External publications

Investment facilitation for sustainable development

Santos-Paulino, Amelia U. / Zoryana Olekseyuk / Ugo Panizza / Jennifer P. Poole / Claudia Trentini / Christian Volpe Martincus
External Publications (2024)

T20 Brasil, Task Force 4 (Trade and Investment for Sustainable and Inclusive Growth), Policy Brief

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Participation in international production networks and inward foreign investment generate important direct and indirect benefits for developing economies (Volpe Martincus and Sztajerowska 2019, UNCTAD 2020).  However, several barriers inhibit developing countries from fully participating in multinational production. Information frictions can prevent countries from appearing on investor radars (Sztajerowska and Volpe Martincus 2021; UNCTAD 2024a), and poorly designed and implemented regulations and burdensome procedures raise the costs for firms to establish in a location. These information asymmetries, red tape, and  associated fixed costs disproportionately affect smaller and financially constrained firms, frequently led by women. The most commonly identified barrier hindering streamlining and clarity, and thus FDI, is a lack of  cooperation and coordination among investment-competent agencies (Berger et al. 2023). Investment facilitation tools, designed to reduce obstacles for investors, are distinct from investment promotion of a location and may include enhanced information provision, reductions of unnecessary regulations and limits to procedural hurdles. As investment facilitation is government-wide, such instruments support domestic business development alongside foreign investment. As such, it can play a pivotal role not just in attracting investment but also in supporting the attainment of the Sustainable Development Goals. By creating a more  transparent and accessible business environment, they can help small firms to move from the informal to the formal sector, enhancing domestic revenue mobilization. By removing barriers to investment and providing equal opportunities for all, investment facilitation can play a role in promoting more inclusive economic growth, enhancing the access of women and rural populations to economic activity.