Trade and Investment Promotion

In the light of a recent surge in the amount of research and policy formulation in the field of trade finance, this paper sets out to discover and summarize the contemporary consensus on the subject with a particular emphasis on the role of public trade finance facilities within the wider ecosystems of export finance and international trade. The enquiry relies on a review of the most recent academic literature in the field, a limited survey of institutional, policy and other non-academic publications pertaining to trade finance, and a comparison of information available on several institutions that administer public trade finance facilities.
The author finds that there exists no clear consensus on the exact effects of trade finance on trade, the causes of demand for trade finance, or its interaction with other financial and economic variables. It thus remains unclear if, how much and what type of government intervention in the trade finance market is desirable from the perspective of sustained economic growth and trade. Nonetheless, there is evidence that the risk and credit markets for international trade show substantial market failure and that government sponsored trade finance fulfils various essential functions in the international economy, over and beyond market correction.

A mapping of the opportunities and challenges of development and commercially-oriented public support to private sector engagement

Developing countries increasingly promote inwards investment and global value-chain integration as strategies to create more and better jobs. At the ‘other end’ of the value chain, partner countries increasingly aim to work with businesses to achieve both commercial and development objectives.  Linked to this, the 2030 Agenda for Sustainable Development calls for greater policy coherence towards sustainable development, so that the pursuit of economic interests should not be delinked from sustainability and development objectives.

This paper maps out the key instruments used by donor country governments to engage the private sector, both for development and for commercial purposes. Categorising different types of support, including both financial and non-financial means of working with firms, it looks at the potential opportunities and challenges for using these for development, and the potential synergies between developmental and commercial approaches. By looking at the overlaps in these approaches and some specific donor-country examples, the paper aims to outline where further policy dialogue and research might be useful.

Key messages
A mapping of public policy instruments to promote private sector trade and investment outside the EU for both development and commercial purposes identifies some of the key opportunities, challenges and synergies for using these instruments in a coherent way to promote sustainable development outcomes.
Development and commercially-oriented public instruments to engage the private sector abroad take similar forms that can be roughly categorised as 1) matchmaking services, 2) financial support and 3) technical support, with an increasing use of loans, equity investments and guarantees – rather than grants or soft loans only.
The similarities between the objectives and means of instruments point to the potential opportunity for synergies and greater coherence between public instruments with commercially-oriented and development-related objectives, and activities that are more inclusive and to the benefit of the poor.
Dedicated efforts are needed for 1) a more coherent application of sustainability criteria to the instruments, 2) better evaluation and learning opportunities of existing instruments, and 4) increasing transparency through better access to data and achieved impact and results.

In recent years and in the aftermath of the world financial crisis, economic slowdown in Europe has encouraged European governments and the European Union (EU) to set up support programmes and instruments that can stimulate national economies and help create the jobs needed to tackle both (youth) unemployment and crumbling growth rates. By providing access to (trade) finance and mitigating risk, the ambition is to help enterprises to expand and grow internationally, as “foreign exposure by these companies can increase enterprise competitiveness, provide access to foreign markets and resources, create new opportunities for exports, and generate profits” (UNCTAD, 2015).

Key messages

Promoting trade and investment along sustainable principles is one of the means to achieve the goals of the 2030 Agenda for Sustainable Development. To this end, what are the potential synergies between development finance institutions (DFIs) and export promotion agencies (ECAs) in promoting sustainable and responsible investments?

DFIs and ECAs follow different institutional mandates and objectives to promote investments and exports. But they tend to engage with similar clients and in similar markets. Besides, the sustainability principles required by DFIs and those of ECAs do tend to converge. Potential for synergy and cooperation thus seems obvious.

Yet, DFI-ECA collaboration until now has been rather limited, due to various challenges that need to be overcome, relating to issues such as differing policies, approaches, operating procedures, credit and pricing parameters, tenor and currency preferences, and transaction eligibility criteria. There is a need for a better understanding of the
respective business practices and priorities of DFIs and ECAs.

More systematic efforts are therefore needed to enhance the cooperation and synergy between DFIs and ECAs. This must also be steered by policymakers, so as to foster a more conducive institutional and policy environment and provide the right incentives for each institution to cooperate, building on their respective comparative advantages, towards enhanced sustainability.

The„outbreak„of„the„crisis„in„Russia„has„severe„implica-
tions„ for„ the„ Kyrgyz„ Republic.„ The„ two„ countries„ have„
long-standing,„ deep,„ political„ and„ economic„ relations.„
Since„the„fall„of„the„Soviet„Union,„the„Kyrgyz„Republic„has„
never„been„connected„that„close„to„the„Russian„economy„
like„today.„In„May„2015,„the„Kyrgyz„Republic„will„join„the„
newly„created„Eurasian„Economic„Union„(EEU),„which„will„
further„intensify„relations„between„the„two„countries.

Twelve years after the inception of the North American Free Trade Agreement (NAFTA), the US policy on the protection of foreign investment is evolving. This article compares the provisions on investment in the recent US free trade agreements (FTAs) and the 2004 model bilateral investment treaty (BIT) with NAFTA’s. While most of the provisions are similar, some differences can be identified, both in substantive and procedural forms. We explain this evolution by a learning process of the US administration from the NAFTA experience. We argue that the new features of the FTAs and of the revised model BIT result from the US interest in reaching a better balance between the protection of investment and the protection of state sovereignty. This American concern stems from a reaction to the claims filed by foreign investors under NAFTA Chapter 11, at least some of which were perceived as ‘frivolous’ by the US government. However, the recent US FTAs and model BIT do not reveal a thorough policy reorientation but rather adjustments to the policy at the basis of NAFTA’s investment chapter.

attracting new projects, and those attracted by the central agencies have shortcomings from the point of view of handling the negative consequences of the crisis. Therefore, from the point of view of local authorities, a strategy aimed at increasing the embeddedness of FDI already present and fostering their upgrades may be fruitful.

Studies on the impact of international investment agreements (IIA), including bilateral invest- ment treaties (BITs), on foreign direct investment (FDI) inflows have been inconclusive. This paper contributes to the debate about the effectiveness of IIAs using an original database that differentiates between investment agreements according to the quality of investor protection, and which covers a wide variety of trade and investment agreements signed and ratified in the Americas. We find evidence that in the least-likely case of South-South FDI flows, high quality international investment treaties have a demonstrable effect on foreign direct invest- ment inflows. Moreover, international investment agreements appear to be most effective in a context of deeper economic integration. That is, they work better when they provide higher quality protection to investors and when they are combined with other preferential economic integration agreements, such as trade agreements.

In the EWEC context the regional growth area model for generating trade and investment has relevance in terms of differences in skilled and unskilled labor endowments, production technologies, and natural resource endowments. Important differences occur among the EWEC member countries in production technologies and both the size and skill-levels of the labor force that cause relative labor productivity to differ across agricultural and industrial activities. The Thai sub-region of the EWEC is relatively abundant in skilled labor, while those of Savannakhet in Lao PDR and the central region of Viet Nam have a scarcity of skilled labor. The lack of skilled labor force in wood processing has prevented the growth of those types of industries in Lao PDR, while Thailand, with its highly skilled labor force in wood processing and caning, has been able to develop its wood-based manufacturing industries. In contrast, the Thai EWEC sub-region is deficient in unskilled labor and that which exists is expensive, while unskilled labor in Savannakhet and central Viet Nam is relatively abundant and inexpensive. Notwithstanding the potential for the growth of subregional trade resulting from differences in factor endowments, it is important to recognize that the EWEC is composed of fairly heterogeneous districts with subsistence-oriented patterns of production in many areas, limited access to financial capital and, with the exception of northeast Thailand, negligible foreign direct investment.  The overall strategy for trade and investment in the corridor is based on a spatial model of production structures and trade. While EWEC trade will undoubtedly be motivated by the inherent differences of the geographical areas that make up the Corridor, it is equally clear that trade will be driven by the desire of businesses to exploit scale and variety gains from specialization. The influence that economic geography has on the structure of production and trade reflects the natural division of economic activities along the Corridor into two distinct areas encompassing, on the one hand, the western sub-region of the Corriodor from Mawlamyine to Phitsanulok and, on the other, the eastern sub-region from Khon Kaen to Da Nang.

In recent years and in the aftermath of the world financial crisis, economic slowdown in Europe has encouraged European governments and the European Union (EU) to set up support programmes and instruments that can stimulate national economies and help create the jobs needed to tackle both (youth) unemployment and crumbling growth rates. By providing access to (trade) finance and mitigating risk, the ambition is to help enterprises to expand and grow internationally, as “foreign exposure by these companies can increase enterprise competitiveness, provide access to foreign markets and resources, create new opportunities for exports, and generate profits” (UNCTAD, 2015). Key messages Promoting trade and investment along sustainable principles is one of the means to achieve the goals of the 2030 Agenda for Sustainable Development. To this end, what are the potential synergies between development finance institutions (DFIs) and export promotion agencies (ECAs) in promoting sustainable an...

The importance of foreign investment in maximising development in the oil and gas industry prompts resource-rich nation states to create an environment that encourages and promotes investment from companies with the requisite capital and expertise. There is a marked difference between countries, which have developed local infrastructure, industrial expertise and comprehensive, stable investment regimes and countries, which have not. A secure legal framework mitigates or reduces the occurrence of risks, which in turn promotes further investment. Furthermore, if the factor that is considered a risk materialises, the framework, serves to manage it so that the investment is protected and any resulting loss is diminished or compensated. Investment regimes of individual states are unique amalgams of national legislation, contractual provisions and international treaties. This dissertation attempts to comprehensively detail and assess the efficacy of individual elements of this framework through illustrative analysis of distinct regimes employed in Venezuela, Nigeria and the United Kingdom.

The paper analyzes the challenges that investment promotion policies face in the Visegrad 4 (V4) countries in the “post-FDI” age. It categorises these challenges into three groups (the changing competitive advantages of the V4; the questionable long- term development impacts of FDI; and the changing nature of multinational production), and argues that investment promotion and other policies in the region have thus far only partially responded to these. The paper recommends a number of policy options for V4 governments which canto ensure that these countries not only remain favourable locations for international business, but also benefit from the presence of foreign companies. A number of these measures go beyond traditional investment promotion policies, and thus require a holistic approach from governments.

Both China and India are two neighboring nations sharing long borders. China is a North East Asian country, and India is a South Asian country bordering with Bangladesh, Pakistan, Nepal, Bhutan and Myanmar. China shares borders with South Asia, South East Asia, North East Asia, Central Asia, West Asia and Russian Federation. Geopolitically and geo-strategically it is located in a center point. According to its size of population and by GDP purchasing power parity (PPP), it has been turned into as number one country in the World. China"s economy is rapidly growing, and it will emerge as a global super power within very short time. However, India is a large country in the context of both geographical size and population. It is the second largest country in world taking into account of its size of population. It is a rising economy, and it has been turned into third largest economy by GDP purchasing power parity (PPP). In this study, some important geopolitical issues of Sino-Indian relations have been discussed in the context of BRI. Friendly relations between China and India are very crucial to ensure peace, security, stability, connectivity and, of course, economic development in the entire region. The main objective of this study is to provide some policy recommendations to improve the relations between China and India. The study is based on secondary data with some field level data which were collected through focus group discussions and observation.

Summary
The present document includes some thoughts in relation to the challenges of international financial architecture and financial regulation, with particular reference to the sovereign debt restructuring processes; macroeconomic cooperation; aspects of trade and investment –among them, the bilateral investment treaties-; the development for emerging economies; and the challenges for developing countries in the current discussion of base erosion and profit shifting.
Resumen
El presente documento incluye algunas reflexiones respecto de los desafíos de la arquitectura financiera internacional y la regulación financiera, con particular referencia a las reestructuraciones de deuda soberana; la cooperación macroeconómica; las cuestiones del comercio y la inversión –entre ellas, los tratados bilaterales de inversión-; el desarrollo para las economías emergentes; y los desafíos para los países en desarrollo de la actual discusión sobre la erosión de la base imponible y el desvío de ganancias.

attracting new projects, and those attracted by the central agencies have shortcomings from the point of view of handling the negative consequences of the crisis. Therefore, from the point of view of local authorities, a strategy aimed at increasing the embeddedness of FDI already present and fostering their upgrades may be fruitful.

The study makes an in-depth analysis of the role of the investment promotion agencies (IPAs) in the increasingly competitive investment market, in recent years. The ability to effectively handle investor inquiries is among the most important of the various activities the IPA performs that can make a difference to investors. However, there is considerable room for improvement in the performance of all the surveyed IPAs. IPAs in the developing countries need to additionally focus on immediately correcting the critical weaknesses that this study found were common to them as a group. Overall, most of the IPAs were not able to achieve outstanding performance in categories that in practice require a small level of effort and organization to boost the quality of the overall service.

Gulf Cooperation Council (GCC) countries have been important economic and trading partners of Japan in the energy sector for many years. Changes in Japan's energy policy, instability in the Middle East and North Africa (MENA) region, and the diversification of the economies of the GCC countries have promoted the transformation of economic relations through the trade of natural resources.

This presentation (1) summarizes the investment promotion policies of Japan and GCC countries and (2) analyzes the changes in economic relations with reference to trade statistics, foreign direct investment statistics, and the trends of Japanese and GCC overseas affiliated companies.

Investment promotion policy is essentially divided into two dimensions: national investment policy and international investment policy. For national investment policy, enterprise development is an important approach for investment promotion and sustainable development in a given country, and the number of GCC companies has increased over the last 10 years. For investment regulation and promotion, the establishment of investment promotion agencies (IPA) can be effective in promoting inward FDI. Among GCC countries, Oman has been a pioneer, establishing their IPA in 1996. In terms of investment-related policies, GCC governments have been working to structure their trade policies, tax policies, competition policies, and labor market regulations. An effective government can also implement appropriate policies for investment, at which the government of the UAE has been more effective than other MENA countries.

With respect to the trends of Japanese and GCC overseas affiliated companies, MENA and GCC countries are not the main markets for Japanese companies to enter, though UAE has been one of the most attractive markets for overseas operations of Japanese companies, at least compared with other GCC countries.



In conclusion, firstly, the ranking of interdependence in non-oil trade relations is decreasing from 1980s to 2010s because of the diversification of GCC trading partners and the development of local GCC industry. Secondly, and in contrast, Japan-GCC FDI has expanded since the 2000s. The interdependency of FDI and business has been gradually increasing in Japan and GCC countries since the 2000s. To improve Japan-GCC investment promotion, the governments need to assist the development of GCC companies and expand national and international investment policies.

Regarding international policies, although the development of Japan-GCC international investment policies have been progressing, their achievements still need improvement, particularly when compared with other developing countries. The current bilateral international investment policies between Japan and GCC countries (specifically Kuwait, Saudi Arabia, and Oman) started to be implemented in 2014.

GCC countries have been important trading partners of Japan for many years. Trade of natural resources of GCC countries and machinery and textile products of Japan had promoted industrial development in these countries. The trade volume between Japan and GCC countries increased from 1980 to 2010, but Japan-GCC trade relations have been changing since the 2000s. GCC countries depended on trade with Japan and other developed countries in the 1980s, but have diversified their trading partners since the 2000s, with their inter-contribution to trade much less significant in the 2000s than in the 1980s. However, in contrast to trade relations, Japan-GCC FDI relations have expanded in recent years.