WORLD TRADE
ORGANIZATIONWT/WGTI/W/101
24 April 2001
(01-2050)
Working Group on the Relationship
between Trade and InvestmentOriginal:  English
COMMUNICATION FROM UNCTAD
Reproduced hereunder is the statement made by the observer representative of UNCTAD at
the meeting of 7 and 8 March 2001.
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Recent work undertaken within
UNCTAD’s work programme on international investment agreements
1. Thank you very much for this opportunity to bring you and the Working Group up-to-date on
UNCTAD’s activities within the work programme on investment policies and international
investment agreements since your last session in November 2000.  My brief remarks will concentrate
on two items: first the fifth session of the Commission on Investment, Technology and Related
Financial Issues that was held on 12-16 February 2001; and second, the various activities
implemented under the purview of UNCTAD’s work programme on capacity-building in developing
countries on issues related to international investment agreements (IIAs).
2. First, the Commission.  The fifth session of the Commission was successful both in terms of
its substantive discussions and its outcomes. The session dealt with two sensitive and difficult issues:
mergers and acquisitions (M&As) and home country measures (HCMs).  The policy dialogues were
built on the outcomes of the respective expert meetings and the secretariat's issues notes.  The
negotiations led to agreed recommendations (which are available at the documents' counter outsidethis room).  These call, among others, for member countries to put in place appropriate, transparent
and predictable policy frameworks, notably to encourage the positive contribution of cross-border
M&As to development and minimize any negative effects of such transactions with a view to
advancing the mutual interests of host countries and transnational corporations.  On the issue of
HCMs, the Commission recommended, among others, that  best practices in the area of HCMs should
be emulated, where appropriate, and applied in a cooperative spirit.
3. The Commission also dealt with Investment Poli cy Reviews of Ecuador, Ethiopia, Mauritius
and Peru.  These attracted high level participation from the countries reviewed. All groups welcomed
the quality of the UNCTAD secretariat’s reports, and there is strong interest to take up the policy
reviews in the future in a format that encourages real dialogue.  All of the Governments of thecountries reviewed requested follow-up assistance on the recommendations.  The countries to be
reviewed at next year’s Commission meeting (in January 2002) include Botswana, Ghana and
Tanzania.WT/WGTI/W/101
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4. Finally, the Commission also endorsed the report of the Intergovernmental Group of Experts
on International Standards of Accounting and Reporting (ISAR). It also approved the provisional
agenda for the next session of the Commission.  Of particular interest is the item on technology
transfer: International policy issues: international arrangements for transfer of technology: best
practices for access to and measures to encourage transfer of technology with a view tocapacity-building in developing countries, especially in least developed countries.   An Expert Group
will meet on this item in June 2001.
5. The second area of my remarks concerns our work programme on IIAs.  As you may be
aware, UNCTAD has since Midrand carried out activities related to IIAs which were mostly financed
through extra-budgetary contributions.  In light of th e evaluation of that work, and taking into account
the endorsement of this work programme in th e Bangkok Plan of Action, UNCTAD had designed a
new trust fund on capacity-building in developing countries on issues in IIAs.  This trust fund becameoperational on 1 December 2000 with donations received from France, Japan, the Netherlands,
Norway, La Francophonie, Sweden, Switzerland and th e United Kingdom.  All of these contributions
are gratefully acknowledged.  This multi-donor trust fund is designed to support a work programme
for a period of five years that is geared around three main pillars of intensive training, ad-hoc
technical assistance and civil society engagement events. Like its predecessor trust fund, it envisionsregular informal meetings with the donor and beneficiary community, as well as an independent
evaluation after 3 years into the programme.
6. Since your last session, various activities have been implemented in this area of work: first,
the UNCTAD pink paper series on Issues in International Investment Agreements  has grown with the
publications of three further papers; second, we have implemented three rounds of bilateralinvestment treaty (BITs) negotiation facilitation workshops; third, we have embarked on our civil
society engagement events with a pilot seminar for non-governmental organizations (NGOs) in
Namibia; fourth, we have finalized the preparations for the joint WTO/UNCTAD regional symposium
on “Trade, investment and development” which will be held next week in Kuala Lumpur, Malaysia,
for South, East and South-East Asian countries; and fifth, we have finalized the planning stages withregard to the intensive training course for anglophone and francophone negotiators of IIAs.
7. The issues paper on Flexibility for Development deals with the basic challenge that
developing countries face when concluding and/or negotiating IIAs, namely how to achieve the goal
of creating the appropriate stable, predictable and transparent FDI policy framework that enables
firms to advance their corporate objectives, while, at the same time, retaining the margin of freedom
necessary to pursue their particular national development objectives. The paper outlines a concept that
can help bridge these two objectives by defining ways in which IIAs can be adapted to the particularconditions prevailing in developing countries on the one hand and to the realities of the economic
asymmetries between these countries and the developed countries on the other.
8. The paper on Transfer of Funds  examines the various existing provisions in IIAs that  concern
a host country’s obligation to permit the payment, conversion and repatriation of amounts relating to
an investment, i.e. measures that ensure that a foreign investor will be able to enjoy the financialbenefits of a successful investment.  It is noteworthy that all of the principal multilateral agreements
permit countries to impose restrictions on such transfers in circumstances where a member is
confronted with a balance-of-payments crisis, while most regional and bilateral agreements do not
allow for the imposition of such restrictions.  The paper discusses the various advantages and
disadvantages of restrictions, including their lack of effectiveness over the long term and the negativeimpact they have on a country’s future access to capital markets.
9. The paper on Environment  examines how IIAs can address commitments to protect the
environment and the promotion of transfer and use of environmentally sound technologies and
management practices to host countries. With respect to the transfer of environmentally soundWT/WGTI/W/101
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technologies and management practices, one important issue that arises is how to enrol transnational
corporations (TNCs) in the provision and use of such technologies and practices to host countries.
10. Since your last session, UNCTAD has impl emented three rounds of BITs negotiation
facilitation events.  The first, from 15-19 January 2001, was organized at the request of the Kyrgyz
Republic and involved Austria, Denmark, Latvia and Sweden. This round resulted in the signature of4 BITs.  The second round of BITs negotiations concentrated on francophone LDCs.  It was held in
Geneva from 24 January to 3 February 2001.  Involving 19 countries, including two developed
countries (Belgium and Switzerland), it resulted in 42 BITs signed.  It is envisioned to finalize these
BITs for signature during the Third United Nations Conference on the Least Developed Countries in
Brussels, in May 2001.  The third round was organized in India, from 20 to 28 February 2001.  It
involved 7 countries (the People’s Republic of China, Croatia, Ethiopia, India, the Islamic Republic of
Iran, Mongolia, and Yemen) and resulted in 6 BITs signed.
11. These rounds are meant to provide a platform for developing countries to negotiate BITs with
other interested countries, and among themselves.
12. Our civil-society engagement events got underway in February with a pilot seminar for
non-governmental organizations (NGOs) from the Southern African region.  Jointly organized with
the Dutch Foundation for Research on Multinationals (SOMO) and the Labour Resource andResearch Institute (LaRRI), the training seminar was held in Namibia from 13-15 February 2001.
Participants included 20 representatives from 21 NGOs, community-based organizations, and trade
unions.
13. I am pleased to also announce that preparations for the joint WTO/UNCTAD regional
symposium for 21 South, East and South-East Asian countries on  “Trade, Investment andDevelopment”  have been finalized.  The symposium will be held from 14-15 March in Kuala
Lumpur.  It is hosted by the Government of Malaysia and is supported financially by the Government
of Japan through the WTO Trust Fund and UNCTAD’s Trust Fund on IIAs.
14. Similarly, we have achieved progress in finalizing the preparations for our training events.
The first training event will take place in India in summer 2001 in cooperation with the IndianInstitute of Foreign Trade, with inputs from the Jawaharlal Nehru University in New Delhi, the
National University of Singapore and the Ministry of Foreign Trade and Economic Relations of the
People’s Republic of China. The other training event is scheduled for June 2001 and will take place in
Alexandria, Egypt, in cooperation with Senghor University and La Francophonie.  Both sets of
intensive training seminars will be based on the UNCTAD series on Issues in International
Investment Agreements , and both sets of training will also include a negotiation skills element that
was added to the programme.
15. Finally, I would like to bring to the attention of the Working Group our recently published
study on Tax Incentives and Foreign Direct .  The study shows that while the efficacy of incentives as
a determinant for attracting FDI is often questioned, countries have increasingly resorted to such
measures in recent years. In particular, they have been offering tax incentives to influence the location
decisions of investors. The UNCTAD study contains a survey of tax incentive regimes in over 45countries from all regions of the world.  Nearly all countries surveyed offer incentives that target
specific sectors. The study illustrates the trends as far as the types of fiscal incentives granted: tax
holidays or tax rate reductions; accelerated depreciation allowances; allowances for investment in
training, research and development or similar types of activities; export incentives etc. The analysis
also throws light on other issues related to the use of incentives, such as design considerations, theimportance of proper administration of incentives and home country measures that increase the
efficacy of tax incentives offered in host developing countriesWT/WGTI/W/101
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16. To conclude, I would like to emphasize that we welcome the opportunity to continue to share
our experiences with this Working Group and to continue to make our expertise available, if so
desired.
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