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Maximizing the Benefits of FDI through CSR

Maximizing the Benefits of FDI through CSR. By Marinus Sikkel United Nations Economic and Social Commission for Asia and the Pacific

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Maximizing the Benefits of FDI through CSR

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  1. Maximizing the Benefits of FDI through CSR By Marinus Sikkel United Nations Economic and Social Commission for Asia and the Pacific At the International Conference “Expansion of FDI in Asia and Implications for the Development of International Rules on Investment” 18 January 2008, NIDA, Thailand

  2. Outline • Potential benefits from FDI • Potential risks • Policy options • Corporate social responsibility (CSR) • Link to multilateral rule making

  3. Potential benefits from FDI • Increased competitiveness, growth and exports • Spill-over effects • Inflows of foreign exchange • Increased access to capital • Job-creation • Better environment and social conditions

  4. Potential risks • Low absorption capacity, limited spillovers • Restrictive business practices • Tax avoidance • Deterioration of balance of payments • Dutch disease • Exploitation of weak regulations • Bribery and corruption

  5. Policy options I • Conclude investment agreements??? • BITs do not address the risks • Negotiations of multilateral rules failed for good reasons • Most countries consider it in their own interest to liberalize, and do so unilaterally • Domestic regulation can maximize the benefits of FDI

  6. Policy options II • Improve the business climate • Introduce a simple tax system • Be careful with tax incentives • Appropriate regulation on transfer pricing • Environmental and labor legislation • Good governance • Establish industrial/free-trade zones • Be careful with requirements • Encourage CSR

  7. CSR • Soft-law approach to achieving social, environmental and good governance goals • Increased competitiveness • Customer perception / branding • New market niches • Increased productivity • Spill-over effects

  8. How can governments encourage CSR? • Create an enabling environment for responsible business conduct: • Communication on expected conduct • Transparency in law enforcement • Strengthen the business case through partnerships and promotion • International cooperation

  9. Link to multilateral rule making • CSR is non-binding! • Encourage desirable behavior • Use existing instruments

  10. UNITED NATIONS ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC Thank you for your attention www.unescap.org 10

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