The PFI has been used by many countries in many contexts, and their experience should be helpful for other countries interested in conducting their own PFI review. Three of the earliest PFI assessments were undertaken by Vietnam, Egypt and the countries of South East Europe. The different ways in which the PFI was used in these cases are described below.
Vietnam and Egypt undertook snapshot or one-off reviews which were largely qualitative, while the regional study of South East Europe was quantitative in that it used an ordinal scoring of factors affecting the investment climate to develop an index. This index can be used to compare results to other countries using the same methodology or it can be used to assess performance over time with repeated use of the review.
Examples of the PFI in use
In the case of the Egypt, answers to PFI questions were grouped into three categories (positive, negative, and unknown) depending on the performance of the policy in relation to the chosen benchmark. With Vietnam, the answers were categorised under the headings of ‘policy action’, ‘stronger points’, ‘weaker points’, ‘no action taken’, and ‘recommendation’.
The type of information that comes from each of these applications, although qualitative, is quite different, and is reflective of the purpose for which the information is being collected. It should also be noted that users decide how, if at all, their answers are categorised.
Egypt PFI pilot study
Egypt was the first country to implement the PFI, volunteering to be the PFI’s ‘pilot case study’. Egypt was in a good position for an assessment of its investment climate given the recent progress made as part of its Investment Climate Reform Strategy. It was also helpful to the OECD too, providing feedback for the development of OECD guidelines on the use of the PFI.
Egypt implemented three of ten PFI chapters:
The results were presented at the at the 2006 Global Forum on International Investment. A second, more complete assessment was conducted jointly with the OECD in the context of Egypt’s adherence in 2007 to the OECD Declaration and Decisions on International Investment and Multinational Enterprises.
Vietnam PFI scoping study and OECD investment policy review
Vietnam implemented a scoping study of the PFI in 2007 to assess its own progress on investment climate reforms. By applying the PFI, Vietnam wanted to identify:
Vietnam’s self assessment was undertaken for five of the ten PFI policy chapters:
Investment policy, Investment promotion and facilitation, Trade policy, Competition policy and Public governance.
The scoping study, conducted by a consultant, has since been followed by a second phase assessment, undertaken jointly with the OECD in 2008. It covered the first 4 PFI chapters and 2 questions on financial sector development (Chapter 9). The resulting OECD Investment Policy Review of Vietnam produced a series of recommendations agreed to by the Vietnamese authorities. Reforms are to be reviewed in two years.
South East Europe Investment Reform Index
The Investment Reform Index (IRI) is the most comprehensive application of the PFI to date. It covers 8 of the 10 policy topics: Investment policy, Investment promotion and facilitation, Tax policy, Competition policy, Trade policy, Human resource development, Regulatory reform* and Anti-corruption and business integrity*.
The IRI has been constructed to measure the performance of South East European (SEE) countries in their investment climate reform, benchmarking against best practice. Measurement is based on a combination of inputs from OECD analysts, SEE governments, private sector experts and existing published materials and condenses over 400 indicators to calculate the overall score for each policy topic. In order to do this, each policy topic is divided into sub-dimensions which are then further divided into indicators informed by the annotations to the PFI questions and structured around five levels of policy reform.
Determining the South East European countries’ score within this framework follows a detailed process. This index has been used to feed into the broader programme of the Investment Compact, which is designed for transition SEE countries wanting to accede to the European Union.
Sectoral and specific approaches: examples from
The 2008 Investment Policy Reviews of Russia and China were undertaken as part of a multi-year cooperation programme. Their limited coverage in terms of PFI questions was compensated by a rigorous treatment of the selected questions.
The PFI application to China focused on the six questions in the area of Responsible Business Conduct (Chapter 7). The result is the first detailed and comprehensive analysis of the Chinese government’s efforts to encourage responsible business conduct by enterprises in China and by Chinese enterprises operating abroad.