WTO Investment Facilitation For Development

Source: Business Line
GS II: Important International institutions, agencies and fora- their structure, mandate

Overview

1. News in Brief
2. About WTO Investment Facilitation For Development
3. World Trade Organisation
4. Way Forward

Why in the News?

The Department of Economic Affairs (DEA) is not in favour of India supporting a China-led informal initiative at the WTO on investment facilitation for development (IFD).

News in Brief

• The DEA is very careful about any agreement related to investments with other countries. Even at the bilateral level, it weighs the details carefully, especially rules related to dispute settlement.
• At the WTO, the stakes are higher as there are many countries and it does not want to lose policy space.
• With the 13th WTO Ministerial Conference starting in Abu Dhabi next week, the proponents of IFD, which includes several developed countries, are trying to bring it in formally.
• Although as part of Annexure 4 of the WTO, the pact would be binding on only signatories, India is apprehensive that it would change the scope and structure of the WTO if allowed.

About WTO Investment Facilitation For Development

• The World Trade Organization (WTO) has been exploring the potential benefits of an Investment Facilitation for Development (IFD) initiative.
• This initiative aims to streamline and enhance the process of foreign investment, particularly in developing countries, by reducing barriers and improving transparency

Key points to consider

• Need for Investment Facilitation: Foreign direct investment (FDI) plays a crucial role in the economic development of countries, especially in developing economies. However, the process of attracting and retaining foreign investment can be complex and cumbersome due to various administrative and regulatory hurdles.
• Potential Benefits
  • Increased FDI inflows: By simplifying administrative procedures and enhancing transparency, countries may attract higher levels of foreign investment.
  • Economic development: FDI can stimulate economic growth, create jobs, transfer technology, and contribute to infrastructure development.
  • Enhanced competitiveness: Streamlining investment processes can improve the overall business environment, making countries more competitive in the global market.
• Current Status
  • As of now, discussions on an IFD initiative at the WTO are ongoing.
  • While there is broad support for the idea, negotiations are still underway to determine the scope, objectives, and modalities of such an initiative.
• Challenges and Concerns
  • Sovereignty concerns: Some countries are wary of relinquishing control over their investment policies and fear that international standards may undermine their sovereignty.
  • Capacity constraints: Developing countries may lack the institutional capacity to effectively implement and enforce investment facilitation measures.
  • Equity considerations: There is a risk that investment facilitation measures may primarily benefit large multinational corporations, exacerbating income inequality.
• Examples of Investment Facilitation Measures: Several countries have already implemented investment facilitation measures to attract foreign investment. These measures include:
  • One-stop shops for investment registration and approval.
  • Simplified visa and work permit procedures for foreign investors and skilled workers.
  • Investor-friendly legal frameworks with clear and transparent regulations.
  • Special economic zones offer incentives and preferential treatment to foreign investors.
• It is backed by 130 member countries, as it could encroach on the country’s policy space.

India’s Stand

• India refused to participate in the IFD talks at the WTO because the agenda falls outside the mandate of the global trade body.
• India is also of the view that the proposed IFAD’s appeal and review mechanism is problematic which may put the burden on the government to consult investors on policy matters.
• India believes that if the countries supporting IFD want to negotiate the subject, they should do it outside the WTO at a dierent forum.

World Trade Organisation

• It is the only intergovernmental organisation which regulates international trade.
• The WTO officially commenced under the Marrakesh Agreement, replacing the General Agreement on Tariffs and Trade (GATT).
• It is the largest international economic organisation in the world.

• The WTO Members
  • 164 members
  • 22 observer governments with Afghanistan the latest to join. 
• WTO members do not have to be fully independent states; they need only be a customs territory with full autonomy in the conduct of their external commercial relations.
• The highest decision-making body of the WTO is the Ministerial Conference, which usually meets every two years. 
• Five principles which WTO follows are
  • Non-discrimination
  • Reciprocity
  • Binding and enforceable commitments
  • Transparency
  • Safety values. 

Way Forward

• Investment facilitation has the potential to contribute significantly to the economic development of countries, particularly in the developing world.
• However, it is essential to strike a balance between facilitating investment and safeguarding national interests. Moving forward, stakeholders must continue to engage in constructive dialogue and negotiations at the WTO to develop an IFD initiative that addresses the needs and concerns of all member states.

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