UNCTAD Investment Policy Framework

The United Nations Conference on Trade and Development (UNCTAD) is actively involved with issues related to investment and enterprise development. It builds on three-and-a-half decades of experience and international expertise in research and policy analysis, fosters intergovernmental consensus-building, and provides technical assistance to developing countries. At a time of economic crisis and pressing social and environmental challenges, harnessing economic growth for sustainable and inclusive development is more important than ever. Investment is a primary driver of such growth. Mobilizing investment and ensuring that it contributes to sustainable development objectives is therefore a priority for all countries and for developing countries in particular. Against this background, a new kind of investment policy is emerging that is intended to pursue a broader and more intricate development policy agenda, while building or maintaining a generally favorable investment climate. Although these concepts are not new, they have not previously been systematically integrated in mainstream investment policymaking. Broadly, these investment policies have three main objectives: (i) create synergies with wider economic development goals or industrial policies and achieve seamless integration in development strategies. (ii) foster responsible investor behavior and incorporate principles of corporate social responsibility. (iii) ensure policy effectiveness in their design and implementation and in the institutional environment within which they operate.
To help policymakers address the challenges posed by this new agenda, UNCTAD has developed a comprehensive Investment Policy Framework for Sustainable Development. This framework consists of a set of core principles for investment policymaking, guidelines for national investment policies, and guidance for policymakers on how to engage in the international investment policy regime, in the form of options for the design and use of international investment agreements. The core principles cover eleven main areas: (i) Investment for Sustainable Development; this overarching objective of investment policymaking is to promote investment for inclusive growth and sustainable development. (ii) Policy Coherence; investment policies should be grounded in a country’s overall development strategy; all policies that impact on investment should be coherent and synergetic at both the national and international levels. (iii) Public Governance and Institutions; investment policies should be developed involving all stakeholders, and embedded in an institutional framework based on the rule of law that adheres to high standards of public governance and ensures predictable, efficient and transparent procedures for investors. (iv) Dynamic Policymaking; investment policies should be regularly reviewed for effectiveness and relevance and adapted to changing development dynamics. (v) Balanced Rights and Obligations; investment policies should be balanced in setting out rights and obligations of States and investors in the interest of development for all. (vi) Right to Regulate; each country has the sovereign right to establish entry and operational conditions for foreign investment, subject to international commitments, in the interest of the public good and to minimize potential negative effects. (vii) Openness to Investment; in line with each country’s development strategy, investment policy should establish open, stable and predictable entry conditions for investment. (viii) Investment Protection and Treatment; investment policies should provide adequate protection to established investors; the treatment of established investors should be non-discriminatory. (ix) Investment Promotion and Facilitation; policies for investment promotion and facilitation should be aligned with sustainable development goals and designed to minimize the risk of harmful competition for investment. (x) Corporate Governance and Responsibility; investment policies should promote and facilitate the adoption of and compliance with best international practices of corporate social responsibility and good governance. (xi) International Cooperation; the international community should cooperate to address shared investment-for-development policy challenges, particularly in least developed countries; collective efforts should also be made to avoid investment protectionism.
The UNCTAD National Investment Policy Guidelines embrace three key levels for policy action. At the strategic level, policymakers should base investment policy in a broad road map for economic growth and sustainable development, such as those set out in formal economic or industrial development strategies. At the normative level, through the setting of rules and regulations on investment and other policy areas, policymakers can promote and regulate investment that is geared towards sustainable development goals. At the administrative level, through appropriate implementation and institutional mechanisms, policymakers can ensure continued relevance and effectiveness of investment policies. While national investment policymakers address these challenges through rules, regulations, institutions and initiatives, policy at the international level is translated through a complex web of treaties, including bilateral investment treaties, free trade agreements with investment provisions, economic partnership agreements and regional agreements. The UNCTAD Investment Policy Framework provides the contours for sustainable development, including the design criteria for investment policies, guidelines to ensure integration of investment policy with development strategy as well as ensuring policy coherence, and designing investment policies in support of sustainable development. The UNCTAD framework is intended for use by policymakers in areas as diverse as trade, competition, industrial policy, and environmental policy, where investment plays an important role.