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UNCTAD: Experts meet to discuss regional integration and foreign direct investment

Geneva:  The rise of the trade and investment nexus, especially in the context of regional value chains, brings into focus the effects of regional integration on foreign direct investment (FDI) and vice versa. On 28-30 January 2013, national, regional and international experts and policymakers will come together to exchange views on this topic, and on how the relationship between FDI and regional integration can be managed in order to foster growth and sustainable development.

This first session of the Multi-year Expert Meeting on Investment, Innovation and Entrepreneurship for Productive Capacity-Building and Sustainable Development will also examine a number of related themes, including:

*  Developments and trends in regional integration (including interregional efforts)

*  The influence of regional integration on transnational corporation (TNC) strategies, and on the governance of TNCs' operations through FDI, trade, and non-equity modes (NEMs), such as contract farming, licensing and services outsourcing.

*  Productive capacity-building through regional clusters and networks.

*  The outcomes of coherent industrial, regional, trade and investment policies.

*  Best practices for promoting sustainable investment and development through regional integration.

The purpose of the meeting is to identify concrete policy lessons, to consider options to foster and benefit from regional integration and FDI, and to establish future areas of work with a view to furthering sustainable development and inclusive growth.

15. Notwithstanding the limited impact of regional integration on FDI inflows to the continent thus far, there are reasons to be cautiously optimistic about future prospects. For instance, REIOs have made investment issues more prominent in their policies and pushed for greater harmonization of investment policies in recent years. The greater scale and scope of investment provisions in COMESA, ECOWAS and SADC is one manifestation of this trend.

16. There is also recognition that the multiple and overlapping memberships in regional blocs can hamper the potential gains from regional integration. Following on the aspiration expressed in the Abuja Treaty to create a pan-African bloc, the African Union decided in 2006 to suspend, until further notice, the recognition of new REIOs with the exception of eight (AMU, CEN-SAD, COMESA, EAC, ECCAS, ECOWAS, IGAD and SADC).

17. An interesting initiative in this context is the COMESA-EAC-SADC Tripartite which seeks to enhance cooperation and harmonization among the three REIOs. This will include the formation of a free trade area among the triumvirate, negotiations for which got under way in mid-2011. The “Draft Agreement Establishing the COMESA, EAC and SADC Tripartite Free Trade Area” currently under negotiation stipulates that members undertake to create a single investment area, develop policies and strategies which promote cross-border investment, reduce the cost of doing business in the region, and create a conducive environment for private sector development. Since the Tripartite seeks coherence among three of the main REIOs, it is likely that it will contribute to progress towards an African Economic Community.

18. Another cross-regional initiative is the Minimum Integration Programme, which is a mechanism for convergence between REIOs and focuses on a few priority areas including investment. The objective of the first phase is to establish a regional and continental platform to promote investment. Doing so will entail establishing regional investment protocols, harmonizing them, formulating a continental investment code and accelerating the establishment of the African Investment Bank.

19. Making the coverage of investment provisions extensive and comprehensive and fully implementing these provisions are paramount preconditions for increasing the impact of regional integration on FDI flows to the countries concerned. A lack of coordination and consistency remain general problems in regional integration in Africa and particularly so for investment.

28 January 2013
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