Resolution on the impact of foreign direct investment (FDI) in the African, Caribbean and Pacific States
Date: 2007-11-22
Institutions: ACP–EU Joint Assembly
Subjects: ACP countries, cooperation agreement (EU), developing countries, direct investment, economic development, foreign investment, investment policy, investment promotion

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on the impact of foreign direct investment (FDI) in the African, Caribbean and Pacific States

RESOLUTION (1)

The ACP-EU Joint Parliamentary Assembly,

— meeting in Kigali (Rwanda) from 19 to 22 November 2007,

— having regard to Article 17(1) of its Rules of Procedure,

— having regard to the objectives of the ACP-EU Partnership Agreement (2) signed in Cotonou on 23 June

2000 in the area of investment and private sector development support, and trade,

— having regard to the United Nations Conference on Trade and Development (UNCTAD) World Invest-
ment Reports for 2005 and 2006, and its Report on Economic Development in Africa: Rethinking of
the Role of Investment (2006),

— having regard to the United Nations Industrial Development Organisation (UNIDO) Africa Foreign

Investor Survey reports for 2005 and 2006,

— having regard to its Cape Town Declaration of 21 March 2002 on future negotiations of new trading

arrangements,

— having regard to the UN Declaration (2000) on the Millennium Development Goals (MDGs) and the

commitment to eliminate poverty,

— having regard to the commitments of the international community made at the United Nations Confer-
ence on Finance for Development
in particular on mobilising international
(Monterrey, 2002),
resources and enhancing the net flow of financial resources and technical cooperation for development,
inter alia to achieve the MDGs,

— having regard to the report of

its Committee on Economic Development, Finance and Trade

(ACP-EU/100.126/07/fin.),

A. whereas FDI plays an important role in the development process of host countries, in particular by
providing both the capital and technology, and thereby bringing skills, know-how and market access
that contributes to improved efficiency in the use of resources and to increased productivity,

B. whereas the flow of private capital to developing countries has been increasing in recent years, being

of growing importance as a source of financing comparable to official development assistance (ODA),

C. whereas FDI enhances growth by incorporating new inputs and technologies into the production
process of the host country and can enhance supply capacities in ACP States and contribute to building
a dynamic investment-export nexus that could help these countries achieve their economic growth and
development objectives, including the MDGs,

D.

E.

believing that FDI can play an important role in the transformation of African economies, but that the
impact depends on both quality and quantity; stressing that the challenge for EU-Africa relations is to
think critically about how to attract and regulate the type of FDI that will support equitable growth,
creating employment and supporting and upgrading local industry,

aware of the barriers to FDI flows that vary greatly across ACP regions and within regions, including,
inter alia, basic issues of governance, the legal framework and corporate climate, the strength of institu-
tions, the degree of financial intermediation, and location factors such as transport and infrastructure,
education, availability of skilled labour and health,

(1) Adopted by the ACP-EU Joint Parliamentary Assembly on 22 November 2007 in Kigali (Rwanda).
(2) OJ L 287, 28.10.2005, p. 4.

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F.

whereas most ACP economies have put in place legislation offering a wide range of guarantees and
opportunities for foreign investors, including reduced restrictions on the ownership of land and real
estate, and foreign exchange restrictions, thereby guaranteeing foreign investors a right to repatriate
capital and profits,

G. whereas many ACP economies have enacted legislation allowing foreign investors to participate in

privatisation programmes and offer generous tax incentives,

H. whereas ACP countries have concluded 210 bilateral investment treaties (BITs) with EU Member States

and are increasingly also doing so with other developing countries,

I.

whereas availability of additional financial resources,
including greater inflows of FDI and trading
opportunities, is of considerable importance to economic and social stability and sustainable develop-
ment in ACP countries,

Significance of FDI

1.

2.

3.

Considers that, in the face of inadequate resources to finance long-term development and with the
MDGs looking increasingly difficult to achieve by 2015, attracting FDI has assumed a prominent place
in economic renewal strategies;

Underlines the need for support to ACP countries in attracting greater flows of FDI and transfer of
appropriate technology in order to enhance their development and competitiveness;

Considers that policies to attract FDI should be revisited and the cost-benefit perspective must be
seriously taken into account, including environmental degradation, as well as social problems and the
contribution to the sustainable development objectives of the national economy;

Corporate environment

4.

5.

Reaffirms the primary responsibility of the ACP countries for their development and the crucial impor-
tance of national ownership of the development effort, including sustained macroeconomic stability
and the business environment;

Stresses the critical importance of location factors, such as economic and social infrastructure, business
climate, local market conditions, resource availability, pro-active investment promotion initiatives and
asset availability, in influencing the decisions to invest in a host country;

6. Welcomes the greater attention given to strengthening governance and transparency, with the aim of

ensuring that benefits reach the poor;

7.

Stresses that many ACP countries still require a big push in public investment to overcome the region's
high transport costs, generally small markets, low-productivity agriculture, adverse agroclimatic condi-
tions, high disease burden and slow diffusion of technology from abroad;

Promoting European FDI

8.

9.

Recognises that host-country drivers — the pull factors — and regional cooperation can bring greater
financial stability, better policy coordination, improved infrastructure planning and a more dynamic
pattern of industrial development, that can contribute to a more favourable investment climate for
domestic and foreign firms alike;

Calls on ACP countries to deepen progressively their respective regional integration initiatives and divi-
sion of labour;

10. Underlines the critical importance of home-country drivers — the push factors — which includes, inter

alia, market and trade conditions, business conditions and home government policies;

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11. Calls on the EU Member States and the European Commission to maintain a high standard of moni-
toring and auditing of European transnational companies (TNCs), particularly in sensitive sectors,
holding them accountable to higher standards of corporate responsibility, sharing information gathered
with host-country policy makers, and designing disciplinary measures and compensation schemes
where there is clear evidence of damage to the host economy;

12. Calls on the EU Member States to agree on a collective framework for the marketing of investment
opportunities in the ACP countries, in addition to encouraging the extension of bilateral investment
treaties (BITs) beyond the current concentration on Germany, the United Kingdom, Belgium, France
and the Netherlands;

13. Calls on the EU Member States to urgently agree on a collective framework of innovative investment
promotion measures including,
inter alia, providing tangible financial and other incentives to their
enterprises and institutions to transfer technology to ACP countries, and providing tax credits to
companies investing in ACP countries; stresses, however, that this cannot be a substitute for develop-
ment finance, and better, more predictable ODA;

14. Stresses the need to analyse how FDI links in with local investment and the need for a structured
discussion on how to promote linkages between TNCs and local firms, including the need to foster
public/private dialogue to remove the main investment barriers;

15.

Is concerned at the lack of information on the national and regional implications of including invest-
ment provisions in EPAs;

16. Asks the European Commission to inform it once a year about the share of FDI originating in the EU

compared to FDI from other parts of the world;

Use of Cotonou Agreement instruments to promote FDI

17. Urges the European Investment Bank to strengthen and improve the performance of the Investment

Facility to make the instrument a viable resource for the private sector in ACP countries;

18. Urges the Parties to the Cotonou Agreement to assign the Investment Facility an investment promotion
mandate, in particular by making this facility an instrument for promoting joint ventures in addition to
its current mandate;

19. Urges the European Commission and the Parties to the Cotonou Agreement to establish, within the
10th EDF, an adequately financed ACP investment guarantee agency, as stipulated in Article 77(4) of
the Cotonou Agreement;

20. Underlines the urgent need to redefine the role and mandate of the joint ACP-EU institutions — the
Centre for Development of Enterprises and the Technical Centre for Agriculture and Rural Cooperation
— with a view to entrusting them with targeted pro-investment promotion mandates with commensu-
rate additional financing;

21. Calls on the European Commission and the EU Members States to increase the level of financial and
technical support to ACP national and regional investment promotion agencies (IPAs), including giving
them an explicit ‘outward investment’ mandate;

22. Underlines the need to address, especially in the framework of ACP-EU cooperation, the structural defi-
cits faced by ACP countries in attracting and retaining FDI inflows; urges all Parties to the Cotonou
Agreement to place special emphasis on resource mobilisation for infrastructure development, social
and economic investments and good governance;

23. Underlines the need to ensure that the expected increase in FDI inflows into ACP States, particularly in
natural resources, creates a balanced development impact through appropriate policies and institutions;
calls on ACP States to fulfil their development commitments in this regard and on the international
community to support this process;

24.

Instructs its Co-Presidents to forward this resolution to the ACP-EU Council, the European Commis-
sion, the World Bank, the European Investment Bank and the African Development Bank.