Indicator 17.5.1 Number of countries that adopt and implement investment promotion regimes for developing countries, including the least developed countries

Indicator 17.5.1: Number of countries that adopt and implement investment promotion regimes for developing countries, including the least developed countries

Target 17.5: Adopt and implement investment promotion regimes for least developed countries

United Nations Conference on Trade and Development (UNCTAD)

Definition:

The indicator provides the number of countries that have adopted and implemented investment promotion regimes for developing countries, including least developed countries (LDCs).

Concepts:

Investment promotion regimes can be defined as those instruments that directly aim at encouraging outward or inward foreign investment through particular measures of the home or host countries of investment.

Investment promotion regimes for LDCs are those instruments that home countries of investors have put in place to encourage outward investment in LDCs directly or through measures intended for developing countries.

Home country refers to donor countries that put in place investment promotion regimes to encourage outward investment which can benefit developing countries, including LDCs.

Foreign direct investment involves a long-term relationship and reflects a lasting interest and control by a resident entity in one economy (foreign direct investor or parent enterprise) in an enterprise resident in an economy other than that of the foreign direct investor (FDI enterprise or affiliate enterprise or foreign affiliate).

Adoption means that a country has put in place such a system i.e. through the formal adoption of a law, regulation or programme to encourage investment in developing countries, including LDCs.

Implementation means that a country has actually started to promote individual investments in developing countries, including LDCs, on the basis of the relevant legislation.

Instruments used under investment promotion regimes include investment guarantees, financial or fiscal support for outward investors. Besides these legal instruments, countries often also provide information and other advisory and investment facilitation services for their outward investors.

Investment guarantee is an insurance, offered by governments of the home country or other institutions, to investors to protect against certain political risks in host countries, such as the risk of discrimination, expropriation, transfer restrictions or breach of contract.

Number of countries

Data sources include the following:

● Survey responses on investment guarantee schemes for outward investment in LDCs specifically or developing countries in general;

● Survey responses on fiscal or financial support for outward investors in LDCs specially or developing countries in general;

● Internet research carried out by UNCTAD to complement survey responses. UNCTAD research complements survey responses in cases where information from official government websites confirms that an outward investment promotion scheme is in place, but the concerned country has not responded to the survey.

Data providers include national ministries, outward investment promotion agencies and other international organisations.

SDG indicator 17.5.1 calls for the measurement of both adoption and implementation of investment promotion regimes. The adoption of investment promotion regimes for LDCs is an important yet not sufficient means for strengthening the global partnership for the SGDs (Goal 17). Subsequent implementation of these regimes is necessary for making the tool effective. However, getting comprehensive and reliable data on the implementation stage (i.e. how many investments in LDCs have actually been promoted through the promotion regime?) will be difficult. These data are usually not publicly available. However, to some extent, data may exist in aggregate form (see below).

Furthermore, UNCTAD research indicated that many developed countries and some emerging economies have national investment promotion regimes in place that encourage investment abroad. Usually, however, these promotion regimes are available for outward investment in any country – not only for investment in LDCs or other developing economies. Some types of investment policy tools can be more country-specific, like bilateral investment treaties (BITs). The indicator reporting started with preliminary estimates covering BITs, relying on comprehensive and country specific UNCTAD data on BITs. Over the past decade, broad consensus formed on the need to reform the BIT regime. UNCTAD provides detailed policy guidance to support the reform action of countries and regions. Data on the actual number of countries with an outward FDI promotion scheme that can benefit developing countries, including LDCs, constitutes a more accurate measurement for this indicator.

The proposed computation method includes the following in the compilation of SDG indicator 17.5.1:

1. Target countries of outward investment promotion regimes

The indicator methodology covers both:

• Specific investment promotion regimes targeted for LDCs only;
• Investment promotion regimes for developing countries in general, including LDCs.

The measurement should include outward investment promotion regimes that do not exclude developing countries. Only this approach ensures getting a full picture of outward investment promotion with LDCs as beneficiaries, which is better aligned with Target 17.5. By contrast, limiting the research to specific promotion regimes for LDCs only would result in partial information, because the number of LDCs that receive support through investment promotion regimes for all developing countries is likely to be much higher than the number of LDCs that benefit from LDC-specific promotion regimes. Therefore, both types are included when identifying the countries that have adopted and implemented investment promotion regimes for developing countries, including least developed countries.

1. Types of outward investment promotion regimes

Based on consultations and feasibility studies on what types of investment promotion regimes to look at, the following methodology is suggested:

Countries use various means to promote foreign investment abroad (see above “Concepts”). Indicator 17.5.1 will focus on the legal investment instruments, since relevant information is – to various degrees - usually publicly available, and thus feasible to compile.

Information is less frequently available on informal and ad-hoc means of outward investment promotion, such as advisory services. The availability of reliable information on such measures would vary greatly across countries. Thus, including such information would hamper the international comparability of the indicator.

To be included in the number of countries that have adopted and implemented investment promotion regimes, the existence of at least one type of promotion instrument (e.g. an investment guarantee scheme or financial support for outward investment that can benefit developing countries, including LDCs) would be sufficient.

1. Adoption vs. implementation of outward investment promotion regimes

Consultations and feasibility studies were carried out on whether – in addition to the existence of an outward investment promotion regime, i.e., whether such tools were signed or otherwise adopted – it would also be feasible to examine as to what extent the regime was actually implemented, i.e., whether the regime is in force or even if an LDC actually benefitted from it, e.g., by receiving a foreign investment promoted by an investment guarantee. It was concluded to focus the research on the adoption of a promotion system as such Otherwise information on the actual stage of implementation in individual countries is usually not publicly available; scattered data about the situation in some countries could not provide a comprehensive and reliable picture of the overall situation. However, it may be possible to come up with some aggregate data at the regional or global level (see below).

1. Coverage of home countries of outward investment promotion regimes

There is also a question of which countries should be included in the measure as home countries of outward investment promotion regimes. The indicator will not only include measures put in place by developed countries but also by emerging economies, thus measuring South-South cooperation in this respect in addition.

2024-07-29

United Nations Conference on Trade and Development (UNCTAD)

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3