UNCTAD: IIA reform, innovation, entrepreneurship & the SDGs

The two-day UNCTAD expert meeting (16-17 March) on investment, innovation and entrepreneurship will be taking stock of recent developments in investment policy at the national, bilateral, regional and multilateral levels, in particular reform efforts related to the International Investment Agreements (IIA) regime.

According to UNCTAD, the Multi-Year Expert Meeting on Investment, Innovation and Entrepreneurship for Productive Capacity-Building and Sustainable Development will also address policy perspectives with regards to science, technology and innovation (STI) and provide an update on entrepreneurship policies, in the context of the Sustainable Development Goals (SDGs).

According to an UNCTAD Secretariat Note prepared for the meeting, in light of the pressing need for a systemic reform of the global regime of international investment agreements to bring it in line with today's sustainable development imperative, it is necessary to take stock of the steps towards such reform.

"Today, the question is not whether or not reform is necessary, but what to reform, how and to what degree," it said.

In his opening statement at the meeting on Wednesday (16 March), the Secretary-General of UNCTAD, Dr Mukhisa Kituyi, said that this expert meeting has two major significance - as the end of a cycle, and as a precursor of a set of activities that UNCTAD anticipates to do as part of its mandate and responsibility to the Sustainable Development Agenda.

This meeting brings to an end the four-year cycle of expert meetings, as part of the last four years of UNCTAD's work.

"And therefore [it] gives us an opportunity to take stock of what has been happening, and draw lessons that can be important in framing the next four-year cycle," he said.

Secondly, it gives UNCTAD an opportunity to concretely filter some inputs that can inform the UNCTAD-14 meeting in Nairobi in July this year.

He said that the three achievements of the expert meeting can make important contributions to the SDG agenda.

They all have to do with the three related policy frameworks that have been dealt with over the four years.

First, is UNCTAD's Investment Policy Framework for Sustainable Development and in particular, its international dimension, the reform of the International Investment Agreement (IIA) regime.

Second, is UNCTAD's Science, Technology and Innovation (STI) Policy Framework, and third, is UNCTAD's Entrepreneurship Policy Framework.

On IIA reform, Dr Kituyi said that there is need to build concretely on the Addis Ababa Action (AAA) Agenda's mandate that was provided to UNCTAD to do important work in this area.

"We, at UNCTAD, have been called upon in the AAA to provide the platform for the exchange of views and experiences on the reform effort so as to provide a common vision and a shared sense of where it should be headed."

He cited UNCTAD research, which showed that at least 110 countries have by now reviewed their national and international investment policies based on UNCTAD's investment policy framework.

Many of these reviews have cited the development of an IIA model in line with a new generation of investment policy-making.

Recently, for example, signed IIAs contain a number of policy options that take better account of countries' right to regulate, or are otherwise conducive to sustainable development.

The Secretary-General also noted that mega-regional or regional IIA models now include reform-oriented policy options. Some inputs into mega-regional negotiations break new ground with respect to reform of the investment agreements, and investment dispute settlement.

According to Dr Kituyi, the road map of IIA reform has been developed throughout a virtuous cycle of inter-governmental deliberation, policy analysis and research, application of ideas in the field, feeding back to the lessons learned into the research and back-and-forth of ideas between members and other investment community stakeholders.

As such, the roadmap constitutes an outcome of these multi-year expert meetings in line with paragraph 207 of the Accra Accord, which is a practical and actionable outcome of direct relevance to member states.

"Clearly, the time for investment governance change has come," the UNCTAD chief said, adding that UNCTAD has a major role to play in it.

He also emphasised the critical role played by effective STI policies in achieving economic growth and structural transformation. The need for policy action in support of STI is especially urgent in the LDCs, he added.

Dr Kituyi further said that enterprise development targeted at micro-, small- and medium-sized enterprises has been identified as a particularly effective means to address fundamental development challenges.

According to the UNCTAD Secretariat Note, IIA reform is taking place against a background of an expanding international investment agreement regime, with intensified investment policy-making efforts at the regional level.

By the end of 2015, 3,286 international investment agreements had been concluded, including 2,928 bilateral investment treaties and 358 "other international investment agreements".

Reform options at the national level include reviews of international investment agreements and action plans, resulting, among others, in new model treaties or unilateral termination of treaties.

Since 2012, at least 115 countries have reviewed their national and/or international investment policies. About 100 of them have used the Investment Policy Framework.

Close to 90 of these countries have focused their reviews on the international policy dimension, that is to say, they have conducted international investment agreement reviews.

In such reviews, countries analyse, among others, their treaty networks and content profiles and carry out impact and risk assessments to identify specific reform needs in line with national development objectives.

As part of these reviews, some countries decide whether certain international investment agreement relationships should be renegotiated, amended or terminated.

Countries that have recently undertaken such reviews are Azerbaijan, Bosnia and Herzegovina, Brazil, Colombia, Egypt, Germany, India, Indonesia, Norway, South Africa, Sri Lanka and Thailand.

Sixty countries have developed or have been developing new model international investment agreements since 2012.

Until the 1990s, such models were used mainly by developed countries, for example, Canada, Germany and the United States of America.

"Today, both developed and developing countries use model treaties. Revised model treaties can also indicate a country's new approach to international investment policymaking."

In terms of content, said the Secretariat Note, most of the new models contain provisions safeguarding the right to regulate - including in the pursuit of sustainable development objectives - and provisions aimed at minimizing exposure to investment arbitration.

Many of these elements are in line with the Investment Policy Framework and match policy options included in the road map for international investment agreement reform.

While new models differ in the extent to which they include reform elements, many of them demonstrate countries' intentions to move away from the protection-only model to a more balanced model of investment for sustainable development.

"Bilateral reform actions include joint international investment agreement consultations and plans for a joint course of action. They can result in joint interpretations, renegotiations and amendments or consensual terminations of the parties' current international investment agreements, as well as the conclusion of new treaties."

According to the Secretariat Note, since 2012, at least 19 international investment agreements, covering close to 50 countries, including the 28 European Union Member States, have been renegotiated or replaced.

During this time, 10 international investment agreements signed prior to 2012 have entered into force, replacing earlier ones, and 9 international investment agreements were signed that have not yet entered into force.

These 19 agreements constitute some 8 per cent of international investment agreements that were signed or entered into force between 2012 and today.

The UNCTAD Note stressed that the conclusion of new, sustainable-development-friendly treaties is a key pathway for the reform of international investment agreements.

As suggested in the UNCTAD road map for such reform, a comparison of the prevalence of provisions relating to international investment agreements promoting the right to regulate shows a clear shift in drafting practices.

"Modern treaty clauses often match the respective policy options set out in the Investment Policy Framework."

This trend towards reform is even more pronounced when adding "other international investment agreements" to the analysis.

The respective reform options are more prevalent in recently concluded "other international investment agreements", compared with bilateral investment treaties signed during the same time frame.

"The difference is most notable with regard to the clarification of indirect expropriation and the presence of public policy exceptions," it said.

Countries have increasingly engaged in regional or mega-regional rule-making with regard to international investment agreements, and some of these treaties display features of international investment agreement reform.

"To the extent that mega-regional agreements consolidate and streamline the regime of international investment agreements, they can also help manage relationships between international investment agreements and help enhance the systemic consistency of the regime, as suggested in the road map for the reform of international investment agreements."

At the multilateral level, the Secretariat Note said that for several years, UNCTAD has assisted countries in the design of new-generation investment policies, that is to say, international investment agreements that prioritize inclusive growth and sustainable development.

Following a request from the Conference on International Investment Agreements, held in connection with the World Investment Forum in 2014, and based on multi-stakeholder inputs, UNCTAD developed the road map for the reform of the international investment agreement regime.

It was launched in the World Investment Report 2015 and first debated by member States during the sixty-second session of the Trade and Development Board.

"The importance of multilateral consultations on international investment agreements in the pursuit of today's sustainable development agenda is recognized in the Addis Ababa Action Agenda, which mandates UNCTAD to continue its consultations with member States on such agreements," said the Note.

It said that multilateral reform of international investment agreements is the most challenging reform path.

"However, only a common approach will deliver a regime in which stability, clarity and predictability help achieve the objective of all stakeholders - that of effectively harnessing international investment relationships for the pursuit of sustainable development."

The Note also said that science, technology and innovation are central to building productive capacity, increasing productivity, promoting competitive firms and industries, and economic catching-up.

However, there remain many challenges for developing countries in using science, technology and innovation policy to help achieve the Sustainable Development Goals.

The Secretariat Note underlined that dramatic policy improvements, such as a stronger focus on investment in science, technology and innovation and the rapid adoption or diffusion of technologies and innovations, will be needed in developed and developing countries if they are to meet the Sustainable Development Goals.

"Since the context of science, technology and innovation varies greatly among developing countries, there is no single optimal system or policy blueprint for all to follow. Science, technology and innovation policy remains highly context specific."

The Note highlighted that entrepreneurship is multi-faceted. As such, it can make an important contribution to the implementation of the Sustainable Development Goals and have a positive impact on the achievement of multiple targets.

"It is critical for employment generation and job creation, particularly in the micro, small and medium-sized enterprise sector, which provides the majority of employment opportunities in most countries; for example, in sub-Saharan Africa, 80 per cent of employment is generated in this sector."

Micro, small and medium-sized enterprise development offers important means of achieving better standards of living. It helps eradicate poverty and reduce inequality, end hunger and achieve food security.

It also helps to ensure healthy lives and well-being for all, provide inclusive and equitable education, and promote gender empowerment and equality.

Compared with large corporations, micro, small and medium-sized enterprises are more flexible and innovative, yet resource constrained, said the Note.

Therefore, they can contribute towards the sustainable use of water, energy, land, forests, marine and other resources. They can help combat climate change, foster sustainable consumption and production patterns, and promote sustainable cities.

The Secretariat Note said that, "Micro, small and medium-sized enterprises are also an important vehicle for diversification and industrialization; they can help build peace by offering new opportunities to those who are not satisfied with their living conditions, particularly in post-conflict zones."

Entrepreneurship is key in attaining the Sustainable Development Goals.
However, to achieve its impact on building productive capacities, strengthen micro, small and medium enterprises, address the challenges of sustainable and inclusive growth, and improve living conditions, particularly of vulnerable groups of the population, such as youth and women, concerted efforts are needed to ensure a comprehensive and holistic approach to entrepreneurship promotion.

"Such an approach should be based on long-term strategies and policies, adequate resource allocation, capacity- building programmes, efficient assessment and monitoring mechanisms, coordination and cooperation at all levels, and sharing of good practices and lessons learned," said the Secretariat Note.

By Kanaga Raja.

Source: SUNS #8204 Friday 18 March 2016.