By Andrew Jay Rosenbaum
ISTANBUL
A national environment that provides good governance and rule of law attracts Foreign Direct Investment, experts at the World Association of Investment Promotion Agencies conference said.
The conference, which ran between Monday and Tuesday in Istanbul, hosted developmental experts and investment agency professionals from all over the world.
Speaking at the conference, Erdal Bahcivan, chairman of the Board of the Istanbul Chamber of Industry, said that stable politics and rule of law were critical to attracting Foreign Direct Investment.
"A stable environment with proper rule of law is essential, otherwise international investors will not risk their funds in a country," Bahcivan said.
In fact, now that countries, and particularly emerging markets, must compete for Foreign Direct Investment, the ability to offer an environment that investors consider safe was an essential characteristic, commented Karim Dahou, deputy head of the Investment Division at the Organization for Economic Co-operation and Development.
"In infrastructure projects, which make up one of the largest targets for Foreign Direct Investment, the role of Public-Private Partnership is becoming increasingly important. It enables governments to tap both private capital and private know-how in these large projects. But for Public-Private Partnerships to be successful, the proper legal climate must be achieved," Dahou explained.
As United Nations Industrial Development Organization Managing Director Celestin Monga pointed out, the achievement of this kind of environment was not easy for developing countries. "But emerging markets must try to achieve this. Today, new competitors for Foreign Direct Investment have emerged; countries like Bangladesh and Ethiopia are now receiving significant amounts of investment. Investor evaluation of emerging markets is becoming ever more demanding."
Monga insisted on the importance of the role of industrialization in making developing countries attractive to investment. "Almost no country gets this right! No country manages to achieve a successful allocation of industrial production, and yet it is only when this is successful that investment becomes attractive," he said. He cited well-regulated industrial parks as one of the most effective ways of achieving industrialization, but added that few countries managed them properly.
In order to help emerging markets achieve good governance, international organizations are developing non-binding templates to provide direction. One such template is an overall assessment of governance that is being worked out by World Association of Investment Promotion Agencies members in the framework of the G20. Mukhisa Kituyi, secretary-general of the United Nations Conference on Trade and Development, noted that this template would permit both national and international evaluation of governance.
"Our organization has also developed a roadmap and guide for sovereign debt workouts, which includes recommendations to improve the coherence, fairness and efficiency of current sovereign debt restructuring processes," Kituyi said. This process provides safeguards that are important to investors, and should be implemented by developing countries, he added.
"The WAIPA organization itself, which brings together such a large group of development experts, is a key resource for investment promotion agencies in their efforts to help their national governments achieve good governance," said the organization’s president, and Turkish Airlines board Chairman Ilker Ayci. "Bringing together this large group and sharing ideas with other experts offers a vast resource for development," Ayci added.
The World Association of Investment Promotion Agencies is registered as a nongovernmental organization in Geneva. According to WAIPA website, its membership is open to all entities, the primary function of which is “to promote any country, political sub-division of a country or other uncontested territory, as a destination for, or source of, investments.”
