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Investment Promotion Agencies: Investment Attraction, Policy Role, and Response to Crises

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Handbook of International Investment Law and Policy

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Abstract

According to the World Bank, Investment Promotion Agencies (IPAs) can be considered a country’s best tool for attracting, establishing, retaining, expanding, and linking private foreign direct investment (FDI). But the ability of a country to attract investment goes well beyond proactive attraction efforts: market size, availability of natural and human resources, physical and digital connectivity, participation in global value chains, and having the right domestic and international policies are some of the factors that have the largest impact on the way investors see a host country. Hence, IPAs are increasingly undertaking a policy advocacy role, in order to improve the country’s investment climate, to the advantage of foreign and domestic investors alike. This advocacy role becomes especially relevant in moments of crises, such as the one presented by the SARS-CoV-2 pandemic (the COVID-19 pandemic) and its subsequent economic recession, as countries need to find innovative ways to attract foreign capital in times of global economic distress, including a continuous improvement of their domestic investment climate. But turbulent times also come with additional considerations with regard to free flows of FDI, including domestic review and/or restrictions on acquisition of sensitive assets by foreign entities (“screening mechanisms”).

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Notes

  1. 1.

    UNCTAD (2020) World Investment Report, Table IV. 1 Evolution of International Production since 1990, p 124. IMF (April 2020). World Economic Outlook Database

  2. 2.

    See this Handbook, Reiter L, Bellak C Effects of BITs on FDI: the role of publication bias

  3. 3.

    OECD (2020) Mealy and Wermelinger, Investment and sustainable development: between the risk of collapse and opportunity to build back better. Discussion paper for the joint IC-DAC session at the 2020 Roundtable on Investment and Sustainable Development

  4. 4.

    OECD and IDB (2019), p XX

  5. 5.

    OECD (2018) Mapping of investment promotion agencies in OECD countries, p 3 www.oecd.org/investment/Mapping-of-Investment-Promotion-Agencies-in-OECD-Countries.pdf

  6. 6.

    See this Handbook, Sauvant K. Multinational enterprises and the global investment regime: toward balancing rights and responsibilities

  7. 7.

    OECD (2015) Policy framework for investment 2015 edition. OECD Publishing, Paris. https://doi.org/10.1787/9789264208667-en

  8. 8.

    As an example, see OECD (2018) Mapping of investment promotion agencies in OECD countries

  9. 9.

    OECD and IDB (2019), p XXIII

  10. 10.

    See this handbook, Gudrun ZAGEL, Achieving sustainable development objectives in international investment law

  11. 11.

    WAIPA-WBG (2020) State of investment promotion agencies: evidence from WAIPA-WBG’s joint global survey

  12. 12.

    Ibid.

  13. 13.

    Ibid.

  14. 14.

    Ibid.

  15. 15.

    UNESCAP (2020) Studies in trade, investment and innovation no. 93 – outward Foreign Direct Investment and Home Country Sustainable Development. p 54

  16. 16.

    World Bank Group (2020) Helibron A, Aranda-Larrey Y, “The Comprehensive Investor Services Framework”, p 3

  17. 17.

    Meaning increasing the possibility of an investor to select one’s country as its project destination

  18. 18.

    OECD (2018) Mapping of Investment Promotion Agencies in OECD Countries, p 14

  19. 19.

    Ibid., p 15

  20. 20.

    For recent publications on the issue, see for example World Bank Group and World Association of Investment Promotion Agencies (WAIPA) (2020) State of investment promotion agencies, evidence from WAIPA-WBG’s Joint Global Survey. In the report the Bank presents a novel “WBG Framework for Investment Promotion,” with three core pillars: (1) Corporate Planning and Sector Prioritization; (2) Institutional Framework for FDI; and, (3) Investor Services (based on CISF, later referred on this chapter)

  21. 21.

    Wells LT, Wint AG (2000) Marketing a country (Revised edition). World Bank FIAS Occasional Paper 13, Washington, DC

  22. 22.

    OECD (2019) Supporting investment climate reforms through policy advocacy, p 1

  23. 23.

    UNCTAD (2008) Investment promotion agencies as policy advocates, Investment advisory series, series A, number 2, pp 1 and 5

  24. 24.

    World Bank Group (2020) Helibron A, Aranda-Larrey Y, “The Comprehensive Investor Services Framework”, p 8

  25. 25.

    Ibid., p 9

  26. 26.

    Ibid., p 9

  27. 27.

    OECD (2019) Supporting investment climate reforms through policy advocacy, p 2

  28. 28.

    OECD (2019) Supporting investment climate reforms through policy advocacy, p 5 and OECD (2018) Mapping of investment promotion agencies in OECD countries, p 46

  29. 29.

    OECD (2019) Supporting investment climate reforms through policy advocacy, p 7

  30. 30.

    OECD (2018) Mapping…”, p 24

  31. 31.

    Ibid., p 47

  32. 32.

    OECD (2019) “Supporting…”, p 10

  33. 33.

    Ibid., p 16

  34. 34.

    OECD (2018) “Mapping…”, p 81

  35. 35.

    OECD (2018) “Supporting…”, p 16

  36. 36.

    OECD (2018) “Supporting…”, p 17

  37. 37.

    Adapted from Bardach E (2000) A practical guide for policy analysis: the eightfold path to more effective problem solving. Chatham House Publishers of Seven Bridges Press, New York; Kingdon J (1984) Agendas, Alternatives and Public Policies, 2edn. Little, Brown and Company, Boston/Toronto. In UNCTAD (2008) Investment promotion agencies as policy advocates, Investment advisory series, series A, number 2, p 6

  38. 38.

    UNCTAD (2008) Investment promotion agencies as policy advocates, Investment Advisory Series, series A, number 2, p 60

  39. 39.

    Ibid., p 14 and 15

  40. 40.

    Ibid., p 28

  41. 41.

    Ibid.

  42. 42.

    UNCTAD (2008) Ibid., p 31

  43. 43.

    Adapted from Gerston L (2004) Public policy making: process and principles. M.E. Sharpe, New York. In UNCTAD, p 37

  44. 44.

    UNCTAD (2008) “Investment Promotion Agencies as …,” p 40

  45. 45.

    Ibid., p 42 and 43

  46. 46.

    Business France’s policy advocacy process in OECD (2019) “Supporting…,” p 6

  47. 47.

    UNCTAD (2008) “Investment promotion agencies as …,” p 47

  48. 48.

    OECD (2018) “Mapping…,” p 48

  49. 49.

    OECD (2019) “Supporting…,” p 10

  50. 50.

    UNCTAD (2008) “Investment promotion agencies as …,” p 47

  51. 51.

    Ibid., p 54

  52. 52.

    Ibid., p 48

  53. 53.

    OECD-IDB (2017) Survey of investment promotion agencies, in OECD (2018) “Mapping…,” p 91

  54. 54.

    UNCTAD (2008) “Investment Promotion Agencies as …,” p 48

  55. 55.

    Ibid., p 57

  56. 56.

    OECD (2019) “Supporting…,” p 16

  57. 57.

    Facilitators are usually IPAs with strong aftercare teams, which are well placed to help identify recurring challenges and support the policy advocacy process. OECD (2019) “Supporting…,” p 13

  58. 58.

    OECD (2019) “Supporting…,” p 18

  59. 59.

    UNCTAD (2020) Investment trends monitor, “Impact of the Covid-19 Pandemic on Global FDI and GVCs”

  60. 60.

    OECD (2020) “Foreign direct investment flows in times of COVID-19,” p 1

  61. 61.

    OECD (2020) “OECD investment policy responses to COVID-19,” p 1

  62. 62.

    OECD (2020) “Foreign direct investment flows in times of COVID-19,” p 1

  63. 63.

    OECD (2020) Borga, Ibarlucea and Sztajerowska, Drivers of divestment decisions by multinational enterprises – a cross-country firm-level perspective. https://doi.org/10.1787/5a376df4-en

  64. 64.

    Borga, M., P. Ibarlucea Flores and M. Sztajerowska (2020), “Drivers of divestment decisions of multinational enterprises – A cross-country firm-level perspective”, OECD Working Papers on International Investment, No. 2019/03, OECD Publishing, Paris, https://doi.org/10.1787/5a376df4-en.

  65. 65.

    OECD (2020) “Foreign direct investment flows in times of COVID-19,” p 8

  66. 66.

    Alfaro, L. and M. Chen (2012), “Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance,” American Economic Journal: Economic Policy, 4(3):30–55.

  67. 67.

    Desai, Mihir, C. Fritz Foley, and Kristin J. Forbes (2008), “Financial Constraints and Growth: Multinational and Local Firm Responses to Currency Depreciation,” Review of Financial Studies, 21(6):2857–88.

  68. 68.

    Ibid., p 1

  69. 69.

    Ibid., p 2

  70. 70.

    Ibid., p 2

  71. 71.

    OECD (2020) “OECD investment policy responses to COVID-19,” p 3

  72. 72.

    Ibid.

  73. 73.

    Ibid., p 6

  74. 74.

    WAIPA (2020) “The impact of Covid-19 from the perspective of IPAS,” p 6–7

  75. 75.

    OECD (2020) “Investment promotion agencies in the time of COVID-19,” p 5

  76. 76.

    Ibid., p 9

  77. 77.

    Ibid., p 8

  78. 78.

    OECD (2020) “OECD investment policy…,” p 6

  79. 79.

    Ibid.

  80. 80.

    UNCTAD. Investment Policy Monitor “National Security-Related Screening Mechanisms for Foreign Investment.” p 3: “UNCTAD has identified 28 jurisdictions that have such mechanisms. These countries are: Australia, Austria, Belgium, Canada, China, Denmark Finland, France, Germany, Hungary, Iceland, India, Italy Japan, Latvia, Lithuania, Mexico, New Zealand, Norway, Poland, Portugal, the Republic of Korea, Romania, the Russian Federation, Spain, South Africa, the United Kingdom, and the United States. In addition to these 28 countries, an FDI Screening cooperation mechanism was also established by the European Union.”

  81. 81.

    See Chaisse J, Chakraborty D, Mukherjee J (2011) Sovereign wealth funds as corporations in the making – assessing the economic feasibility and regulatory strategies J World Trade 45(4):837–875

  82. 82.

    OECD (2020) Acquisition – and ownership-related policies to safeguard essential security interests, pp 1–2

  83. 83.

    See Chaisse J (2015) Demystifying public security exception and limitations on capital movement – hard law, soft law and sovereign investments in the EU internal market. Univ Pa J Int Law 37(2):583–646

  84. 84.

    OECD (2020) “Acquisition – and ownership-related policies to safeguard essential security interests,” p 37

  85. 85.

    758 F.3d 296 (D.C. Cir. 2014) United States Court of appeals for the district of Columbia. Ralls Corporation v CFIUS et al., p 47

  86. 86.

    UNCTAD, Investment Policy Monitor, “National Security-Related Mechanisms for Foreign Investment,” p 2

  87. 87.

    Ibid., p 3

  88. 88.

    See https://www.beltandroad.news/2019/10/25/china-state-grid-buys-chiles-chilquinta-electricity-utility-for-us2-23-billion/

  89. 89.

    UNCTAD, Investment Policy Monitor, “National Security-Related Mechanisms for Foreign Investment,” p 12

  90. 90.

    UNCTAD, Investment Policy Monitor, “National security-related mechanisms for foreign investment,” Annex I – FDI screening: foreign takeovers over $50 million blocked or abandoned for national security reasons, 2016-september 2019, p 1

  91. 91.

    OECD (2020) Investment policy responses to COVID-19

  92. 92.

    European Commission. Communication from the Commission – Guidance to the Member States concerning foreign direct investment and free movement of capital from third countries, and the protection of Europe’s strategic assets, ahead of the application of Regulation (EU) 2019/452 (FDI Screening Regulation)

Author information

Authors and Affiliations

  1. Heidelberg University and University of Chile, LL.M. Lecturer in International Law, Providencia, Chile

    Carlos Portales Undurraga

  2. David Rockefeller Center for Latin American Studies (DRCLAS) at Harvard University, Luksic Visiting Scholar, Cambridge, MA, USA

    Cristián Rodríguez Chiffelle

Authors
  1. Carlos Portales Undurraga
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  2. Cristián Rodríguez Chiffelle
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Correspondence to Cristián Rodríguez Chiffelle .

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Editors and Affiliations

  1. School of Law, City University of Hong Kong, Kowloon, Hong Kong

    Julien Chaisse

  2. School of Business and Law, University of Portsmouth, Portsmouth, UK

    Leïla Choukroune

  3. Institute of Malaysia and International Studies, National University of Malaysia, Bangi, Selangor, Malaysia

    Sufian Jusoh

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Portales Undurraga, C., Rodríguez Chiffelle, C. (2021). Investment Promotion Agencies: Investment Attraction, Policy Role, and Response to Crises. In: Chaisse, J., Choukroune, L., Jusoh, S. (eds) Handbook of International Investment Law and Policy. Springer, Singapore. https://doi.org/10.1007/978-981-13-5744-2_129-1

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