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Foreign Direct Investment and Sustainable Development in International Investment Governance

image of Foreign Direct Investment and Sustainable Development in International Investment Governance

Foreign direct investment (FDI) is a principal means of financing the 2030 Agenda for Sustainable Development and the corresponding 17 Sustainable Development Goals. FDI’s potential contributions to sustainable development in Asia-Pacific can only be realized if the right conditions and policies are in place and if both the quantity and quality of FDI to, from, and within the region increase. This requires not only identifying and prioritizing FDI projects in key sustainable development sectors - such as renewable energy, education, health, water and sanitation, etc. - but also developing and operationalizing FDI policies and legal and regulatory frameworks at national and international levels that maximize the sustainable development potential of FDI in local economies. This publication sets explores the latter point further by focusing on two emerging and important issues related to international investment governance: sustainable development-orientation in international investment agreements (IIA) and the coherence between IIAs and national investment laws in Asia-Pacific. This publication comprises of three chapters. The first chapter sets the scene analyses recent FDI trends, both in terms of flows of inward and outward investment as well as FDI policymaking and international investment governance; the second chapter provides an in depth analysis of the extent to which the bilateral investment treaties of Asia-Pacific least developed countries and landlocked developing countries are oriented towards sustainable development; and, the third and final chapter examines the extent of coherence between the IIA regimes and national frameworks for investment in Thailand and Viet Nam. The chapters in this publication offer promising signs that the momentum for and political will to reform the IIA regime to make it more sustainable development-oriented and coherent are picking up, and ESCAP stands ready to further support its member States in their efforts to achieve both.

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Strengthening coherence and synergies of international investment agreements with national legal investment frameworks for sustainable development: Case studies of Thailand and Viet Nam

As laid out in the introduction of this volume, FDI is a key source of capital, technology and access to markets for recipient countries, and it has therefore become an invaluable mechanism for boosting developing countries’ economic growth and development. With the mainstreaming of the sustainable development agenda globally recipient countries have started to prioritize increasing both the quantity and quality of FDI they attract. As was discussed in chapter 2, sustainable development-oriented IIAs can be an effective tool for helping countries achieve this; but much progress still needs to be made in terms of concluding and reforming the IIA regime in Asia-Pacific to make it more sustainable-development oriented. Aside from increasing the number and extent of sustainable development provisions in their IIAs, as suggested by the analysis in chapter 2, another avenue countries in the region could pursue to ensure that IIAs are broadly consistent with their individual sustainable development objectives and priorities would be to focus on improving FDI governance frameworks. To this end, this chapter suggests that it is of paramount importance that efforts in this vein especially focus on improving the coherence, consistency and interaction between domestic and international investment governance frameworks. This refers to both domestic investment laws and regulations as well as IIAs, including BITs and TIPs.

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