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  • 3. Investment-related policies
    • 3.1 Trade policy
      • 3.1.1 International trade agreements
        Access to global markets is essential for resource- and efficiency-seeking foreign investors, and the size of local/regional markets is equally important for market-seeking investors. Active participation in international trade agreements (in particular the WTO) and enhanced integration at the regional level should be considered an integral part of development strategy and a key factor in promoting investment.
      • Follow 3.1.2 Trade restriction and promotion
      • 3.1.3 Customs and border procedures
        Compliance costs and efficiency of border procedures should be periodically benchmarked against international best practice and should avoid as much as possible forming an obstacle to the attraction of export-oriented investment or investment that relies on imports of intermediate goods.
    • 3.2 Tax policy
      • 3.2.1 Corporate taxation (1)
        A periodic review, including international benchmarking, of corporate taxation (and fiscal incentives) for effectiveness, costs and benefits should be an integral part of investment policy. Reviews should consider costs linked to the structure of the tax regime, including (1) administrative and compliance costs for investors, (2) administrative and monitoring costs for the tax authorities, and (3) forgone revenue linked to tax evasion and/or tax engineering.
      • 3.2.2 Corporate taxation (2)
        Undue complexity of income tax law and regulations should be avoided and they should be accompanied by clear guidelines, as transparency, predictability and impartiality of the tax regime are essential for all investors, foreign and national alike.
      • 3.2.3 Corporate taxation (3)
        The tax system should tend to neutrality in the treatment of domestic and foreign investors.
      • 3.2.4 Fiscal incentives (1)
        In line with a country’s development strategy, incentives can be used for the encouragement of investment in specific industries or in order to achieve specific objectives (e.g. regional development, job creation, skills upgrading, technology dissemination). Fiscal incentives for investors should not by nature seek to compensate for an unattractive or inappropriate general tax regime.
      • 3.2.5 Fiscal incentives (2)
        The general corporate income tax regime should be the norm and not the exception and proliferation of tax incentives should be avoided as they quickly lead to distortions, generate unintended tax avoidance opportunities, become difficult to monitor, create administrative costs and may end up protecting special interests at the expense of the general public.
      • 3.2.6 Transfer pricing and international cooperation
        Well-established and clearly defined transfer pricing rules are essential to minimize tax engineering and tax evasion. Developing countries can build on international best practices. International cooperation between tax authorities is key to fight manipulative transfer pricing practices.
      • 3.2.7 Double taxation treaties (1)
        Double taxation treaties are an effective tool to promote inward and outward FDI. Developing countries should carefully negotiate such treaties to ensure that the principle of “taxation at the source” prevails.
      • 3.2.8 Double taxation treaties (2)
        A country's international tax treaty network should focus on major countries of origin for the types of investment prioritized in its investment policy.
    • 3.3 Intellectual property
      • 3.3.1
        Laws and regulations for the protection of intellectual property rights and mechanisms for their enforcement should meet the need of prospective investors (especially where investment policy aims to attract investment in IP-sensitive industries) and encourage innovation and investment by domestic and foreign firms, while providing for sanctions against the abuse by IPR holders of IP rights (e.g. the exercise of IP rights in a manner that prevents the emergence of legitimate competing designs or technologies) and allowing for the pursuit of the public good. As national investors are frequently less aware of their IP rights they should be sensitized on the issue.
      • 3.3.2
        Developing countries are encouraged to integrate the flexibilities in IP protection granted under international treaties, including the WTO's TRIPS agreement, into national legislation and consider the extent to which these flexibilities can create opportunities for investment attraction (e.g. in the production of pharmaceuticals).
    • 3.4 Competition policy
      • 3.4.1 Competition laws and regulations
        Competition laws and regulations, covering practices in restraint of competition, abuse of market power and economic concentration (mergers and acquisitions), together with effective monitoring and enforcement mechanisms, are essential to reap the benefits from investment and should provide fair rules and a level playing field for all investors, foreign and domestic.
      • 3.4.2 Coordination of investment and competition authorities (1)
        Investment policy makers should cooperate closely with competition authorities with a view to addressing any anti-competitive practices by incumbent enterprises that may inhibit investment. Particular attention should be paid to priority industries and investment types.
      • 3.4.3 Coordination of investment and competition authorities (2)
        Where investment policy pursues objectives for sectors that may be considered to fall under a public services obligation or for regulated sectors (e.g. public transport, utilities, telecommunications), competition authorities should be actively involved in the shaping of relevant policies and measures, coordinating closely with sectoral regulators.
      • 3.4.4 M&As and privatizations (1)
        Competition laws and decisions related to M&As, as well as the policy framework for privatizations, should support development strategy and investment policy objectives, and should ensure continued attractiveness of the relevant sector for further investment by avoiding market exclusivity and preventing abuse of dominant market power.
      • 3.4.5 M&As and privatizations (2)
        Close coordination between competition authorities in neighbouring countries should be pursued in case of cross-border M&As, particularly in small economies.
    • 3.5 Labour market regulation
      • 3.5.1 Balancing labour market flexibility and protection of employees
        Labour market regulations should support job creation objectives in investment policy, including through an appropriate degree of labour market flexibility. At the same time, employees should be protected from abusive labour practices.
      • 3.5.2 Core labour standards
        Countries need to guarantee internationally recognized core labour standards, in particular regarding child labour, the right for collective representation and other core protections as guaranteed by the ILO conventions the country is a party to. Effective mechanisms to promote core labour standards should be put in place and applied equally to foreign and domestic firms.
      • 3.5.3 Adjustment costs of investment policy
        Adjustment costs or friction caused by shifting productive capacity and employment to priority investment areas, industries or activities as per investment policy should be addressed both in labour market policies (e.g. re-training, social support) and in investment policy (e.g. encouraging investors to help ease transition costs).
      • 3.5.4 Hiring of international staff (1)
        Expatriate staff can at times be critical to the success of individual investment projects. Labour policy and/or immigration policy should avoid unduly restricting or delaying the employment of foreign personnel, including in skilled trades/artisan jobs, by investors in order not to hinder the build-up of productive capacity. At the same time, employment opportunities for nationals in jobs they can adequately fill should be promoted.
      • 3.5.5 Hiring of international staff (2)
        Transfer of skills from expatriate staff to nationals should be actively encouraged, including through technical and vocational training requirements at the company level whenever expatriates are employed. The use of foreign employees in skilled trades/artisan jobs may be time-bound in order to encourage foreign invested firms to establish local linkages.
    • 3.6 Access to land
      • 3.6.1 Titles (1)
        More than the nature of land titles (full ownership, long-term lease, land-use rights or other), predictability and security are paramount for investors. Governments should aim to ease access to land titles, adequately register and protect them, and guarantee stability. Developing and properly administering a national cadastre system can be an effective tool to encourage investment
      • 3.6.2 Titles (2)
        Full ownership of land or tradable land titles can help companies secure financing for investment, as land can be used as collateral. Transferable titles should be encouraged where specific country circumstances do not prevent this option.
      • 3.6.3 Agricultural land
        Foreign ownership or user titles over agricultural land is particularly sensitive in most countries, in particular those with large rural populations and where food security is an issue. Governments should pay particular care in putting in place and enforcing regulations to protect the long-term national interest and not compromise it for short-term gains by special interest groups. Adherence to the UNCTAD, FAO, IFAD, and World Bank Principles for Responsible Agricultural Investment should be encouraged.
      • 3.6.4 Industrial land and industrial parks
        The development of industrial, technology or services parks as public-private partnerships has worked well in a number of countries and can be an effective tool to facilitate access to fully-serviced land by (foreign) investors.
    • 3.7 Corporate responsibility and governance
      • 3.7.1 CSR standards
        Governments should encourage compliance with high standards of responsible investment and corporate behaviour, including through: (1) capacity building and technical assistance to local industry to improve their ability to access markets or work with investors that prefer or require certified products; (2) public procurement criteria; (3) incorporating existing standards into regulatory initiatives, and/or turning voluntary standards (soft law) into regulation (hard law).
      • 3.7.2 Corporate governance
        Countries should aim to adopt international standards of corporate governance for large formal businesses under their company law or commercial code, in particular: (1) protection of minority shareholders; (2) transparency and disclosure on a timely, reliable and relevant basis; (3) external auditing of accounts; and (4) adoption of high standards and codes of good practices on corruption, health, environment, and safety issues. The OECD Principles of Corporate Governance and UNCTAD Guidance on Good Practices in Corporate Governance Disclosure may serve as guidance.
      • 3.7.3 Reporting standards
        Corporate reporting standards should provide for disclosure by foreign-controlled firms on local ownership and control structures, finances and operations, and health, safety, social and environmental impacts, following international best practice (recommendations by the UNCTAD Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) may serve as guidance).
    • 3.8 Environmental policy
      • 3.8.1 Environmental impact of investment (1)
        Environmental impact assessments (EIA) should be part of investment policies; it is useful to classify projects based on a number of pre-defined criteria, including sector, nature, size and location to place more stringent or less stringent requirements on preliminary environmental impact assessments (or absence thereof).
      • 3.8.2 Environmental impact of investment (2)
        Environmental norms, including EIA requirements, should be transparent, non-discriminatory vis-à-vis foreign investors, predictable and stable; Governments should ensure that environmental licensing procedures are conducted without undue delay and in full technical objectivity.
      • 3.8.3 Environmental dumping
        Foreign investors should be encouraged to adhere to international standards of environmental protection and committed not to engage in environmental dumping; in specific cases (e.g. mining or oil extraction), Governments may wish to legally require international best practices (including the use of technologies) to be strictly adhered to.
    • 3.9 Infrastructure, concessioning and PPP policies
      • 3.9.1 Opening infrastructure sectors to investors (1)
        Given the potential contribution of private investment to building high-quality infrastructure, countries should consider the extent to which basic infrastructure sectors can be opened to domestic and foreign private investment, and under what conditions.
      • 3.9.2 Opening infrastructure sectors to investors (2)
        In sectors opened to private investment, careful efforts should go into identifying specific projects to be taken up by private investors. Shortlists of projects for concessioning are a useful tool, and Governments should initially focus on projects of moderate complexity, where commercial gains are easier to realize for investors, and where the socio-economic gains are clearly measurable.
      • 3.9.3 Concessioning rules and regulations (1)
        Following strategic decisions on which sectors to open to private investment, Governments should put in place a carefully crafted legal framework for concession contracts and public-private partnerships. Given the long-term nature of concession agreements in infrastructure, the legal framework should provide significant assurances to investors, including regarding contractual terms and their enforcement, and property rights.
      • 3.9.4 Concessioning rules and regulations (2)
        The legal framework for concession contracts needs to adequately protect the long-term national interest and consumers, ensuring adequate sharing of risks between the private and public partners.
      • 3.9.5 Competitive outcomes
        Wherever possible, concessioning to private investors should aim to introduce competition so as not to replace a public monopoly with a private one. Placing natural monopolies under private concession should be limited to cases where it increases efficiency and the delivery of services. Putting in place appropriate competition and sectoral regulations should be considered a pre-requisite for the successful concessioning of infrastructure services.
      • 3.9.6 Institutional framework for concessioning and PPPs
        Given the complexity of contractual terms involved in large infrastructure concessions, strong institutions need to be put in place first in order to achieve desirable outcomes; in addition to strengthening sectoral regulators, countries should consider the establishment of a dedicated PPP unit.