Presentation on the Lao PDR-OECD 2015 Investment Policy Review

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1. 1 OECD Investment Policy Review of Lao PDR 3 April 2015, Vientiane 1 Government of Lao P.D.R. 2. 1. The OECD 2. The Policy Framework for Investment 3. Investment Policy Review of Lao PDR Structure of the presentation 2 3. 1. The Organisation for Economic Co-operation and Development 3 4. What is the OECD? 4 34 members, incl. Japan, Korea, Australia and NZ Close cooperation with non- members on areas of mutual interest All policies areas, except defence and sports 250 committees, working groups, expert groups 2500 staff Better policies for better lives 5. How the OECD works 5 Evidence-based analysis Promotes reforms by convincing governments that it is in their own self-interest Does not disburse grant money Operates based on consensus Has no disciplinary powers other than moral suasion 6. 2. The Policy Framework for Investment 6 7. Investment policy Investment promotion and facilitation Trade Competition Tax Corporate governance Policies for promoting responsible business conduct Human resource development Public governance Infrastructure investment Investment framework for green growth Financial sector development Governance: transparency, stability/predictability, coherence, effectiveness A multilaterally-backed instrument to improve the investment climate, building on good practices A comprehensive framework covering numerous policy areas affecting the investment climate The PFI is. Covers both domestic & foreign investment 8. Non-prescriptive & non-binding Flexible Comprehensive How the PFI works Self-assessment by Government (in cooperation with OECD) 8 9. Introducing the draft chapters Chapter format: Introductory text (rationale of the chapter and policy area) Core questions (embodying key principles) Supplemental questions (detailed check-list) 10. A checklist of questions in key policy areas 10 Investment Policy Market opportunities, risks, exit barriers Policy areas Affecting investment through multiple channels Investment promotion & facilitation Transaction (red tape) and information costs Trade Policy Cost of inputs, size of market, competition Competition Policy Market opportunities, productivity, benefit sharing with workers and consumers Tax policy (incentives) Returns to investor, benefits to government Corporate Governance Corporate efficiency, cost of capital Responsible Business Conduct Social and environmental risks, Human Resource Development Supply and quality of labour, innovation Investment in Infrastructure Cost of inputs, market size, productivity etc. Financing Investment Supply, cost and access to capital etc. Public governance Regulatory quality and predictability, cost of doing business etc. Investment for Green Growth Input costs; environmental externalities 11. Investment Policy Reviews Comprehensive (many policy areas) Thematic (one policy area, e.g. RBC) Sectoral (energy, agriculture) Regional dialogue ASEAN, SADC, MENA, SE Europe Capacity building APEC, ASEAN (CLMV) and at country level Development assistance IFC, JICA, Finland How the PFI has been used 11 12. OECD Investment Policy Reviews since 2006 Sub-Saharan Africa Zambia Burkina Faso Mozambique Botswana Tanzania Mauritius Nigeria Asia India Cambodia * China (2) Viet Nam* (2) Indonesia Lao PDR* Malaysia Myanmar Philippines* MENA Egypt Morocco Tunisia Jordan Latin America Peru Costa Rica Colombia Eurasia Ukraine (2)* Russia Kazakhstan * On-going or planned 12 13. Updating the PFI Over 25 countries have used the PFI in IPRs and many more in regional discussions Need to update the instrument, incorporate new dimensions and receive users feedback Task Force meetings in regions and OECD headquarters, technical revisions in OECD committees, web-based consultations Task Force co-chaired by Finland and Myanmar Updated PFI in 2015 Global landscape of investment has changed (e.g. GVCs, RBC) New policy challenges, players, priorities 13 14. 3. Investment Policy Review of Lao PDR 14 15. Investment Policy Review process Preparatory phase Evaluation of government requests Scoping missions Identification of key stakeholders (Task Force) Self-assessment & review OECD coaching Government responds to PFI questionnaire OECD drafts IPR with inputs from government Presentation & publication Stocktaking & implementation support Dissemination of results Selected implementation & follow-up A process as much as an outcome: Capacity building (workshops in Lao PDR and elsewhere) Whole of government approach (task force) Peer dialogue (within ASEAN and with OECD) Follow up 16. 2015 Early April OECD mission, PFI presentation to the Taskforce April-June Government prepares answers to PFI questionnaire July Second OECD mission to discuss answers to questionnaire and for further fact-finding August-October OECD prepares draft report October-Nov. Third OECD mission (Task Force meeting, fact-checking) Nov.-December Government provides written comments on draft report 2016 Jan.-February OECD-MPI Seminar with ministries and stakeholders in Vientiane to discuss draft IPR of Lao PDR March Presentation of draft IPR to OECD Inv. Committee in Paris April-May Revised draft IPR circulated for final comments June-July IPR of Lao PDR launched in Vientiane or in ASEAN region Follow-up Results presented at regional or sub-regional level (including Regional Policy Network), other activities Suggested timeline 17. 1. Introduction 2. Investment trends and performance 3. Horizontal policies affecting investment 4. Investment policy 5. Investment promotion & facilitation 6. Policies to promote responsible business conduct 7. Infrastructure investment 8. Other areas of the PFI: Corporate governance, financing investment, incentives, green growth Structure of the IPR of Lao PDR 17 18. How is the framework for SEZs and investment expected to evolve? How to improve the development impact of investment? How to improve implementation of laws and regulations? What will be the expected impact of the AEC on Laos economy and how to benefit from ASEAN integration? How best to address investor grievances? How to diversify inward FDI by sector and by country? How to integrate into GVCs? How to raise local value addition and linkages? How to best make use of PPPs in infrastructure? Some areas to be addressed 18 19. A whole-of-government approach to investment policy making Benchmark relative performance and progress over time An opportunity to showcase recent reforms to partner countries and the international investment community Recommendations based on good practices in both OECD and emerging economies Assistance in implementing reforms through donor agencies and the World Bank Capacity building can also be provided on an ad hoc basis where necessary Benefits of undertaking a PFI assessment 19 20. Provide guidance in assessing which policies and practices are most likely to create obstacles to domestic and foreign investment PFI questions and supplemental questions Helps to improve political feasibility Broad public consultations with stakeholders about reform priorities Helps to build a constituency for reform Transparent assessment of policy options PFI helps to identify where capacity constraints may exist so the aid community can respond Develop administrative capacity through the process of undertaking PFI assessments itself Repository of good practices Diagnosing the factors impinging on the investment climate Supporting investment reform 21. OECD Investment Policy Review of Myanmar 21 The recommendations from the Review are candid, impartial and highly practical. Aung Naing Oo, Director General, Ministry of National Planning and Economic Development, Myanmar 22. Provides factual information and inputs into the Review Helps to build ownership of the process Demonstrates the approach and scope of the Review Fosters communication within the Task Force Please try to do the following: identify challenges, describe recent and planned reforms and the impact of past reforms Refer to (and attach if possible): legal texts, strategic documents, existing studies, useful websites, other relevant documents PFI-based questionnaire 22 23. THANK YOU stephen.thomsen@oecd.org alexandre.decrombrugghe@oecd.org fernando.mistura@oecd.org 24. ANNEX 24 25. INVESTMENT POLICY 26. - Entry and establishment - Ownership and control - Operational restrictions - Authorisation and reporting - Sectoral limitations - Standards of treatment (NT, MFN, FET) - Expropriation - Transfer of funds - Dispute settlement - Transparency - Etc. REDUCING STRENGHTENING Investment Policy 26 Regulation Protection 27. Strategy What is the role of private investment, including by foreigners and SMEs, within the countrys overall development strategy? Legislation How is the strategy reflected in the investment law or other laws and in commitments under bilateral, regional or multilateral agreements? Implementation Who manages the overall coordination of investment policy making? Is there a formal process for monitoring and improving the investment climate? Who is in charge of this process? How is feedback from stakeholders taken into account? Is there an advocate for investment climate reform within the government? Investment climate strategy 28. Areas covered in investment policy Legal framework for investment Non-discrimination and national treatment Land ownership and registration Intellectual property rights Contract enforcement and investment dispute settlement Expropriation regime Investment treaty policy 28 29. INVESTMENT PROMOTION & FACILITATION 30. Investment attraction Investment Promotion Department Business facilitation Integration in GVCs/RVCs Co-ordination with other agencies Linkages promotion Regulatory reforms Whole of government approach SEZs/IPs Institutional framework for investment promotion and facilitation 30 31. Good policies Promotion Facilitation: Establishment and post- establishment After-care services Policy Advocacy investor feedback to policies: surveys, public-private committees, participation in task force, policy and legal proposals, reporting investor's perceptions... Investment promotion and facilitation depends on the quality of policies Best performing IPAs are good policy advocators 32. Strong supplier base is an important investment decision factor Channel for technology and knowledge transfer; Proactive measures to promote business linkages and build capacities of SMEs Efforts by the government to address skills shortages (HRD, training facilities, etc.) Role of SEZs/IPs Building research, innovation capacity Promoting partnerships with the private sector in skills upgrading Linkages with domestic firms or economic enclaves? Promotion of business linkages Making investment work for development 32 33. RESPONSIBLE BUSINESS CONDUCT 34. Responsible Business Conduct Responsible business conduct (RBC) means that businesses should: a) contribute positively to economic, environmental and social progress to achieve sustainable development and b) avoid and address adverse impacts through their own activities and prevent or mitigate adverse impacts directly linked to their operations, products or services by a business relationship. Risk-based due diligence is a key element of RBC by identifying, preventing and mitigating actual and potential adverse impacts. 35. The RBC chapter of the PFI included questions on promoting responsible business conduct related to: 1. Clear separation of government and business roles 2. Promoting effective two-way communication: law making and other dialogue 3. Providing an adequate framework for corporate disclosure 4. Enlisting business as a partner in the legal and regulatory system 5. Strengthening the business case for responsible conduct 6. Intergovernmental co-operation Policy Framework for Investment: chapter on responsible business conduct 36. INFRASTRUCTURE DEVELOPMENT 37. Ensure coherence and support for infrastructure development Planning of infrastructure development: What are the needs and strategy for infrastructure? Credible project pipeline and clear private sector role? What consultation mechanisms are used to ensure projects correspond to needs and expectations?; Do agencies coordinate to ensure coherence? Infrastructure chapter (1/3) 37 Create a suitable enabling environment for investment in infrastructure Regulatory & institutional environment What is the legal regime for investment in infrastructure (laws and agencies and mandates)? Are these clear and transparent? Regulatory Impact assessments? How is corruption being prevented? Is the public procurement system transparent and efficient in promoting competition? Are there still barriers to entry for investors? Are competition laws being enforced? 38. Mitigate risk and ensure value for money Selecting and prioritising projects; enhancing implementation Are cost-benefit analysis, taking into account alternative modes of delivery, full range of risks, undertaken? How are risks identified and allocated? Are fiscal liabilities transparently accounted for in the budget? What has been done to improve preparation, selection and implementation of projects (e.g. PPP unit, output based contract specifications; performance monitoring system)? Ensure adequate regulation and pricing of infrastructure markets Predictability and viability of infrastructure projects Are regulatory agencies independent, adequately resourced and accountable? Do SOEs compete on equal terms with private firms? How the government strike balance in tariff setting (cost and affordability)? When subsidies are needed, what has been done to use it more efficiently? Infrastructure chapter (2/3) 38 39. Increase the supply of financing for infrastructure projects Facilitate financing of infrastructure What has been done to leverage sources of finance to infrastructure projects and mitigate shortfalls if insufficient cost recovery? Is ODA used to mitigate project risks and leverage private investment? Are there obstacles for investors to bring in and out international capital if needed? Encourage inclusiveness and responsible business conduct Predictability and viability of infrastructure projects Broad-based stakeholder consultations Environmental & social impact assessments Ensure resilience of infrastructure to climate change Ensure that both public & private providers observe RBC standards and perform adequate due diligence to identify, manage & monitor any environmental & social risks Infrastructure chapter (3/3) 39 40. THANK YOU! stephen.thomsen@oecd.org alexandre.decrombrugghe@oecd.org fernando.mistura@oecd.org