11.2 Interviews M= Monique I = Interviewee 11.2.1 Interview 1
Interview with IISD (The International Institute for Sustainable Development) 1st of March, 2021. Time: 37 minutes
I: Hi Monique, can you hear me?
M: Hi ----, I am Monique. Very glad that you could join today and that you take the time for this interview. I have send you some information regarding the interview, the research question and the topic. So the topic in investment facilitation for development through sustainable foreign direct investment. I have therefore developed the research question of how can the WTO facilitate in attracting and maintain sustainable foreign direct investment for development in emerging markets. I also Just want to make sure that I can record the interview
I: As long as you do not leak it to the WTO
M: No I won’t. It’s just for my thesis and mainly for my own use
I: No its fine I’m just joking. Me and the WTO are not always on the same page.
M: haha, but no, anyways I won’t.
I: No worries. I’m just trying to find what you send me. Could you send it again, I you have my email?
Or no, I know where it is
M: Actually, If it is ok with you, I would like you to present yourself and also, what is your profession and why are you interesting for sustainable FDI so to speak?
I: Actually I don’t have what you send me. But anyway I am XX and I am the ….director … international institute for sustainable development in Europe, so that is the subsidiary for IISD and I also lead the IISD economic law and policy program. And I have a long history on working on sustainability for FDI because IISD believe that investment is needed to ensure transition to more sustainable practices. As an example, low carbon economy and if you want that transition to happen, you need investments. So we do believe that investment is a sustainable development issue and needed to achieve sustainable development. But we also believe that not every investment is sustainable and not every investment contributes to sustainable development automatically but that it needs to be designed and framed in a way that ensures that that will happen.
M: Ok, so there is obviously then a clear distinction between what is Foreign direct investment and how do we actually make it sustainable?
I: Normal or even negative, right? It can be a foreign direct investment that doesn’t really bring benefits but could actually lead to negative effects. For example if you have a mining investment that is not properly regulated and that pollutes or actually just exports the raw materials without adding value to the country and, you know, developing jobs. That could actually have a negative effect as well. So there is the normal investment that can create proper jobs and then it’s could but sometimes its negative and sometimes, yea, it can be very positive.
M: Ok, yea, Because that is also one of the aspects that I would want to go into. And I just forwarded the info to you, So I think you should have them by now. One of the first things within attracting investors, there I would like to know, what are the relevant stakeholders? Within the process that have influence on FDI and in particular sustainable FDI?
I: Well to ensure that FDI is sustainable, obviously the government plays an important role on having the proper regulations in place. To have policies in place, plans and having an environment that attracts responsible investors and not those that exploit and then leave. They are an important stakeholder. Also the companies that come in and that invest. Eh whether they will be responsible, will they play by the rules, will they go beyond the rules that they might have at home and play good
salary. The home state can be a player and they can support investors going out and also regulate them and ensure that they have due diligence in place to ensure that the investments are conducted in a sustainable way. And then you have civil society also. They can see whether the investment is actually beneficial and ensure compliance with labor laws and environmental laws etc. and you know the local companies too. Not only the foreign companies. How can they be part of the eco system of the investment and develop more local and a bit more engrained in the country . And of course you have the financiers, those that provide the finance for the investment and depending of their rules, they might finance anything or they might not. They might be more, you know, they might decide not to fund fossil fuels etc.
M: Ok, great so of course you have the home country and the host country. You have the companies, the governments and so on. And then I am quite interested in such as intergovernmental organizations such as WTO. What is their role in attracting or facilitating for investors for instance?
How can they influence the process in between ?
I: Well up to now, the WTO has not worked specifically on investments. They have on services and goods but they have mostly been developing disciplines and rules. How to do things and how to regulate things and also sometimes to de-regulate. To have rules that ensure that the countries don’t regulate too much. That is something that they can help lock-in market access rights and things like that . so that is what WTO traditionally does. But on investment, except for services in some limited ways. WTO has traditionally dealt with transport issues, even the facilitation agreement. It was more about, what happens at the border. And here we will be looking at –what happens within the country It is very much about disciplines and rules whereas some of the other organizations, they do more work within the countries and facilitate the governments. So UNCTAD has programs, the world bank has programs. The OECD has programs The ITC. They all have kind of capacity building programs. They work with countries to set up electronic means and electronic investment systems and things like that. So the WTO is basically right now a venue to negotiate norms basically.
M: yea, cause I know from my internship at WTO that there is a joint statement initiative for instance of investment facilitation for development in which I took part quite a lot, due to the Danish interest as well.
I: Oh yea
M: Here they talk about different way and how can we really attract investors. But it does not really seem like there is anything specific in place. So could you say that WTO is mostly creating the rules and the harder rules and regulations and the framework. Could you then give some examples of who the other organizations – you mentioned UNCTAD as an example. What is the difference between their role and the role of WTO ?
I: yes. SO ITC or UNCTAD, they will work with the government and detect how do you put this in place where you collect all the information for investors to go to when they want to invest. They will maybe set up electronic systems to do this. They will do workshops and things like that. So they have done things like developing guidelines that can help them. But the WTO does not have the mandate right now to negotiate, those are on the countries. So they are negotiating rules. And those rules, you know, if you look at other investment agreements or free trade agreements the rules that are in the draft right now, they are more provisions that has previously been labeled something else. So free trade agreements until recently, you never see investment facilitation in WTO. You see issues such as domestic regulation or regulatory good practice or you know, titles like that. Until recently, you never had free trade agreements that said investment facilitation. It is very recent that they even use that terminology. But the rules that are now in the draft in WTO or within that group in the joint statement initiative. They are… you.. they kind of collected some of the ideas within the trade agreements and the Brazilian, you know the Brazilian investment agreements. And they called it investment facilitation. But those provisions are already like in some scattered ways. The idea has been there a little bit, scattered out, but they have not been collected or called free trade agreements.
M: Do you think that they is a potential to actually collect it and make it more simple for instance?
As you said, they can implement electronic means to make it easier. Do you think there is a potential to collect information to make it easier for investors to gain the information on where to invest and how to invest and the political regime, the laws and rules and regulations of course. So to the county that they want to invest in?
I: I think that that is what they are trying to make happen in the capacity building that is happening.
What is here is about the governments promising to put certain things in place in terms of transparency and in terms of, you know making processes faster. To get a mining permit for example. So what is different here is depending on how it is phrased, the governments promise.
And they can be sued if they don’t do it. That is what is new. So previously. Well.. all governments want investments.
M: Yes, that makes sense
I: yes, that is for sure. And. But. They sometimes don’t want certain types of investments or they have regulations in place. It is not always easy cause you have social regulations, environmental regulations. so if you want a permit, it is not always done so fast. So if you want a permit it might take a while. Foreign investors would like to have a certainty that everything will be easier you see.
And so, the difference is that if you put it into international law, you know, when you don’t do something, it is not like you are violating international law. That will mainly be what is new and that will be effecting developing countries. Cause they will have to put more new processes in place to comply with the new laws that are now on an international level. That is what is new. Countries have been wanting to make investment flow easier but I think that one of the things that were.. you know.. European countries are interested in is. They want to have some leverage over the developing countries to say. Well you need to speed up. Our investors are coming and what you are doing is not as fast as it should be and what you are doing now is arbitrary and btw. You did not consult our investor when you wanted to adopt this environmental law. Why not. And that is what will happen with these rules.
M: So you are increasing the level of compliance or? So the governments are obligated ?
I: yes, definitely. It is compliance but one of the issues are also, what is arbitrary and what is not arbitrary. It is not always very clear. But all I can say is that working with so many developed countries that I know developing countries want investment. So they do try to make it easy but sometimes there are issues that happen. Let’s say, I want this mining operation and the government says, ok there won’t be a problem, you will get the permit. Don’t worry and then. You know, the people that will get affected by this process, they start demonstrating. They block roads, and you know there is an upward. And then the government says, I can’t do this, politically I want to do it but I cant. So of you have international rules in place then all of a sudden it will be on the international bodies saying, that was arbitrary cause you said that you were going to do it and that it will happen. So if you do not have international rules, you cannot come and say that what you did was wrong. But then there are other.. you know.. it I not always black and white, it is complicated.
But for both side it can be complex when you have international rules. You say, this is arbitrary, this is not. This is compliance, this is not compliance. It is not always that clear.
M: So exactly as you say, it is not always black and white. But are there any kind of measurements that you could evaluate on and say.. this is sustainable, this is not sustainable and what kind of measurements could that be.
I: yes, but that is different . say ok. What these rules do is that they do not distinguish, which is the problem. So I don’t know if you have seen the clear text but the rules that are being made now are very general.
M: No I know, they are very general
I: yes, so it is all just investment, right. And there is a lack cause it does not address that issue.. yet at least.. at all.
M: Yes, I agree, so that is why I am asking you if you could maybe think of any measurements that could be interesting, namely in order to distinguish. As the framework, as you said is now very general. But in order to detect when it is sustainable and maybe also to ensure that it is sustainable.
Are there any different factors or measurements in that sense that you can think of?
I: Absolutely. So first of all, you can look at areas that are particularly in the areas of sustainable development. So something that is environmental or let’s say something that is related to infrastructure in rural areas or roads or other type of infrastructure that are in particular valuable for countries and that are developed in a sustainable way. So what you may want to look at, where you have these distinctions is at the EU, where you have the taxonomy and it is a green finance taxonomy. With the taxonomy. The EU says that if you fulfill these conditions that means that it is sustainable finance but if you don’t, it is not sustainable finance
M: Ok interesting
I: That is just an example of one approach and here you could go further as that one is just on climate change and you know low carbon and such. But you know, it can also be other things like type of infrastructure or investments that create a large number of jobs r you know, designed on different elements to say. These ones will be treated more favorable than others. Or this agreements apply to these types of investments and then you have a list of the kinds of investments that are prioritized under a certain type of agreement and the idea is like on environmental goods and services in a way. Where you distinguish that some goods are environmental and some aren’t. and you could do this on investments where you want to support it and the states can say for these investments, the home states will, you know.. provide facilitated finance for example. You could have you know, incentives that are integrated.
M. yea ok yea
I: those that are integrated in the agreements where the home states have agreements with respect to certain types of investment. But unfortunately this has not been implemented in a certain draft.
M: No, that I noticed as well. And maybe there is a bit of gap as well. Or something that is missing as well. But in this relation, i was thinking about something in particular. I have participated a webinar, where you participated on sustainable FDI and I noticed… as you said in the beginning of this interview that maybe there are also negative investments
I: Oui, oui
M: and yea.. disputes that can happen in the process. So what I wanted to ask you is based on what I remember you suggested that there could maybe be alternative ways to avoid these disputes. I want to ask what these disputes could potentially be and also what alternative ways could be to avoid disputes ?
I: Oh sorry, you froze for a second. Is it how you can avoid disputes under this agreement?
M: Oh ok. Yes
I: Well, I mean the countries still have to decide whether they want to subject everything and under this subject and dispute or not. The rules are about making investment easier, to set up a single window. But the question is whether it should be a hard obligation or how much the governments should have to say because ultimately they will benefit, but really it is a sovereignty issue. So far the agreements have not been binding to the extent that you can be sued. Here you can go to dispute settlement. But it is not clear if everything will be subject to dispute settlement. What has been talked about under this meeting is that any dispute settlement will be state to state, so not investors involved. It would not be a private party involved. Most countries are more in systems under investment treaties where private parties can make a claim. This has led to unacceptable issues. The governments are worried that if they make a joint statement or set up a specific focal point to speed up certain procedure process. They may also promise that they will not have any arbitrary set ups.
It sounds good in theory but what It means in practice is very unclear. Governments are afraid not
to live up to these promises and will get sued. The problem is that the framework and agreements make it possible to sue under the WTO.
M: For the same thing?
I: In addition. This is what the government are afraid of. It is more problematic if a private investor sue a state. The governments or state will not try to sue each other. So this is what they are afraid of.
M: So it is correctly understood that they can sue the state based on something that is negotiated within WTO but after that WTO does not have anything to do with it any longer.
I: If there is and agreements, the states can sue each other under that system. It is something different if they have agreements where private companies can sue the governments. They governments are afraid of this.
M: Do you think that some countries are more interested in having frameworks that are more binding than other? Ex: Developing / developed countries?
I: Yes. Developing countries would prefer that it is more aspirational and non-binding. EU and Japan or South Korea would want something binding.
M: There are maybe some underlying factor but what are some of your explanations for why that might be?
I: It is about market access. The rules, they say is not about market access but really that is the reason. Investors from EU want to make sure that they can easily invest and that they can control as well. New environmental labor laws will affect an investment, so it is different from other WTO laws. It is different from normal trade law that happens more often at the border and on what is going in and out. Here it is more about what happens and EU want to control what is going on.