CFI spring 2015 Columnist

Ten Guiding Principles to Encourage Foreign

Direct Investment
Worldwide, foreign direct investment (FDI) volumes are shortly expected to
breach the $3tn mark representing fully 4% of the global GDP. Foreign
direct investment and trade liberalisation, two faces of the same coin, are
seen as key drivers of economic development and powerful enablers that
allow countries to escape poverty and thus realise their full potential.
However, as was pointed out at this years Davos Summit of the World
Economic Forum, there is currently no comprehensive multilateral legal
framework or global institution that oversees investment flows and
activities. Instead, investment flows face a bewilderingly complex overlay of
bilateral, plurilateral, and interregional treaties that do little to encourage
the growth of FDI volumes. If investment volumes grow, as they do, it is in
spite of rather than because of this mesh of countervailing agreements.
Trying to make sense of the FDI universe, participants of the fifth Annual
Investment Meeting (AIM) celebrated in Dubai between March 30 and April
1, at length debated ways to ease and encourage investment flows. The
2015 edition of the meet focused on FDI as an agent for sustainable
development via innovation and the transfer of technology.
In their final declaration, attending ministers and other government
representatives called upon the United Nations to include the critical role of
foreign direct investment in the attainment of the sustainable development
goals (SDGs) that are expected to be adopted later this year by the UN
General Assembly. The ministerial declaration emphasises that FDI can
contribute towards ensuring food security and help countries exploit their
competitive advantages. The ministers further concluded that in order to
increase investment volumes to the level necessary for SDGs to be fully
met, it is necessary for recipient nations to put a stable and predictable
policy framework in place.
As an AIM 2015 knowledge partner, CFI.co teamed up with the DeputyDirector Ann Low of the Office for Investment Affairs at the US State
Department and officials of the UAE Ministry of Economy to draw up a list of
ten guiding principles for effective FDI policies.
The principles aim to help countries compose a legal framework that
facilitates FDI flows and ensures key elements are put in place that
encourage sustainable development.
Ten Guiding Principles for Governments Effective FDI Policies
1.
2.
3.
4.
5.
6.
7.

Play on Strengths (comparative advantage)

Be predictable and Friendly (clear rules and welcoming attitude)
Create Incentives (encourage investors)
Do Not Discriminate (all are equal in the eyes of the law)
Regulate for Sustainability (growth now and in the future)
Protect Intellectual Property Rights (shield creativity from pirates)
Remove Red-Tape (minimise bureaucracy)

8. Provide Access to Finance and Risk Management Services

9. Fund FDI-Agencies and Listen to their Feedback (data and research
are essential)
10.Communicate, Communicate, Communicate (keep talking and
listening)
The objective of these principles is to be effective: the government policies
and actions they encourage should result in the transfer of technology and
encourage innovation, including by small and medium-sized enterprises.