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Southern Agenda on Investment

IISD and its partners in key developing countries have drafted the first model agreement for investment - a tool that will firmly entrench economic policy in a sustainability framework. Crucial to this endeavour was a parallel effort that fed into the Model Agreement, and was launched simultaneously: a "Southern Agenda on Investment" (SAI).

The SAI is based on our belief that investment can play a key role in turning unsustainable practices and processes into sustainable ones in energy, industry and resource management. This project aimed to help level the playing field in regional and bilateral negotiations on investment by helping to identify issues of specific concern to a range of developing countries currently attracting different levels of foreign direct investment.

Consistent identification of issues across different levels of foreign direct investment and development will help to elaborate a sounder basis for negotiating investment agreements, and help lead to investment agreements that promote sustainable development. This next generation of agreements, IISD believes, must be based on balancing investor responsibilities and rights with the rights and responsibilities of capital importing and exporting countries.

The Southern Agenda on Investment project featured a two-pronged strategy: (1) to improve and broaden the understanding of existing agreements within developing countries; and (2) to determine objectives for future agreements. The methodology included research and extensive consultations with trade representatives from developing countries and with NGOs, policy institutes and government departments in developing countries.

The Partners

The partner organizations were:

• University of San Andrés, Argentina;
• Fundação Centro de Estudos do Comércio Exterior, Brazil;
• Thai Development Research Institute, Thailand; and the
• Trade Law Centre for Southern Africa.

The Consultations

A series of regional consultations were organized in Southern Africa, South East Asia and Southern America and through trade representatives in Geneva. Staged in May and June 2004, these had two goals: first, to better understand the existing experience and, second, to find new directions for investment negotiations from a developing country perspective. The following papers were prepared by IISD and the regional partners to provide context for the consultations.

• Towards A Southern Agenda on International Investment: Discussion Paper on the Role of International Investment Agreements (PDF - 525 kb)
  Until recently, the universe of international investment agreements (IIAs) and their role in relation to sustainable development had not received much attention. This paper addresses this relationship. It identifies some of the key developments in relation to IIAs, and articulates a number of issues specifically relating to sustainable development.

• Country Study Report - Argentina (PDF - 341 kb)
  This paper takes the reader through the development in the field of FDI since the 1990s. Among others, the paper looks at the legal and policy framework that governs FDI. Furthermore, it analyses the extension and implications of the international commitments undertaken by Argentina and impact on the collapse of the economy. And it discusses the linkages between FDI and economic development focusing on the impact of FDI on trade patterns, the balance of payments, environmental management, etc.

• Country Study Report - Brazil (PDF - 292 kb)
  The paper on Brazil analyses the policies geared at improving the general regime of FDI and points out how creating an appropriate "investment climate" is essential for raising the rate of investment in the economy. It looks at the role of TNCs in Brazil and the governments involvement in investment agreements. It also focuses on the current debate on the contribution of FDIs to development.

• Country Study Report - South Africa (PDF - 362 kb)
  South Africa's policy framework faces important challenges as it attempts to marry an environment conducive to investment with the need to achieve important development objectives. This paper discusses the current domestic legal framework for FDI and it investigates the negative impacts of FDI. It also focuses on bilateral and multilateral investment agreements and looks at to what extent FDI relates to sustainable development objectives in South Africa including the relationship with the black economic empowerment scheme.

• Country Study Report - Thailand (PDF - 392 kb)
  The investment policy regime in Thailand has been continually revised to reflect the broad development of the economy and its trade regime. This paper presents the legal framework in relation to FDI and it looks at the Thai involvement in regional and bilateral investment agreements and analyzes the impact of FDI on the development of the Thai economy. This analysis also takes into account social and environmental concerns.

• Country Study Report - Malaysia (PDF - 190 kb)
  The paper illustrates how Malaysian investment regime has been designed to serve the changing needs and directions of the country's industrial policy. It gives an overview of the economic development and how FDI has been applied the past decades. It also looks at Malaysia's labor policy, particularly it's affirmative action program targeted at the country's economically disadvantaged Malay (Bumiputras) majority, the country's political and macroeconomic stability, coherent industrial policy, relatively liberal trade regime, skilled human resource and superior infrastructure provide the necessary "enabling environment" for FDIs.

The Results

The process described above produced three results: a synthesis of the country reports, a Southern Agenda report, and a negotiators' handbook on investment:

• Towards A Southern Agenda on Investment: Summary of Country Studies and Some Observations (PDF - 236 kb)
  The five studies represent a remarkable initial approach to the complex issues of articulating a Southern Agenda on Investment that promotes sustainable development. They provide important insights and lead to a number of follow-up questions that are arguably even more difficult to answer. This note summarizes some of the results of the studies and articulates some follow-up questions with a view to promoting further debate about the research and policy requirements for international investment regimes that promote sustainable development.

• A Southern Agenda on Investment? Promoting Development with Balanced Rights and Obligations for Investors, Host States and Home States
  The final report of the project, this is a deliberate effort to approach international investment negotiations from a perspective that takes the priorities of developing countries as its starting point. Existing international investment agreements, by contrast, are based on a 50-year-old model that remains focussed on the interests of investors from developed countries. This paper identifies major issues of concern for developing countries that are vital from the perspective of sustainable development but that are not being addressed in the current negotiating processes, beginning with the very need for investment to support development goals.

• IISD Model International Agreement on Investment for Sustainable Development - Negotiators' Handbook
  This document takes an in-depth look at IISD's Model Agreement on Investment for Sustainable Development. It includes article-by-article commentary that draws out the nuances and intent of the text, differentiating it from the current standard approaches and related alternatives. It is an invaluable resource for developing country negotiators struggling against the traditional variety of investment agreements.

The first phase of the Southern Agenda on Investment project started in July 2003 with the generous support of the Swedish International Development Agency, the Swiss Agency for Development and Cooperation, the Government of Norway as well as the Henrich Böll Foundation, and finished in April 2005. IISD is currently seeking funding to follow up this work.

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