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On 11 May 2006, the OECD Council adopted and declassified the final report by the Investment Committee on the Policy Framework for Investment (PFI). It was then endorsed during the OECD Ministerial meeting on 23-24 May 2006. This reaffirmed the OECD's strong commitment to the implementation of the Millennium Declaration and the Monterrey Consensus and recognised the central role of private investment for growth, poverty eradication and sustainable development worldwide.
The PFI was developed as a non-prescriptive checklist of issues for consideration by any interested governments engaged in domestic reform, regional co-operation or international policy dialogue aimed at creating an environment that is attractive to domestic and foreign investors and that enhances the benefits of investment to society.
Investment has proven to be a powerful catalyst for innovation, sustainable growth and poverty reduction. Despite positive trends in the past decade, business investment and enterprise development in non-OECD regions continue to fall short of development needs. The Monterrey Consensus identified private capital, including foreign direct investment, as “vital complements to national and international development efforts” and emphasised the need “to create the necessary domestic and international conditions to facilitate direct investment flows”.
The OECD launched the Initiative on Investment for Development in 2003 in Johannesburg, South Africa. The Initiative included three closely inter-related projects: 1) the Policy Framework for Investment; 2) using ODA to mobilise private investment; and 3) using investment policy peer reviews as capacity building mechanisms. The Initiative on Investment for Development is inspired by the values that underpin the Monterrey Consensus: transparency, accountability and respect for human rights, including the right to development.
The OECD has a long history with peer learning and consensual approaches towards the development of “best practice” across a wide range of policy areas that are relevant from an investment perspective. As such, the OECD is well placed as a forum for countries to share their experiences, to develop common understanding, and to elaborate policy guidance aimed at enhancing the contribution of private investment to development, as called for in the Monterrey Consensus.
The PFI was developed by a task force comprised of representatives from some 60 economies (OECD members and non-members), business, labour, civil society and other international organisations, such as the World Bank and UNCTAD. The task force took advantage of the OECD Global Forum on International Investment and various regional events organised by the Investment Committee as opportunities to discuss inputs into the PFI in both global and regional contexts. Following the fourth plenary meeting of the Task Force which took place in December 2005, the draft text was made available for public comment via an online consultation in January 2006. Responses received were made available on the website and were taken into consideration by the Task Force at its meeting in March 2006.
With its broad horizontal approach, covering 10 different policy areas, the PFI is also serving as a reference point for investment promotion agencies, donors as they assist recipient country partners in improving the investment climate, and businesses, trade unions, and NGOs in their dialogue with governments. The PFI recognises that the needs of countries at different levels of development call for a flexible and non-prescriptive approach that provides constructive policy guidance across a range of areas in order to maximise the contribution of investment to development.
While the PFI is addressed to governments, it needs to be seen in the broader context of other converging international initiatives to improve the investment climate, including the OECD Guidelines for Multinational Enterprises.
Putting the PFI into action
The PFI was designed as a flexible instrument that governments can adapt to their specific circumstances, objectives and needs while at the same time providing a common platform for dialogue and peer learning. The flexibility is evident in the variety of ways governments are already using the PFI, such as regional investment initiatives, investment policy peer reviews, and by international organisations working with developing countries.
The PFI is now used to structure OECD Investment Policy Reviews, starting with Egypt’s examination for adherence to the OECD Declaration on International Investment and Multinational Enterprises which was completed in July 2007. The next Review based on the PFI will concern Peru, which has applied for adherence to the Declaration.
The focus of the Investment Compact for Southeast Europe (SEE) www.investmentcompact.org is implementation of reforms. The Investment Reform Index (IRI) for SEE is the first comprehensive application of the PFI, which SEE countries use to measure and communicate progress on investment climate policy reforms.
Under the MENA-OECD investment programme www.oecd.org/mena/investment, the participating countries will begin to develop and subsequently implement a comparative benchmark measuring the process of investment policy reform based on the PFI.
The OECD/NEPAD Africa Investment Initiative www.oecd.org/daf/investment/africa uses the PFI. Its next roundtable will explore options for introducing a PFI-like investment dimension in the APRM - Africa's own peer review mechanism.
APEC/Asia. APEC held a High-Level Public-Private Dialogue on the PFI in Melbourne in late April 2007. Following the detailed self-assessment carried out by Vietnam in 2006 using selected chapters of the PFI, this work is being followed-up with a more complete and detailed PFI-based assessment of Vietnam’s policy framework for investment, which will be presented at the next Global Forum on International Investment, to be held in March 2008 at the OECD. Other Asian APEC members are considering following suit.
Latin American countries have expressed strong interest in launching a regional capacity building initiative based on the PFI in 2007. Chile co-chaired the work on the development of the PFI. Costa Rica, and Mexico at sub-national level, intend to use the PFI to conduct self-assessments.
At the Global Forum on International Investment (GFII) www.oecd.org/daf/investment/gfii, the draft PFI Users’ Handbook will be reviewed and tested.
Documentation and links
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Policy Framework For Investment: A Review of Good Practices, OECD, 16 July 2006 [ English / français ] (companion volume to the Framework providing analytical background material on each of the ten chapters of the Framework)
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OECD Initiative on Investment for Development - Note on the outcome of the work, 15 May 2006 [ English / français ]
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- Enabling Development - OECD statement to the follow-up of the UN Millennium Declaration and Monterrey Consensus, May 2005 [ English / français ]
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OECD Initiative on Investment for Development: Progress Report, April 2005 [ English / français ]
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Partner organisations
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United Nations Conference on Trade and Development (UNCTAD) www.unctad.org
Conferences
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