WORLD TRADE
ORGANIZATIONWT/WGTI/W/46
29 July 1998
(98-2989)
Working Group on the Relationship
between Trade and InvestmentOriginal:  English/
French/Spanish
COMMUNICATION FROM UNCTAD
The Working Group agreed at its meeting of 16-17 June 1998 that the following document
submitted to the Working Group by UNCTAD would be circulated as a Working Group document.  It
is a report on the UNCTAD Expert Meeting on Existing Regional and Multilateral InvestmentAgreements and their Development Dimensions held from 1-3 April 1998.
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TRADE AND DEVELOPMENT BOARD
Commission on Investment, Technology
   and Related Financial Issues
REPORT OF THE EXPERT MEETING ON EXISTING REGIONAL
AND MULTILATERAL INVESTMENT AGREEMENTS AND
THEIR DEVELOPMENT DIMENSIONS
Held at the Palais des Nations, Geneva,
from 1 to 3 April 1998
CONTENTS
I. Agreed conclusions
II. Chairperson's summaryIII. Organizational matters
Annex
AttendanceWT/WGTI/W/46
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I.  AGREED CONCLUSIONS1
1. The Expert Meeting reviewed regional and multilateral investment agreements in pursuanceof the mandate given in paragraph 89 (b) of "A Partnership for Growth and Development" to identifyand analyse implications for development of issues relevant to a possible multilateral framework on
investment.  The meeting focused on the objectives of regional and multilateral instruments and the
question of definition of investment in existing in vestment agreements, paying particular attention to
their development dimension.  It had a broad discussion of these subjects.
2. As regards the question of definition, the Expert Meeting discussed, in particular, the
advantages and disadvantages for development of broad and narrow definitions of "investment".  Itconcluded that these  provisions raise questions that are both difficult and complex, and, at the same
time, very important because they interact with and define the scope of all other provisions.  The
Expert Meeting recognized the importance of developing a knowledge base concerning countries’
experience with different types of definitions and recommended that the secretariat should prepare an
analysis of such provisions in international investment agreements.
3. The Expert Meeting observed that development is an important objective of international
investment agreements.  How this can be achieved remains a critical issue that needs to be examined
further.  The experts felt that further work could be undertaken to elucidate development dimensions
that need to be taken into consideration when formulating international investment agreements.
4. The Expert Meeting also felt that, in order to help clarify the complex issues related to
international investment agreements, all appropriate stakeholders may be heard, so as to shed further
light on the interrelationships between internationa l investment agreements and economic growth and
development.
                                                     
1 As adopted by the Expert Meeting at its closing plenary meeting on 3 April 1998.WT/WGTI/W/46
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(UNCTAD document TD/B/COM.2/11, TD/B/COM.2/EM.3/3)
II.  CHAIRPERSON'S SUMMARY
1. The discussions of the Expert Meeting on agenda item 3 were structured according to the
following two themes:
(a) Objectives of regional and multilateral investment agreements, with particular
attention to the development dimension;  and
(b) Definition of investment in regional and multilateral investment agreements.
A.   Objectives of regional and multilateral investment agreements,
with particular attention to the development dimension
2. In his opening address, the Secretary-Genera l of UNCTAD noted that the number of regional
and multilateral investment agreements had increased significantly in recent years, and stressed the
importance of keeping the development dimension in mind when dealing with such agreements.  It
followed that, in order to ensure tangible benefi ts, international investment agreements must meet
what could be called criteria for "development-friendliness".  Those criteria should determine, firstly,
how investment frameworks could promote the equita ble integration of developing countries into the
international economic system by facilitating increased foreign direct investment (FDI) flows to awide range of developing countries, and, secondly , how investment frameworks could help countries
to maximize the positive effects of FDI and minimize any negative effects.  Learning from the actual
experiences of countries that had signed international investment agreements recently would be
especially beneficial.  Important indicators would in clude not only the quantity of investment received
under such agreements but also the quality of that investment.  The Secretary-General stressed theneed to avoid creating a gap between international organizations and Governments working on the
elaboration of international investment agreements, on the one hand, and groups from civil society
that were affected by those agreements (including local businesses and social and environmental
groups), on the other.
3. The session began with a panel discussion on the topic entitled "How can regional and
multilateral investment agreements be structured to serve development objectives?".Mr. A.V. Ganesan, introducing the discussion,  noted that developing countries wished to encourage
the flow of FDI and maximize the benefits to be derived from it, while at the same time fostering and,
if necessary, protecting domestic enterprises with a view to strengthening domestic economic and
technological capabilities.  He pointed out that most international investment agreements did not
prevent host countries from establishing their own policies on the admission of foreign investors; itwas on that basis that they guaranteed the treatment and protection of investments after admission.
Mr. F. Hamburger, in describing the development ob jectives in the investment-related provisions of
the Lomé Convention, stressed the need for technology transfer on a sustainable basis.  He noted that
domestic capital formation was an important prerequisite for investor confidence and that training and
capacity-building had to be provided in order to bring about an investment-friendly environment.Development-friendly investment should be based on transparent rules balancing the benefits and
obligations of the contracting parties.  The concerns of developing partners could be taken into
account by means of safeguard clauses, transition periods and specific provisions ensuring the gradual
integration of developing countries in the world economy.  Mr. C. Phasukavanich compared theWT/WGTI/W/46
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principles under negotiation for the Investment Area of the Association of South-East Asian Nations
(ASEAN) to the Non-binding Investment Prin ciples adopted by the Asia-Pacific Economic
Cooperation forum (APEC) in 1994, emphasizing thei r development objectives.  He noted that a
transition period was necessary for developing countries entering into a liberalized trade and
investment regime and pointed to the economic and technical cooperation activities in the framework
of APEC as reflecting the need for adjustment before liberalization.  Mr. J. Poblano discussed the
development dimension of the General Agreemen t on Trade and Services (GATS) and the North
American Free Trade Area (NAFTA), emphasizing the role of developing countries in the GATS
negotiations and the resulting emphasis on progressive liberalization, strengthening domestic service
capacities and increasing exports from developing countries.
4. In the discussion that followed, several themes emerged and specific points were made.
There was extensive agreement on a number of issues, although different opinions were expressed on
others.  It was generally agreed that international agreements per se, however friendly to investors,could not guarantee an increase in FDI flows.  Economic and other preconditions for investment were
more important in influencing the direction of FDI.   Much of the discussion on objectives focused on
liberalization, and on its extent and timing.  Many experts considered liberalization inevitable, but
concern was expressed over its impact on the economies of developing countries and on domestic
firms there.  It was thus accepted that liberalization had to be progressively implemented, on theinternational as well as on the national levels, although there were various opinions as to the exact
sequence or phases of implementation and the precise measures and devices to be used.  Recent
practice concerning transitional arrangements and exceptions in specific international agreements
showed that it was possible, through the use of such methods, to cope with the diversity of situations
and development levels in international arrangements.  Several experts stressed the need to respect the
policy choices of capital- and technology-receiving countries (the host countries) and the need for
increased flexibility in any international investme nt agreement, which should take into account the
special needs of developing countries, particularly those of the least developed ones.   The need for
proper national policies in host countries and for compensatory mechanisms to balance the possible
negative social or other effects of liberalization was also stressed.
5. The issue of national treatment for FDI was a matter of considerable debate.  Some delegates
held that national treatment should certainly cover the admission of investments as well as their
treatment after entry, even if subject to exceptions or "negative lists".  Other experts questioned
whether it was appropriate for host Governments to accord national treatment to foreign firms, even
after admission, since a Government would then be  deprived of its capacity to help domestic
enterprises successfully face their foreign competitors. They stressed  that the host Governmentshould be able to apply its policies to specific cases and only offer protection guarantees to
investments which had already been admitted.  There were also some differences of opinion over the
use of performance requirements.  Some experts felt that they constituted valuable tools of economic
policy for host countries, while others rejected them as undue interferences in the market, and recalled
that some performance requirements were covered under the agreement on trade-related investmentmeasures (TRIMs).  The need for a stable and transparent institutional and legal framework in host
countries was emphasized by many experts, alt hough some questioned whether it could be brought
into existence before the effects of unfettered liberalization were felt.  Finally, the need for rules
concerning competition, restrictive business practices and incentives, and the protection of the
environment was accepted by most experts as complementing liberalization and in no way runningcounter to it.  It was stressed by several experts that the extent to which an international investment
agreement was development-friendly would depend on many factors, particularly the extent to which
development objectives were apparent, not only in its preamble, but also in its structure and scope andWT/WGTI/W/46
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in its particular provisions, and in the ways in which it took account of the diversity of the situationsand conditions in various countries.
6. In summary, it should be noted that existing regional and multilateral investment agreements
had been useful in balancing the interests of the countries concerned.  While liberalization appeared
inevitable, the spirit and pace at which it took place could vary, and host countries remained
responsible for their own development.
B.   Definition of investment in regional and
multilateral investment agreements
7. Several experts recognized the difficulty and complexity of the provisions concerning
definitions in international investment agreements.  Such provisions interacted with and defined thescope of all other provisions.  Much of the disc ussion concerned the advantages and disadvantages
from a development perspective of broad and narrow definitions of "investment".  It was noted that
the most commonly used definition embraced "every kind of asset", although some experts questioned
the desirability from a development perspective of including certain types of assets, such as portfolio
investment, non-equity forms of investment, non-commercial assets and intangibles, particularly inagreements that liberalized entry of investment.  At the same time, other experts considered that each
type of investment could potentially make a contribution to development and that a narrow definition,
particularly in a multilateral agreement, might not provide sufficient flexibility over time.  Some of
the practical difficulties of distinguishing between different types of investment were also noted.
8. There was also discussion on the interaction between the definitions and the other provisions
of investment agreements.  It was noted, for example, that concerns raised by broad definitions of
investment could be addressed through qualifications in the operative provisions.  A number of
experts commented, however, that in a multilateral agreement the necessary qualifications could
create undue complexity, particularly when taking into account the different levels of development ofcountries and each country’s development policies.  Accordingly, it was suggested that there was a
need for the creation of a knowledge base concerning each country’s experience with definitions of
investment.
9. In summary, the complexity of the issue of definitions should be noted, as should the
importance of further detailed study of the issue by the secretariat.
C.   Chairperson's synthesis
10. There appeared to be broad agreement that the ultimate objective of existing regional and
multilateral investment agreements was to promote increased investment flows, initially betweensignatories of the agreements, which would help countries to strengthen their corporate sectors  so that
they could open up eventually to others outside the signatory countries.  The critical elements in
existing agreements included non-discrimination, the opening up of industries, equitable treatment
under the rule of law and recognition of the nature and differing stages of development of various
signatories.
11. All participants saw the validity of FDI as an aid to economic growth and development.  It
was acknowledged that investment agreements in and by themselves did not increase the flow of
cross-border investment.  The investment environment was vital to attract investments.  Its principalWT/WGTI/W/46
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elements included political and economic stability, the rule of law, a strong institutional andregulatory framework providing intellectual property protection and protection against unfairexpropriation, and dispute-resolution mechanisms.  With or without investment agreements, those
were all critical issues for investors.
12. Regional and multilateral investment agreements were recognized as an added factor, a new
dimension in the investment equation.  Ho wever, such agreements should promote
development-friendly liberalization.  It was generally accepted that what was desired was sustainable
growth and development, with all players - foreig n investors, domestic investors, host Governments
and the Governments of the capital- and technology-exporting countries (the home countries) - taking
responsibility for ensuring sustainable development that would bring short-, medium- and long-term
benefits to all.
13. There was, however, an appeal from both developed and developing countries that
liberalization should not undermine domestic investor  rights, or deprive them of opportunities within
their own economies.  Domestic investors might not be in a position to compete with foreign
investors, even if the foreign investors were medium-size companies from large developed
economies.  In that respect, it was noted that the control of anti-competitive practices and issues
relating to the transfer of technology and the obligations of investors often became critical issues.International agreements needed to take those sensitivities into account.
14. With regard to the question of the "level playing field", it was a valid approach as long as it
meant that the rules were the same for everybody, and that all players had similar status and were thus
in a position to take advantage of what the playing field had to offer.  In that context, it wasrecognized that the pace of liberalization and the progressive phasing of liberalization had been
critical to the successful conclusion of regional and multilateral investment agreements to date.  It was
noted that regional and multilateral investment agreements had successfully taken into account the
special needs and interests of signatory countries in different stages of economic development.
Special and differential treatment had been agreed upon which reinforced and respected the regulatoryresponsibilities of individual Governments.  Such treatment was critical in that it gave countries time
to evolve adequate laws, rules and regulations to ensure that all players benefited from the initiatives.
It was agreed that all international investment agre ements should strive to create a win-win situation,
and that international investments flows should not be a zero-sum game.  Not a
"beggar-my-neighbour" but a "prosper-my-neighbour" policy should be the prime objective driving
regional and multilateral investment agreements, and it should be coupled with the recognition that
the growth and development objectives of all pa rties provided the foundation for such investment
initiatives.
15. In sum, it was suggested that the ultimate objective of international investment agreements
was growth and development. To that end, stable, transparent and predictable investment frameworks
that also provided security for investments helped to attract investment flows that could contribute to
employment, technology transfer, efficiency and competitiveness, and help in promoting the
integration of developing countries into the wo rld economy, with a view towards sharing in the
benefits of globalization and strengthening domestic capacities.  Those objectives could further be
served by progressive, development-friendly liberalization, with appropriate timing and pace and
proper flexibility, such as allowing for special and differential treatment for developing countries,safeguards, exceptions, derogations, escape clauses and phasing, and taking into account the diversity
of national capacities and conditions.  Liberalization needed to be combined with sound and coherent
domestic economic policies, the creation of effective judicial systems, the promotion of the rule of
law and respect for the regulatory responsibility of Governments.  In furthering the developmentWT/WGTI/W/46
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objective, attention also needed to be given to meas ures ensuring the proper functioning of the market,
especially through the control of anti-competitive practices (including transfer pricing) by firms, thepromotion of the transfer of technology, the question of investor obligations, and the use of
investment incentives.  In addition, investment arrangements needed to be seen in the wider context of
other international agreements, broader macroeconomic policies and the basic determinants of
investment flows.
16. To help create a better understanding of the issues involved, it was suggested that the
UNCTAD secretariat should:
(a) Prepare a set of criteria for development-friendliness and identify ways and means of
applying them to the formulation of international investment agreements;  and
(b) Study and make transparent - through dialogues and other appropriate mechanisms -
the initiatives, development efforts, aspirations and strategies (or "IDEAS") of the
key players in international investment, namely, foreign investors, home countries,
host countries and domestic investors.
17. The question of definitions was recognized as being highly technical in nature.  Many
regional and multilateral investment agreements used definitions that had been designed to meet the
specific aspirations and needs of the signatory parties.  The broadness of definitions in respect of
investment protection agreements and the narrowness of the definition in respect of liberalization
emphasized the complexity of the issue.  It was suggested that the UNCTAD secretariat should
develop a compendium and analysis of definitions within existing agreements, so that they couldbecome reference points for future drafters of regional and multilateral investment agreements.
18. Most, if not all, participants shared the vi ew that the meeting was a great success.  The
discussions on substantive items of significance to the international community were well focused, in
depth and animated.  However, if there had been more give and take from all sides, and if everyparticipating expert had been prepared to see more clearly and appreciate the need to recognize the
IDEAS of the diverse parties to the dialogue, more progress could have been made on substantive
issues and on making recommendations that would benefit all parties.
19. There is a need to bridge the gap between the legitimate concerns of home countries that there
should be fair treatment and security for their investors and the equally legitimate fears of host
countries that the process of liberalization could compromise domestic IDEAS and the legitimateconcerns of domestic investors.  International investment agreements, to be of interest to all and to be
durable, need to take into account both the concerns of investors and the legitimate fears of host
countries.
20. There should also be heightened awarene ss that the dichotomy between the home countries
and the host countries is becoming increasingly blurred, as many countries (even developing
countries) play the dual role of home and host country, and while FDI is welcomed, their own
investors also participate in FDI in other countries.
21. Finally, the secretariat should be thanked for the standard of excellence that it has set in the
organization of the meeting in both substantive and logistic terms.  The professionalism exhibited by
all secretariat staff resulted in the documentation made available to experts and the agreed conclusions
of the Expert Meeting.WT/WGTI/W/46
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(UNCTAD document TD/B/COM.2/11, TD/B/COM.2/EM.3/3)
III.   ORGANIZATIONAL MATTERS
A.  Convening of the Expert Meeting
1. In accordance with the recommendation made by the Commission on Investment, Technology
and Related Financial Issues at the closing meeting of its second session on 3 October 19972, the
Expert Meeting on Existing Regional and Multilateral Investment Agreements and Their
Development Dimensions was held at the Palais des Nations, Geneva, from 1 to 3 April 1998. The
meeting was opened on 1 April 1998 by Mr. Rubens Ricupero, Secretary-General of UNCTAD.
B.  Election of officers
(Agenda item 1)
2. At its opening meeting, the Expert Meeting elected the following officers to serve on its
Bureau:
Chairman: Mr. Dato Jegathesan (Malaysia)
Vice-Chairman-cum-Rapporteur: Mr. Zoran Jolevski (The Former
  Yugoslav Republic of Macedonia)
C.   Adoption of the agenda
(Agenda item 2)
3. At the same meeting, the Expert Meeting adopted the provisional agenda circulated in
TD/B/COM.2/EM.3/1.  Accordingly, the agenda for the Meeting was as follows:
1. Election of officers2. Adoption of the agenda3. Examination and review of existing regional and multilateral investment agreements
and their development dimensions in pursuance of the mandate of paragraph 89 (b) of"A Partnership for Growth and Development"
4. Adoption of the report
                                                     
2 See Report of the Commission on Investment, Technology and Related Financial Issues on its second
session (TD/B/44/14-TD/B/COM.2/7), paragraph 51.WT/WGTI/W/46
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(UNCTAD document TD/B/COM.2/11, TD/B/COM.2/EM.3/3)
D.  Documentation
4. For its consideration of the substantive agenda item (item 3), the Expert Meeting had before ita report by the UNCTAD secretariat entitled "Existing regional and multilateral agreements oninvestment and their relevance to a possible multilateral framework on investment"
(TD/B/COM.2/EM.3/2).
E.  Adoption of the report
(Agenda item 4)
5. At its closing meeting, on 3 April 1998, the Expert Meeting adopted the agreed conclusions
reproduced in section I above, and authorized the Chairperson to prepare a summary of the Meeting
(see section II above).WT/WGTI/W/46
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(UNCTAD document TD/B/COM.2/11, TD/B/COM.2/EM.3/3)
Annex
ATTENDANCE*
1. Experts from the following States members of UNCTAD attended the meeting:
                                                     
* For the list of participants, see TD/B/COM.2/EM.3/INF.1.Algeria
Argentina
Austria
Bangladesh
Belarus
Benin
Botswana
BrazilBulgaria
Cameroon
Canada
Chile
ChinaColombia
Comoros
Costa Rica
Côte d’Ivoire
CubaCzech Republic
Dominican Republic
Egypt
Ethiopia
FranceGabon
Guinea-Bissau
Indonesia
Iran (Islamic Republic of)
Iraq
Israel
ItalyJamaica
Japan
Jordan
Kenya
Libyan Arab JamahiriyaLithuania
Madagascar
Malawi
Malaysia
MaltaMauritius
Mexico
Morocco
Myanmar
Nepal
Netherlands
Nigeria
NorwayPakistan
Peru
Philippines
Poland
RomaniaRussian Federation
Saudi Arabia
Senegal
Singapore
SlovakiaSouth Africa
Spain
Sri Lanka
Sweden
SwitzerlandThailand
The Former Yugoslav
  Republic of Macedonia
Trinidad and Tobago
Tunisia
Turkey
UgandaUkraine
United Kingdom of Great Britain
  and Northern Ireland
United States of America
VenezuelaViet Nam
Yemen
Zambia
ZimbabweWT/WGTI/W/46
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2. The Economic Commission for Europe, the United Nations Environment Programme and theUnited Nations Development Programme were represented at the session. The International Trade
Centre UNCTAD/WTO was also represented at this session.
3. The following specialized agencies and related organizations were represented at the session:
International Monetary Fund
World Intellectual Property Organization
United Nations Industrial Development Organization
The World Trade Organization was also represented at the session:4. The following intergovernmental organizations were represented at the session:
African, Caribbean and Pacific Group of States
Agency for Cultural and Technical Co-operation
Arab Labour Organization
European CommunityEuropean Free Trade Association
Latin American Economic System
League of Arab States
Organisation for Economic Co-operation and Development
Organization of African UnityOrganization of the Islamic Conference
5. The following non-governmental organizations were represented at the session:
General Category:
Commission of the Churches on International Affairs
Friends World Committee for Consultations (Quakers)
International Confederation of Free Trade Unions
Third World Network
Women’s International League for Peace and Freedom
World Federation of United Nations Associations
Panellists, resource persons specially invited participants
Panellists
Mr. A.V. Ganesan, Former Commerce Se cretary to the Government of India
Mr. Friedrich Hamburger, Director, Directorate General VIII-A, Development Policy,
  European Commission
Mr. Chakramon Phasukavanich, Deputy Secretary General, Office of the Board of Investment,  Thailand
Mr. José Poblano, Trade Representative of Mexico in CanadaWT/WGTI/W/46
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Resource persons
Mr. A.A. Fatouros, Professor of International Economic Law, University of Athens, Greece
Mr. Kamel Hossain, Senior Advocate of the Supreme Court, Bangladesh
Mr. Kenneth J. Vandevelde, Professor of Law,  Thomas Jefferson School of Law, San Diego,
  California, United States of America
Specially invited participants
Mr. Anders Ahnlid, Deputy Permanent Representa tive of Sweden to the OECD Paris, France
Mr. Michael Green, Economist, Department of International Development, United Kingdom
Mr. Wolfgang Kreissl-Doerfler, Rapporteur on the MAI, European Parliament
Mr. Fulgence Bassono, Director, Multi Cons eils Associés, Ouagadougou, Burkina Faso
Mr. Al Fadil Nayil Hassan, Director, Le gal Department, Inter-Arab Investment
  Guarantee Corporation, Safat, Kuwait
Mr. Michael Hindley, European Parliament
Ms. Alice Landau, Department of Political Science, University of Geneva, Switzerland
Ms. Vera Nicolas-Gervais, Executive Director , Emporio Trade and Investment Consultancy,
  Swampscott, Ma., United States of AmericaMr. François de Tinguy, Union internationa l du Notoriat Latin, Lausanne, Switzerland
Mr. François Ullmann, Hexa Consultants, Geneva, Switzerland
Mr. Mark Vallianatos, Friends of the Earth, Washington, DC, United States of America
Mr. Kee Hwee Wee, Assistant Director, Investment and Finance, ASEAN Secretariat,
  Jakarta, IndonesiaMs. Lise Weis, Senior Expert,  Energy Charter Secretariat, Brussels, Belgium
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