potential unintended consequences of their interventions, particularly with respect to domestic firms or the creation of market distortions.
5. Engaging with businesses, trade unions and civil society. Involving stakeholders in the design and implementation of development co-operation initiatives is key to maximise their effectiveness. This is especially relevant when it comes to sustainable investment, as domestic reforms to be implemented under the umbrella of relevant IIAs are generally aimed at improving the investment climate in a way that benefits businesses, workers, and civil society alike. Recent IIAs also stress the role of the private sector in shaping development co-operation initiatives for the improvement of the domestic investment climate. For example, the WTO IFD Agreement highlights the importance of ensuring that private sector-led investment facilitation reform initiatives are taken into account into prospective development co-operation initiatives (Article 35.3, letter (c)).
6. Enhancing impact measurement and accountability. The Guide highlights the importance of adequate impact measurement, transparency, and accountability in ensuring that development co-operation initiatives achieve their intended objectives, while at the same time promoting effectiveness and trust. This principle is connected to the need to ensure effective monitoring and evaluation of development co-operation interventions, measuring them against desired results. More generally, monitoring and evaluation activities undertaken in this context could also contribute to determining whether IIA provisions have been properly implemented. In general, the Guide notes how there is significant scope to enhance monitoring and evaluation capacities linked with development co-operation initiatives. On this topic, the WTO IFD Agreement highlights the importance of relying on existing in-country and regional co-ordination structures (e.g. roundtables, consultative groups) to co-ordinate and monitor implementation activities (Article 35.3, letter (e)).
FDIQR-aligned IIA commitments on sustainable investment have very peculiar features. They are positive in nature, as they require an active conduct from the state party in the form of the adoption of measures to implement treaty commitments. They can produce widespread benefits, as improvements in the investment climate prompted by the adoption of relevant measures ultimately have beneficial consequences not only for investors of the other party, but for all foreign and domestic investors. Because the benefits they give are widespread, in case of non-compliance, the remedy of compensation traditionally associated with the breach of IIA provisions may be less appropriate. In these cases, the focus should be placed in ensuring that the state adopts the measures required under the breached commitment, thus leading to an effective improvement of the investment climate.
All these specificities inevitably influence their implementation, requiring the development of a new framework that seeks to facilitate parties’ compliance with international commitments on sustainable investment, rather than sanctioning instances of non-compliance. Such an implementation framework relies on three main tools: reporting and information exchange, financial assistance, and technical assistance, including capacity building. These tools can be harnessed through three different implementation mechanisms: treaty-based institutional co-operation mechanisms; support from international organisations; and development co-operation. In practice, the way in which these tools and co-operation mechanisms interact will vary depending on the different stages of the IIA process, and in particular on whether an IIA is already in place or not.
4.5.1. Facilitating the implementation of existing IIAs
The application of the implementation framework to existing IIAs is straightforward and can be better understood by taking the EU-Angola SIFA as an example (Figure 4.5). The choice of analysing the EU-Angola SIFA can be justified due to the high number of sustainable investment-related commitments that it includes, its bilateral nature, and the circumstance that it makes an explicit reference to two out of three co-operation mechanisms considered in the implementation framework, namely the recourse to institutional co-operation mechanisms and reliance on development co-operation.
While both the European Union and Angola bear the primary responsibility for the implementation of their commitments under the EU-Angola SIFA, they can first rely on treaty-based institutional co-operation mechanisms to support and facilitate their respective implementation efforts. The EU-Angola SIFA establishes a Committee on Investment Facilitation (Article 43), tasked with supervising and facilitating the implementation of relevant treaty commitments (Article 44). For this purpose, the Committee can adopt recommendations in respect of all matters covered by SIFA, , as well as binding decisions “where provided for in [the agreement]”. The parties could harness the powers attributed to the Committee on Investment Facilitation to support implementation efforts. For example, while specific reporting or information exchange obligations are not specifically envisaged in the EU-Angola SIFA, the Committee could recommend that the parties periodically submit reports detailing progress in the implementation of the treaty, included measures adopted. The provision of information in this area would facilitate monitoring efforts, as well as the identification of gaps in implementation. In particular, it could be possible for the Committee to recommend to the parties specific technical or financial support interventions that would be beneficial to assist in implementing SIFA commitments.
Treaty parties, either independently or in the context of their co-operation in the Committee on Investment Facilitation, could seek development co-operation support, as made available under the EU framework. Resources granted to the parties can be used to implement technical assistance and capacity building programmes conducive to the implementation of the SIFA (Article 42), as well to support domestic reform processes. Development co-operation resources could also be harnessed to enlist international organisations in supporting the implementation of international commitments. For example, such resources could be used to support sustainable investment areas where parties have identified gaps or opportunities for priority interventions.
Note: This figure examines how the implementation framework developed in connection with international commitments on sustainable investment could be applied to the implementation of the EU-Angola SIFA, and in particular be harnessed to support Angola in its efforts to implement relevant treaty commitments at the domestic level. The dotted green lines show the direction in the disbursement of funds from EU development co-operation, while the blue lines show the requests for support that can be issued by treaty parties.
Source: OECD, based on the implementation framework.
Regardless of the initiative of the Committee on Investment Facilitation under the EU-Angola SIFA, the parties would remain free to seek the support of international organisations of their own accord. In the implementation of SIFA-like agreements, international organisations could play a key role in the preparation of a gap analysis or needs assessment study on the parties’ legal and policy frameworks on investment, with a view to identifying areas where domestic reforms are needed. The support could also extend to the provision of technical assistance and capacity building in the implementation of relevant recommendations under the study (Box 4.6).
A gap analysis of Angola’s legal and policy framework could help assess the country’s level of alignment with international principles on sustainable investment, identifying areas where further action might be required in the implementation of relevant IIA commitments.
To better illustrate how such a gap analysis might work in practice, the examples below provide a high-level assessment concerning the alignment between Angola’s legal framework with selected principles of the FDI Qualities Recommendation. It will also provide high-level examples of how such an alignment may impact the implementation of relevant commitments under the EU-Angola SIFA.
FDIQR principle 1.d, Impact assessment: Angola has a legal framework on Environmental and Social Impact Assessment (ESIA) in line with international standards. A gap analysis focusing on the ESIA law would therefore focus on challenges in implementing relevant legislation at the domestic level and how they affect the implementation of investment projects in Angola, to be assessed through interviews with selected stakeholders. At the same time, it does not appear that Angola has enacted legislation on Strategic Environmental Assessment (SEA) for policies, plans and programmes. If the lack of SEA legislation were to be confirmed through stakeholder interviews, domestic action in this area would, therefore, be required, to ensure compliance with relevant provisions under the EU-Angola SIFA.
FDIQR principle 2.b, Domestic alignment between investment and gender objectives. Angola’s National Development Plan (NDP) 2023-2027 includes specific objectives concerning the achievement of gender equality in economic activities. The NDP seeks to promote women’s economic empowerment through targeted action, involving, among other things, promoting women’s access to finance, providing training courses to women on small business management and entrepreneurship, providing financial education services, and monitoring the representation of women in the different employment and entrepreneurship projects. In 2018, Angola also adopted a Strategy for Investment Promotion and Attraction, which does not appear to be publicly available. A gap analysis in this area would allow to determine the level to which the Strategy for Investment Promotion and Attraction considers gender-related concerns and to formulate recommendations on how to ensure increased consistency between the two areas, in compliance with relevant provisions under the EU-Angola SIFA.
FDIQR principle 4.b and 4.c, Investment Promotion and Facilitation. Since 2020, AIPEX, Angola’s investment promotion agency, manages the Single Investment Windows (Janela Unica de Investimento), which is aimed at simplifying contacts between foreign investors and public entities involved in the approval of foreign investment projects. Publicly available information on investment promotion and facilitation activities, especially in support of specific sustainability objectives, are scarce. A gap analysis would allow to take direct contact with governmental authorities to obtain more information on this matter, thus gaining insights on the measures that the investment promotion agency is implementing to promote and facilitate sustainable investment at the domestic level, in alignment with commitments under the EU-Angola SIFA.
Source: For ESIA, Law No. 5/98, Basic Environmental Law and Presidential Decree No. 117/20, General Regulation for Environmental impact Assessment and Environmental Licensing Procedure; for the NDP 2023-2027, https://www.mep.gov.ao/assets/indicadores/angola2050/20231030(3)_layout_Final_Angola_PDN%202023-2027-1.pdf; for the Single Investment Window, https://www.aipex.gov.ao/PortalAIPEX/#!/destaques/setip.
4.5.2. Facilitating the negotiation and implementation of future IIAs
Applied to the negotiation and implementation of future IIAs, including SIFAs, the implementation framework offers additional opportunities for interactions between the three different implementation mechanisms (Figure 4.6). To ensure consistency with the previous section, the analysis will take as example the negotiation of a future SIFA-like agreement, that the European Union may wish to negotiate in the future. This exercise could also be done for any other possible future agreement with sustainable investment objectives.
Parties that may wish to engage in the negotiation of a future SIFA-like arrangement could seek immediate recourse to development co-operation. The support provided could be twofold. First, development co-operation resources could be directed towards the strengthening of state parties’ capacity to negotiate IIAs themselves, enhancing government officials’ skills to identify domestic negotiation priorities objectives and red lines and to adopt specific negotiation strategies. Such type of support could be provided through the involvement of relevant international organisations, thus contributing to the dissemination and uptake of best practices in IIAs negotiation and leading to better negotiation outcomes in the future. For example, it could support the inclusion in the future SIFA-like commitments in line with sustainable investment, as well as of provisions establishing institutional co-operation mechanisms with powers to effectively support and facilitate domestic implementation.
Development co-operation, however, could also facilitate broader investment climate reform processes, regardless of the involvement in an IIA negotiation. Efforts to improve the investment climate at the domestic level undertaken in the pre-negotiation phase could also contribute to ease the implementation of future SIFA commitments. Also in this case, support could be provided through the involvement of relevant international organisations. Their involvement could support the development of a gap analysis concerning the alignment of the existing legal and policy framework with sustainable development objectives, as well as in the provision of technical assistance and capacity building in the implementation of relevant recommendations. At the same time,
The same type of support could be provided also following the signature of the new SIFA-like agreement, thereby supporting its implementation. In this case, the options available to treaty parties and the interactions among different implementation mechanisms would follow the analysis already outlined in the previous section. In particular, the Committee on Investment Facilitation envisaged under the new SIFA would be able to exercise oversight and facilitation functions over the implementation of the agreement, activating, where necessary, recourse to development co-operation and support from international organisations in facilitating investment climate reforms in accordance with international commitments.
Note: This figure examines how the implementation framework developed in connection with international commitments on sustainable investment could be applied to the implementation of future SIFA-like agreements that the European Union may wish to enter into with third countries. The red line in the timeline represents the signature of the new SIFA-like treaty, thus distinguishing the pre-negotiation and negotiation phases from implementation.
Source: OECD, based on the implementation framework.
References
[14] ASEAN (2020), Investment Policy for Sustainable Development in the AANZFTA Region, https://aanzfta.asean.org/uploads/2020/08/Investment%20Policy%20for%20Sustainable%20Development%20in%20the%20AANZFTA%20Region_Final%20Res.pdf.
[1] Bodansky, D. (2010), The art and craft of international environmental law, Harvard University Press.
[3] Dupuy, P. and J. Viñuales (2018), International Environmental Law, Cambridge University Press, https://doi.org/10.1017/9781108399821.
[2] Gordon, K. and J. Pohl (2015), “Investment Treaties over Time - Treaty Practice and Interpretation in a Changing World”, OECD Working Papers on International Investment, No. 2015/2, OECD Publishing, Paris, https://doi.org/10.1787/5js7rhd8sq7h-en.
[6] IISD (2024), Investment Facilitation for Development Agreement: A reader’s guide, https://www.iisd.org/system/files/2024-02/investment-facilitation-development-agreement-wto.pdf.
[4] International Trade Center and World Economic Forum (2024), Report on the 7th capacity building workshop on “Making use of the WTO’s Investment Facilitation for Development Agreement for attracting sustainable and inclusive FDI”, https://intracen.org/sites/default/files/inline-files/IF%2C%20WTO%20IISD%20event%2C%20Feb.%2024%2C%20Report_FINAL%20for%20publication.pdf.
[7] ODI (2023), AfCFTA National Implementatio Committees: Scoping options and support mechanisms, https://media.odi.org/documents/ODI-AfCFTA-Report-18Apr23-FINAL.pdf.
[12] OECD (2023), FDI Qualities Review of Croatia: Advancing the Strategic Framework for Investment Promotion and Facilitation, OECD Publishing, Paris, https://doi.org/10.1787/79b2345b-en.
[15] OECD (2022), FDI Qualities Guide for Development Co-operation: Strengthening the Role of Development Co-operation for Sustainable Investment, OECD Development Policy Tools, OECD Publishing, Paris, https://doi.org/10.1787/7f251bac-en.
[8] OECD (2022), FDI Qualities Policy Toolkit, OECD Publishing, Paris, https://doi.org/10.1787/7ba74100-en.
[13] OECD (2022), FDI Qualities Review of Jordan: Strengthening Sustainable Investment, OECD Publishing, Paris, https://doi.org/10.1787/736c77d2-en.
[11] OECD (2015), Policy Framework for Investment, 2015 Edition, OECD Publishing, Paris, https://doi.org/10.1787/9789264208667-en.
[10] UNCTAD (2008), The Investment Policy Reviews Programme: A Framework for Attracting and Benefitting from FDI, https://unctad.org/system/files/official-document/iteipc20083_en.pdf.
[9] World Bank Group (2022), Investment Policy and Promotion: Attracting Foreign Investment and Maximizing Impact for the Local Economy, https://documents1.worldbank.org/curated/en/099040009302225750/pdf/P1755370c5dafe0440b2e40efcc6443b101.pdf.
[5] World Trade Organization (2023), WTO Technical Assistance Annual Report, https://www.wto.org/english/tratop_e/devel_e/teccop_e/ta_annrep23_e.pdf.