Investment Policy reforms help developing economies better integrate their private sectors with global value chains. These reforms address the legal, regulatory, and administrative impediments to attracting and retaining foreign direct investment (FDI). They also promote steps towards maximizing the potential benefits of FDI and its interaction with the domestic economy to foster sustainable development.
Adequate policies can boost foreign and domestic investment and ensure that they have a positive impact on a country's sustainable development. In contrast, inadequate legal and policy frameworks pose significant barriers to a developing economy's ability to attract and retain investment, as well as harness the benefits of that investment. Moreover, undue restrictions in market access, lack of investor protections, and inadequate enforcement or implementation of regulatory frameworks further discourage investment.
Improvement in the business environment is a long-standing area of expertise for the Investment Climate Department of the World Bank Group, with a well-established track record of assistance to more than 100 countries over the past two decades. Investment Policy work is currently structured around six interrelated areas:
The Investment Policy team works closely with other teams throughout the World Bank Group to deliver customized, demand-driven solutions for clients focused on:
- Promoting good practices in the use and allocation of investment incentives. This includes helping clients identify if and how incentives contribute to FDI inflows and policy objectives such as employment generation and export promotion.
- Establishing enhanced investor entry regimes by helping countries adopt and implement non-discriminatory treatment of foreign and domestic investors, reducing sectoral restrictions and performance requirements, and streamlining investment procedures, among other interventions.
- Strengthening investor confidence to help clients retain and expand FDI through measures addressing unlawful expropriation, protection against internationally recognized arbitrary actions or payment transfers, and currency convertibility. This also includes minimizing investment risks by promoting best practices in conflict management and risk mitigation.
- Promoting good practices in investment policy to foster linkages and spillover effects of FDI to local economies.
- Implementing good practices to help clients create regional spaces for investment through regional integration processes that promote greater FDI flows within and into the region.
As part of a larger investment climate program, the World Bank Group provided technical assistance on investment policy to the government of Bosnia and Herzegovina with the goal of removing key regulatory and administrative obstacles for FDI. Advisory support focused on streamlining FDI registration procedures, increasing investors' access to investment and information, and improving the process for obtaining work permits for foreign employees. Project achievements include:
- Elimination of obligatory double registration of foreign investment at the Ministry of Foreign Trade and Economic Relations;
- Creation of an interactive business map for land-related transactions that contains useful information for investors on starting a business, such as economic and demographic data, infrastructure, natural resources, land use, and investment procedures (http://www.fipa.gov.ba/);
- Reduction in the number of documents required to obtain expatriate work permits by more than half (from 19 to 8), as well as a cap on the time allowed for the government to approve permit applications (15 days rather than the previous 30-day limit).
Roberto Echandi | Global Product Specialist, Investment Policy