Investment Facilitation Implementation Handbook for Latin America & the Caribbean Volume II: A Comprehensive Analysis COMPETITIVENESS FOR JOBS & ECONOMIC RMA TRANSFORM ATION © 2024 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of the World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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Table of Contents Table of Acronyms ...................................................................................................... 10 Acknowledgements ..................................................................................................... 14 Introduction ................................................................................................................... 15 How to use the Investment Facilitation Implementation Handbook .. 17 WBG support for implementing investment climate reforms ........... 23 LAC Investment Facilitation Implementation Handbook: A Comprehensive Analysis ......................................................................................... 25 A. Enhancing the accessibility and transparency of investment policy measures .................................................................................................... 25 Measure 1: Publication and advance publication of investment measures .................................................................................................................. 27 Measure 2: Availability and accessibility of information .............. 40 B. Improving the efficiency and effectiveness of investment-related administrative procedures .............................................................................. 52 Measure 3: Streamlining Investment Authorization Procedures .. 53 Measure 4: Streamlining Investment Screening and Approval Mechanisms ........................................................................................................... 74 Measure 5: Digitalizing investment facilitation ................................. 90 C. Strengthening the governance of authorization processes ......... 115 Measure 6: Independence of Competent Authorities ...................... 116 Measure 7: Appeal and Review Mechanisms ........................................ 125 D. Building strong and effective relationships with investors ........... 137 Measure 8: Focal Points providing information, assistance, and advocacy services ............................................................................................... 138 Measure 9: Retention Mechanisms ............................................................ 155 E. Fostering MNC-Supplier Relationships ...................................................... 174 Measure 10: Domestic Supplier Databases ........................................... 176 Measure 11: Supplier Development Programs ....................................... 187 F. Improving investment policy- and law-making processes .............. 207 Measure 12: Public Consultation on Investment Measures .......... 207 Measure 13: Regulatory Impact Assessments (RIAs) ...................... 225 Measure 14: Periodic Review of Investment Facilitation Measures ... 249 G. Facilitating Sustainable Investments ........................................................ 265 Measure 15: Promoting responsible business conduct (RBC) ...... 267 Measure 16: Combatting Corruption ......................................................... 286 H. Building an M&E framework for investment facilitation reforms .. 298 Appendix: M&E’s outputs, outcomes, impacts, and KPIs for Measure 3. Streamlining investment authorization procedures .............................. 302 Table of Boxes, Figures & Tables Box 1. Needs Assessments in the context of the IFD Agreement ...... 18 Box 2. Publication and Advance Publication in the IFD Agreement ....... 27 Box 3. Regulatory improvement platform of Costa Rica ...................... 37 Box 4. Availability and accessibility of investment-related information in the IFD Agreement ....................................................................................... 40 Box 5. Mexico’s National Catalog for Regulations, Administrative Procedures and Services ......................................................................... 46 Box 6. ProColombia – Availability and Accessibility of Information ... 49 Box 7. Streamlining and speeding up administrative procedures in the IFD Agreement ............................................................................................... 53 Box 8. Legal framework on investment authorization procedures ... 65 Box 9. Implementation of Laws on Administrative Procedures in Peru .. 70 Box 10. FDI screening contributed to FDI recovery in Chile ................. 87 Box 11. Single information portal and the utilization of ICT in the IFD Agreement ....................................................................................................... 91 Box 12. Modalities for keeping information on authorization and measures updated ..................................................................................... 97 Box 13. Single Window for Investors and Single Registry for Investment Projects in Mexico ............................................................ 109 Box 14. Independence of Competent Authorities in the IFD Agreement ...................................................................................................... 116 Box 15. Creation of an autonomous telecommunications and broadcasting regulator in Mexico ...................................................... 121 Box 16. Appeal or review in the IFD Agreement ......................................... 125 Box 17. Strengthening the revenue appeal and review process in Jamaica ............................................................................................................ 133 Box 18. Focal points and cross-border cooperation in the IFD Agreement .................................................................................................... 137 Box 19. Common characteristics of high-performing IPAs .................. 141 Box 20. Example of mandate focused on investment promotion and facilitation ..................................................................................................... 147 Box 21. PRONicaragua, the evolution of the IPA in Nicaraguan ....... 149 Box 22. CINDE´s Costa Rica .................................................................................. 152 Box 23. Focal points in the IFD Agreement .................................................. 155 Box 24. Investment Retention Mechanisms in Brazil .............................. 167 Box 25. Investor Grievance Mechanism in Costa Rica ........................... 168 Box 26. National System for the Prevention of Trade and Investment Disputes in the Dominican Republic ................................................ 170 Box 27. Domestic supplier databases in the IFD Agreement .............. 175 Box 28. Guinea Online Local Supplier Marketplace (GOSLM) ............ 183 Box 29. Costa Rica and the Matchmaking Database ............................. 185 Box 30. Supplier Development Programs in the IFD Agreement ...... 187 Box 31. Types of Supplier Development Program Implementation Designs ............................................................................................................ 192 Box 32. Intel in Costa Rica - The transformative potential of attracting an anchor investment ..................................................... 199 Box 33. Supplier Development Program in Türkiye ................................. 203 Box 34. Opportunity to comment on proposed investment measures in the IFD Agreement ................................................................................... 207 Box 35. Types of public consultation ............................................................... 212 Box 36. Key components in stakeholder engagement ............................ 115 Box 37. Institutions that should be involved in public consultation processes of investment-related regulations ............................. 216 Box 38. Examples of online public consultation platforms .................. 218 Box 39. Examples of online platforms for dialogue in LAC and other regions ............................................................................................................ 220 Box 40. Colombia: Platform to enable public consultation on draft regulations from national and local governments ................... 221 Box 41. Domestic Regulatory Coherence in the IFD Agreement ....... 226 Box 42. RIA process basic steps ......................................................................... 233 Box 43. M&E programs in the context of RIA ............................................. 235 Box 44. Examples of public institutions that should be involved in the ex-ante impact assessment process of investment- related regulations ................................................................................. 237 Box 45. Capacity-building in a RIA system ................................................. 240 Box 46. Methodologies to assess impacts ..................................................... 241 Box 47. Mexico: RIA evolution between 2010 and 2019 ....................... 245 Box 48. Periodic reviews in the IFD Agreement ......................................... 249 Box 49. Example of periodic/ex post review guidelines from different countries and regions ............................................................................. 258 Box 50. Chile: Ex post law evaluation ............................................................. 259 Box 51. German Supply Chain Act .................................................................... 267 Box 52. Responsible business conduct in the IFD Agreement ............ 271 Box 53. RBC policies in Peru and Chile ........................................................... 277 Box 54. National Action Plans on RBC ........................................................... 278 Box 55. EU Regional Programs to promote Responsible Business Conduct ........................................................................................................... 279 Box 56. Measures against corruption in the IFD Agreement ............. 285 Figure 1. Investment Climate Reform Measures Across the Investment Lifecycle ........................................................................................................ 22 Figure 2. Artificial intelligence tool for public services information in Bueno Aires, Argentina ......................................................................... 106 Figure 3. Example of foreign investment notification mechanism (FINS) as recommended to Nepal by the World Bank ....................... 109 Figure 4. Integrated Investor and Business Service Delivery .............. 110 Figure 5. Correlation between GDP (per capita, 2021) and WJP Rule of Law Index (Regulatory enforcement score, 2021) ................ 115 Figure 6. Legal institutional Set-up of IPAs (n=89) ................................. 146 Figure 7. Investment Retention and Investor-State Conflict Continuum ................................................................................................. 157 Figure 8. Implementation phases for supplier development programs ..... 191 Figure 9. Consultation with the public across the globe (2018) ..... 209 Figure 10. Legal requirements to solicit comments and report consultation results (2015) ............................................................ 211 Figure 11. Stakeholder engagement at different stages of rule-making, 2015 and 2019 ....................................................................................... 212 Figure 12. Types of consultative practices by region (2018) .............. 214 Figure 13. RIA implementation across the globe (2018) ....................... 226 Figure 14. RIA key components ........................................................................... 229 Figure 15. RIA’s best practice elements ......................................................... 230 Figure 16. Percentage of countries with RIA required by law (2018, by level of income) ..................................................................................... 231 Figure 17. Requirements to conduct RIA for subordinate regulations, 2015 and 2019 ...................................................................................... 232 Figure 18. RIA Light system minimum requirements .............................. 233 Figure 19. Type of impacts measured across the 92 countries with a RIA policy (2018) ................................................................................. 235 Figure 20. Bodies in the LAC region promoting and monitoring regulatory policy and their functions, 2019 ......................... 239 Figure 21. Australian Commonwealth Regulatory Burden Measure ..... 243 Figure 22. Mexican RIA electronic system (SIMIR) .................................. 244 Figure 23. Regulatory Policy Cycle .................................................................... 250 Figure 24. Factors to consider when implementing ex post reviews .. 255 Figure 25. Anti-Corruption and Anti-Money Laundering Framework in the USA .................................................................................................... 291 Figure 26. A conceptual structure of a comprehensive M&E system .. 298 Figure 27. Theory of change for implementing investment facilitation reforms ...................................................................................................... 301 Figure 28. An example of a theory of change for reforms on streamlining investment authorizations ................................ 302 Table 1. Concordance Table: Investment Facilitation Implementation Handbook and IFD Agreement ........................................................... 20 Table 2. Transparency policies for new laws and regulations in LAC countries ....................................................................................................... 30 Table 3: The scope of the in-depth diagnostic can vary ....................... 58 Table 4. Key and optional implementation measures for streamlining investment authorization procedures ........................................... 62 Table 5. Key and optional implementation principles for implementing a single point of contact and digital investment authorizations ............................................................. 94 Table 6. How are the comments received in practice across the LAC region, 2018 ................................................................................................. 214 Table 7. Types of ex post reviews of regulation ........................................ 251 Table 8. Periodic review approaches across the LAC region, 2018 ..... 252 Table 9. RBC Policy Areas ...................................................................................... 273 Table 10. List of indicators that can be considered ................................ 301 Table of Acronyms ADB – Asia Development Bank AfCFTA – African Continental Free Trade Area AI – Artificial Intelligence B2B – Business to Business B2C – Business to Citizen BEDU – Business Environment Delivery Unit BHR – Business and Human Rights BI – Business Intelligence BKPM – Indonesia Coordinating Board BRRU – Business Regulatory Reform Unit (Kenya) CBA – Cost-Benefit Analysis CBB – Central Bank of Belize CC – Control of Corruption CDRF – Capacity Development and Results Framework CEA – Cost-effectiveness Analysis CIT – Commissioner of Income Tax CIT(A) – Commissioner of Income Tax Appeals CoE – Council of Europe COFEMER – Federal Regulatory Improvement Commission (Mexico) CONAMER – National Regulatory Improvement Commission (Mexico) CPI – Corruption Perception Index CSR – Corporate Social Responsibility DCED – Donor Committee for Enterprise Development DIO – Direct Investment Ombudsman DPIIT – Department for Promotion of Industry and International Trade (India) 10 ECA – Europe and Central Asia ECOSOCC – Economic, Social, and Cultural Council ERP – Enterprise Resource Planning ESG – Environment, Society and Governance EU – European Union F4F – Fit for Future Program (EU) FDI – Foreign Direct Investment FIRB – Foreign Investment Review Board (Australia) FISR – Foreign Investment Security Review (China) G2B – Government to business G2C – Government to Citizen G2G – Government to Government GDP – Gross Domestic Product GOJ – Government of Jamaica GOSLM – Guinea Online Local Supplier Marketplace GRIG – Global Indicators of Regulatory Governance GVC – Global Value Chain HR – Human Resources IC – Investors Council (Georgia) ICA – Investment Canada Act ICT – Information Communication Technology IFD Agreement – Agreement on Investment Facilitation for Development IGM – Investor Grievance Mechanism IIA – International Investment Agreement ILO – International Labor Organization IO – International Organization IPA – Investment Promotion Agency iREG – OECD Indicators of Regulatory Policy and Governance Surveys ISDS – Investor-State dispute settlement 11 ISIC – International Standard Industrial Classification ITAT – Income Tax Appellate Tribunal KOTRA – Korea Trade-Investment Promotion Agency KPI – Key Performance Indicator LAC – Latin America and the Caribbean LAP – Laws on Administrative Procedures LDC – Least developed countries LFPA – Federal Law on Administrative Procedure (Mexico) LMIC – Low-and middle-income countries M&E – Monitoring and Evaluation MENA – Middle East and North Africa MNC – Multinational Corporation MNE – Multinational Enterprise MOFCOM – Ministry of Commerce, China MoU – Memorandum of Understanding MSMEs – Micro-, Small-, and Medium-sized Enterprises NCLR – National Council of Law Reporting (Kenya) NCP – National Contact Points NDRC – National Development and Reform Commission (China) OCM – Council of Ministers (Cambodia) OECD – Organization for Economic Cooperation and Development OFIO – Foreign Investment Ombudsman (South Korea) ORIA – Office of Regulatory Impact Assessment (Cambodia) OSS – Online Single Submission PMR – Product Market Regulation RAD – Revenue Appeals Division (Jamaica) RBC – Responsible Business Conduct RBM – Regulatory Burden Measure RCEP – Regional Comprehensive Economic Partnership Agreement 12 RDB – Rwanda Development Board REFIT – Regulatory Fitness and Performance Program RFI – Request for Information RFP – Request for Proposal RFQ – Request for Quote RFTS – Administrative Procedures and Services Federal Registry (Mexico) RIA – Regulatory Impact Assessment ROB – Regulatory Oversight Body SDP – Supplier Development Program SIFA – Sustainable Investment Facilitation Agreement SLA – Service Level Agreement SOE – State-Owned Enterprise SOP – Standard Operating Procedure SP – International Standards and Policy SRM – Supplier Relationship Management TA - Technical Assistance TACB – Technical Assistance and Capacity-Building UN – United Nations UNCTAD – United Nations Conference on Trade and Development USD – US Dollar WAIPA – World Association of Investment Promotion Agencies WGI – World Governance Indicators WIDA – World Investment for Development Alliance WJP – World Justice Project WTO – World Trade Organization 13 Acknowledgements This report was prepared by the World Bank’s Trade, Investment and Competitiveness (TIC) Investment Climate Unit, in collaboration with the Equitable Growth, Finance, and Institutions (EFI) department of the Latin America and Ca- ribbean Region. The report was drafted by a team led by Ivan Nimac and Sylvia Solf and comprised of Daniela Gomez Altamirano, Yago Aranda Larrey, Altagracia Evangelista Cuevas Arthur, Luis Aldo Sanchez Ortega, and Tatiana Whately De Moura. The report was prepared under the supervision of Thomas Haven and Woori Lee and overall guidance of Yira Mascaro, Doerte Doemeland, Asya Akhlaque, Mona Haddad, and Oscar Calvo-Gonzalez. The team is grateful to peer reviewers Alejandro Espinosa-Wang and Pierre Sauve for their feedback. This publication is funded by Competitiveness for Jobs and Economic Transformation, a World Bank Group Umbrella Trust Fund. https:// www.worldbank.org/en/programs/competitiveness-for-jobs-and- economic-transformation. 14 Introduction The World Trade Organization (WTO) Investment Facilitation for De- velopment Agreement (IFD) has the objective to increase the partici- pation of developing countries and least-developed countries (LDCs) in global investment flows by improving the domestic and the internation- al business climates and make it easier for investors in all sectors to conduct business. The IFD Agreement provides rules that create clear and consistent global standards for investment facilitation measures, enhance transparency between governments and businesses, simplify and speed up administrative procedures, and provide a global forum to promote best practices and international cooperation.1 The IFD Agreement has the potential to generate global gains.2 This is especially prescient at a time when foreign direct investment (FDI) is a key contributor to the sustainable energy transition, yet LDCs currently receive a mere 2% of global greenfield flows.3 Focused on sustainable development, the effective implementation of the IFD Agreement will help achieve the UN 2030 Sustainable Development Goals. The IFD Agreement is the first international investment agreement at the global level. During the 13th WTO Ministerial Conference in February 2024 and after over six years of intense negotiations, the text of the IFD Agreement was officially finalized. Currently, the IFD Agreement boasts participation from over 128 WTO members spanning all regions, representing more than three-quarters of the WTO membership.4 A key aspect of the IFD Agreement is that it provides developing countries and LDCs special and differential treatment by allowing them to specify the technical assistance and capacity building support they 1 WTO. 2024. WT/MIN(24)/17, Joint Ministerial Declaration On The Investment Facilitation For Development Agreement, Article 1. 2 Balistreri, Edward J. & Zoryana Olekseyuk (2024). “Investment Facilitation for Development Agreement: Potential Gains.” Yeutter Institute Working Paper, University of Nebraska-Lincoln. 3 UNCTAD, Global Investment Trends Monitor, No. 45. 4 See: https://www.wto.org/english/tratop_e/invfac_public_e/invfac_e.htm. 15 need to implement and benefit from the Agreement. In doing so, WTO member countries that wishes to benefit from the special and differ- ential treatment under the IFD Agreement will have to notify the WTO of the time they need to implement specific IFD provisions, along with their needs for technical assistance and capacity-building. The notification process for developing and LDCs members starts with a needs assessment exercise. Such an exercise involves a detailed measure-by-measure gap analysis with the obligations of the IFD Agreement. The WTO, together with seven international or- ganizations—including the World Bank Group (WBG)—elaborated a Self-Assessment Guide. The Guide aims to assist developing and LDCs members in grouping the provisions of the Agreement in categories A, B, and C in view of the future implementation of the Agreement, by helping them complete a situational/gap analysis and answering a questionnaire on each of the provisions. Building on the Self-Assessment Guide, the WBG developed this Invest- ment Facilitation Implementation Handbook for Latin America & the Caribbean (LAC) as a tool not only to assist countries during the needs assessment by providing good international practices, but as a set of reform guidelines that policymakers could use in the reform process for the full implementation of the IFD Agreement. The Handbook has been developed as a public good to support countries in the LAC region that wish to use the IFD Agreement as a benchmark to attract invest- ment and improve their domestic investment climates.5 The LAC region was chosen given the importance of investment to help the region adapt to geopolitical and structural trends, including climate change, digital transformation, and global value chain realignments. Climate change brings risks and opportunities for LAC. Extreme weather events are becoming more frequent and severe and the high reliance on agricultural exports and tourism in many LAC countries make them particularly vulnerable. Climate policies from major trading partners (US, EU, and China) can bring export oppor- tunities for producers that demonstrate carbon competitiveness. 5 Although the Handbook has been conceived to support the implementation of the IFD Agreement, it can be generally applied to any reform agenda on investment facilitation. Some of the material offered on each measure goes beyond what is required by the IFD Agreement and the Self-Assessment Guide to include further information on good practices. 16 Private investment in mitigation, adaptation, and green sectors (e.g. energy transition mineral value chains) is needed to mitigate the risks and take advantage of the opportunities. Digital transformation is expanding the types of goods and services that LAC countries can offer. Private investment is key to developing LAC’s tech sectors (e.g. Intel’s investment in Costa Rica) and digitally-enabled services (e.g. knowledge process outsourcing). Investment is also critical for improving digital infrastructure. Global value chain realignments are underway due to geopolitical tensions and an enhanced focus on risk and resilience from COVID-19. Nearshoring investments in LAC are a key part of this trend. While the Handbook focuses on LAC examples, it is also relevant for policymakers in other regions looking to attract more investment. Volume II of the Investment Facilitation Implementation Handbook for Latin America & the Caribbean presents a comprehensive analysis of each of the investment facilitation measures foreseen in the IFD Agreement. For a summarized version of the Handbook, please refer to Volume I. How to use the Investment Facilitation Implementation Handbook The Investment Facilitation Implementation Handbook provides guidance for policymakers seeking to implement the IFD Agreement, additional invest- ment facilitation provisions in other IIAs, or any reform agenda linked to investment facilitation measures. It can be used to inform different imple- mentation phases: Needs assessment and notifications: When implementing investment fa- cilitation measures under an investment agreement, a needs assessment may serve as a starting point to determine a country’s degree of com- pliance with the agreement, identify reform needs and their optimal se- quencing. A country’s investment facilitation framework is analyzed and compared via gap analysis with the obligations included in the investment agreement that is implemented. These results can inform a reform action plan and help identify specific technical assistance and capacity-building needs. Under some agreements, including the IFD Agreement (see Box 1), the needs assessment process may further prepare the submission of notifi- cations regarding the status of implementation and existence of technical as- sistance and capacity building needs to an administering body or secretariat. 17 The Investment Facilitation Implementation Handbook may support a needs assessment and notification process by providing relevant information about what the effective implementation of specific measures included in an agreement may entail. Such context can facilitate benchmarking of the status quo against the provisions in the IFD Agreement and help identify specific reform actions and resource needs based on the reform path most appropriate for a given country context. The Investment Facilitation Implementation Handbook is complementary to the WTO IFD Self-Assessment Guide, which has been developed by seven international organizations (IOs), including the World Bank,6 in a process coordinated by the WTO Secretariat (see Box 1). By providing substan- tive knowledge on investment facilitation measures and related reforms, the handbook complements other publications more focused on procedural aspects of organizing needs assessment processes.7 Development of reform action plans: Based on the gaps identified during the needs assessment process, a reform strategy and action plan should be created. A reform action plan is essential for effectively implementing an investment agreement as it provides a reform roadmap. It supports timely implementation by defining time-bound actions and priorities, supporting coordination among stakeholders, allowing for monitoring and evaluation of progress, and facilitating timely adjustments and corrective measures. The handbook can be used by policymakers to inform the development of reform action plans, including dedicated M&E frameworks that should inform any reform agenda (see H. Building an M&E framework for invest- ment facilitation reforms). Implementation of reforms: The objective of the handbook is to enable policymakers to implement specific reforms. It offers guidance on conduct- ing in-depth diagnostics, reform design, and setting up M&E frameworks. In some of the areas, a more in-depth diagnostic may be required during the implementation phase. 6 The IOs include the World Bank Group, the Inter-American Development Bank (IDB); the International Trade Centre (ITC); the Organisation for Economic Co-operation and Development (OECD); the United Nations Conference on Trade and Development (UNCTAD); the United Nations Economic Commission for Africa (UNECA); and the World Economic Forum (WEF). 7 See for example, Berger, A., Bolmer, A., and Olekseyuk, Z. 2022. Implementing an Investment Facilitation for Development Agreement: How to self-assess implementation gaps and technical assistance needs. International Trade Centre, Geneva. 18 Capacity Building: The handbook can be used as a resource for capac- ity-building at every stage of the implementation process of the IFD Agreement or other IIAs with investment facilitation provisions. In addition to providing detailed information and case studies on relevant investment facilitation measures that can be used to train government officials as well as facilitators for needs assessments, the handbook has specific sections on Human Resources (HR) and capacity-building that may help policymak- ers identify capacity-building needs when implementing a measure. Box 1. Needs Assessments in the context of the IFD Agreement When signing on to the IFD Agreement, developing and LDCs will be required to notify the WTO of the time they will need to implement specific measures, along with their needs for technical assistance (TA) and capacity-building. The current draft of the agreement provides for different treatment for de- veloping countries and LDCs. Both developing and least-devel- oped country WTO members will be provided with assistance and support by different specialized organizations for capac- ity-building to implement the provisions of the framework. The extent and timing of implementation of the provisions of the framework shall be related to implementation capacity. Least-developed country members will only be required to undertake commitments that are consistent with their individ- ual development and financial, administrative and institution- al capabilities. Led by these general principles, drafters of the agreement are considering a classification of provisions into three categories (A, B and C) for developing countries and LDCs. These categories would differ in their notification periods, im- plementation timelines and need for capacity-building and TA.8 8 Category A: provisions that a developing country Member or a least-developed country Member designates for implementation upon entry into force of the framework, or in the case of a least- developed country Member within one year after entry into force; Category B: provisions that a developing country Member or a least-developed country Member designates for implementation on a date after a transitional period of time following the entry into force of the framework; and Category C: provisions that a developing country Member or a least-developed country Member designates for implementation on a date after a transitional period of time following the entry into force of this framework and requiring the acquisition of implementation capacity through the provision of assistance and support for capacity-building. 19 To be able to self-assess and notify the WTO about their commitments under the IFD Agreement, participating WTO Members may decide to undertake a needs assessment. This process will require detailed measure-by-measure benchmark- ing with the agreement obligations to determine the obliga- tions with which a country already complies and the ones it does not yet comply with. In the latter case, the needs as- sessments should also identify the actions required to comply with the obligation, and any TA and capacity-building needed to implement it effectively. Together with other IOs, the WBG has developed a Self-As- sessment Guide. The Guide aims to assist developing and LDC Members to identify possible implementation gaps, assessing their technical assistance and capacity-building needs and priorities, and in categorizing the provisions in cat- egories A, B, and C, in view of the future implementation of the IFD Agreement. The Guide also helps developing and LDC Members submit the necessary notifications to make use of the special and differential treatment provisions contained in the IFD Agreement. Source: WBG based on IFD Agreement. While this Handbook can be generally applied to any Investment Facilitation reform agenda, it is designed specifically to support the implementation of the IFD Agreement. Each measure in the Handbook has an anchor provision in the IFD Agreement. Table 1 provides a concordance table that indicates the IFD Agreement Articles that correspond to the respective measure. At the same time, some of the guidance may extend beyond what is required by the IFD Agreement to include further information on good practices. Some of the IFD Agreement Articles were combined because there is a natural connection in implementing them, for example, creating single information portals and digitalizing authorization processes. The seven topics selected for this handbook are designed to combine measures that function together to illustrate their application for policy makers. Guidance on each measure is presented in sections following the below structure: 1. Introduction: This section introduces the purpose of the measure, expected benefits from implementing it, variance of use in different countries and/ or trends of deployment, as well as the type of corresponding obligation included in the IFD Agreement. 20 2. Diagnostics: This section explains how best to conduct diagnostics regarding the existence and effectiveness of a specific measure in a given country, e.g., the use of desk research vs/ in-country discussions. It also includes sources to be consulted as well as indexes to be used in the specific diagnostic process. 3. Key Implementation Principles: This section identifies key implementation principles that are commonly in place when the measures are successfully im- plemented. These include the availability and/or adequacy of (a) Legal and Policy framework, (b) Procedures, (c) Institutional framework, (d) Human resources and training, and (e) Information and Communications Technology (ICT). 4. Case Studies: Where available, this section presents case studies of countries that successfully implemented the specific investment facilitation measure. 5. Further Resources: This section lists further resources to be consulted. The handbook provides guidance on how best to implement the IFD Agreement, focusing on 16 investment facilitation measures across seven topics. The measures were chosen based on the experience of the World Bank’s Global In- vestment Climate Unit. They are grouped into seven topics (A-G) representing key dimensions of effective investment facilitation frameworks. The 16 measures correspond to the provisions of the IFD Agreement shown in Table 1. In addition, an overarching theory of change as well as results indicators at the output, outcome and impact level for the different sections are presented in section H (Building an M&E framework for investment facilitation reforms) and its Appendix. Table 1. Concordance Table: Investment Facilitation Implementation Handbook and IFD Agreement Topic Measure IFD Agreement 9 1: Publication and advance Art. 6.1-6.3; Art. 10.1-10.2 A. Enhancing the accessibility publication of investment measures and transparency of investment policy measures 2: Availability and accessibility of Art. 6.4-6.5; Art. 7; Art. 9; information Art. 12 3: Streamlining investment Art. 13-17 Bis B. Improving the efficiency and authorization procedures effectiveness of investment- 4: Streamlining investment screening Art. 13-17 Bis related administrative and approval mechanisms procedures 5: Digitalizing investment facilitation Art. 8; Art. 18 9 Articles are based on the IFD Agreement WTO document INF/IFD/RD/136 dated 6 July 2023. This table will be updated upon availability of the final IFD Agreement text. 21 Topic Measure IFD Agreement 6: Independence of competent Art. 19 C. Strengthening the governance authorities of authorization processes 7: Appeal and review mechanisms Art. 20 8: Focal points providing Art. 22.1-22.2; Art. 26 D. Building strong and effective information, assistance, and relationships with investors advocacy services 9: Retention mechanisms Art. 22.3 10: Domestic supplier databases Art. 24 E. Fostering MNC-supplier relationships 11: Supplier development programs Art. 25 12: Public consultation on Art. 10.3 investment measures F. Improving investment policy- 13: Regulatory Impact Assessments Art. 23.1-23.2 and law-making processes (RIAs) 14: Periodic review of investment Art. 21 facilitation measures 15: Promoting responsible business Art. 37 G. Facilitating sustainable conduct (RBC) Investments 16: Combatting corruption Art. 38 Source: Authors elaboration. Investment Climate Unit, WBG. Note: Sections of the IFD Agreement that do not contain directly implementable measures have been excluded from the Handbook. These refer to Section I (Scope and General Principles), Section V (Special and Differential Treatment for Developing and Least-Developed Country Members), as well as Section VII (Institutional Arrangements and Final Provisions). This also extends to obliga- tions that are specific to the IFD Agreement (e.g., Art. 11 - Notification to the WTO). Reference List: 1. Balistreri, E. J. & Olekseyuk, Z. 2021. “Economic impacts of investment facilitation.” Center for Agricultural and Rural Development/Iowa State University, Working Paper Series 21-WP 615. 2. Berger, A., Bolmer, A., and Olekseyuk, Z. 2022. Implementing an Invest- ment Facilitation for Development Agreement: How to self-assess im- plementation gaps and technical assistance needs. International Trade Centre, Geneva. 3. UNCTAD. 2023. World Investment Report 2023. 4. World Trade Organization (WTO). 2023. Available at: [https://docs.wto.org/ dol2fe/Pages/SS/directdoc.aspx?filename=q:/INF/IFD/W51.pdf&Open=True] 22 WBG support for implementing investment climate reforms The WBG has extensive experience supporting countries with the implemen- tation of investment facilitation and broader investment climate reforms (Figure 1). The WBG can offer technical assistance and capacity-building for the implementation of the investment facilitation measures covered in this Handbook. This includes information about the different investment facilitation measures and best practice approaches to deploy them, how to organize multi-stakeholder diagnostics and reform processes, how to develop reform action plans and im- plementation plans, and how to institutionalize reforms. The WBG also provides support for developing countries and LDCs during the process of notifying the WTO on their commitments, including conducting needs assessment exercises. Support can also be provided beyond the measures in the IFD Agreement, spanning the investment lifecycle. Figure 1. Investment Climate Reform Measures Across the Investment Lifecycle Internationalization, linkages and spillovers Investment Vision and Supplier databases Strategy Supplier development programs Inter- Comprehensive linkages programs nationalizacion, Attraction & Transparency and affectiveness Linkages and Encouragement of outward FDI (OFDI) facilitation Spillovers measures Investment Vision & Strategy Policies strengtening firm- and INVESTMENT Private sector development and economy-level absorptive capacity LIFECYCLE (stimulating productivity and FDI attraction strategy growth ofdomestic firms, SME promotion, developing human capital, investing in R&D, etc.) Retention & Entry Attraction & Encouragement Expansion IPA establishment and service Retention and Expansion provision Aftercare programs Operations Targeted investment promotion Investor grievance mechanisms (IGMs) Comprehensive incentives inventories Sound contractual environment Improved incentives administration Operations Entry Transparency of investment measures Predictable and efficient business entry and establishment Focal points procedure (company and tax registration; FDI approval/registration) Private sector consultation and follow-up Access to land and clear property rights Promotion of responsible business conduct satndards Transparent FDI entry regimenes (e.g., on restrictions to FDI) Investor obligations to boost responsible business conduct Single information portals and integrated servoce delivery Investment protection guarantees Effective use of ICT in entry and establishment procedures Access to investor-State dispute settlement (ISDS) No/low legar and policy barriers to entry and establishment Improved marked access Source: Authors elaboration. Investment Climate Unit, WBG. Note: Measures highlighted in blue are investment climate measures going beyond investment facilitation. 23 Implementing the IFD Agreement and advancing a broader private invest- ment enabling agenda will require increased collaboration and coordination among international organizations. The WBG is seeking to build and nurture partnerships to enhance international standard-setting to support private in- vestment. These include the Investment Facilitation Agreement process at the WTO, the Donor Committee for Enterprise Development (DCED), and the World Investment for Development Alliance (WIDA). The latter two are collaborative mechanisms bringing together the World Bank OECD, UNCTAD, ITC and various bilateral actors. Collaborations also take place bilaterally with other IOs including the OECD through its FDI Qualities Initiative, UNCTAD with its annual World Investment Report and related initiatives, the World Association of Investment Promotion Agencies (WAIPA) through sharing good practices, and the joint IPA Advocacy Services competition, among others. 24 LAC Investment Facilitation Implementation Handbook: A Comprehensive Analysis A. Enhancing the accessibility and transparency of investment policy measures Public sector transparency is one of the key building blocks of investment policy and the cornerstone of a well-func- tioning regulatory process. A transparent and predictable regulatory framework influences investment decisions and their impact on development.10 For domestic and foreign investors alike, knowledge about rules and regula- tions, including how they are implemented and how they evolve over time, is often a critical input when determin- ing whether or not to invest in a country.11 Transparency and predictability may be even more important for foreign investors having to cope with host country regulatory systems, cultures, and administrative frameworks that are different from their home countries. It is therefore not surprising that lack of transparency and predictability are often important concerns of foreign investors.12 The LAC region has pioneered enabling access to public records, including legal documents both digitally and physically, thanks to access to information laws.13 Colombia, with its Law 57 of 1985 (subsequently amended in 2011 and 2014), was one of the first countries in ensuring access to public information. Mexico’s 2002 Federal Law 10 OECD 2015. Policy Framework for Investment 2015 Edition, OECD Publishing, Paris. 11 Ibid. 12 More than 50 percent of investors in middle income countries considered accessibility of laws to be a major or moderate obstacle. World Bank Group. 2020. Global Investment Competitiveness Report 2019/2020: Rebuilding Investor Confidence in Times of Uncertainty. Washington, DC: World Bank. http://hdl.handle.net/10986/33808 License: CC BY 3.0 IGO. 13 Orme, Bill. (2017). Access to Information: Lessons from Latin America. UNESCO: Cuadernos de Discusión de Comunicación e Información. P. 12. 25 of Transparency and Access to Public Government Information is considered a model legislation14 followed by Chile (2008) and Brazil (2011). Nowadays most of LAC’s access to information laws require governments to provide free online access to specialized websites where citizens can search for official data and documents, as well as request information, sometimes vesting individuals with constitutional rights and involving all levels of public administration (such as the cases of Mexico and Brazil with federal structures). The Organization of American States (OAS) has played a pivotal role, providing a model law, together with legal and technical support for the adoption of successful access to information laws, as well as access to LAC countries’ core legal frameworks. The OAS’ Foreign Trade Information System (SICE)15 has served as repository for both trade- and investment-related laws for many LAC countries. However, even if sound efforts have been conducive to ensuring widespread accessibility of laws overall, some efforts are yet to be deployed by LAC countries to streamline access to the entire legal framework governing in- vestments (horizontal and sectorial), and ensuring that the laws and regulations are centralized, more easily accessible, and that investors are given the chance to participate more actively in the legislative process, in particular when law amendments have the potential of affecting ongoing investments. This section focuses on two key dimensions of transparency: publication of investment measures, ideally in advance (Measure 1), and availability and ac- cessibility of investment-related information (Measure 2). Combined, these two measures provide the basis of a transparent investment framework by ensuring access to information. Transparency often includes a participatory aspect such as allowing foreign stakeholders to become involved in the legislative process (Measure 12: Public Consultation on Investment Measures). Measure 5 (Digitaliz- ing Investment Facilitation) deals with digital aspects of transparency, in par- ticular single information portals. Lastly, Measure 16 (Combatting Corruption) addresses transparency in the context of preventing corruption. There are other aspects of transparency such as the right to access information that are beyond the scope of this handbook.16 14 Some key features of Mexico’s Federal Law of Transparency and Access to Public Government Information (latest update on 9 May 2016) are: advance publication of draft laws (Art. 69 I. b)); publication of tax incentives (Art. 69. III. c)); publication of laws, decrees and agreements approved by the legislative power (Art. 70 VIII.). Art. 68 also obliges federal authorities to make information publicly available using electronic means, subject to periodical updates. 15 http://www.sice.oas.org 16 See further OECD (2019), Institutions Guaranteeing Access to Information: OECD and MENA Region, OECD Publishing, Paris, https://doi.org/10.1787/e6d58b52-en. 26 Measure 1: Publication and advance publication of investment measures 1. Introduction By improving transparency and access to information, countries help reduce information asymmetries and risks for investors as entry and operating costs become more predictable in advance. De jure protection of rights provides guar- antees for investors against unexpected interference.17 De jure provisions requiring the publication of investment-related laws and regulations are also common in international trade and investment agreements. A number of recent IIAs also require the disclosure of draft or proposed measures by the host State.18 The im- portance of publication and advance publication has been further recognized in the text of the IFD Agreement. (See Box 2). In the LAC region, several countries have adopted de jure provisions requiring the publication of investment-related laws and regulations, and even contemplat- ing advance publication and reasonable opportunity to comment on proposed measures. Such adoption has become more prevalent in IIAs than in investment laws per se. For instance, the 2007 Panama-US FTA mandates its parties to ensure that laws, regulations, procedures, and administrative rulings of general application are promptly published or otherwise made available to enable inter- ested persons to become acquainted with them.19 Moreover, this same legal in- strument provides for advance publication of measures and a reasonable oppor- tunity to comment on proposed measures, to the extent possible.20 Pertaining to domestic laws, only Venezuela has been found to have a transparency clause in its investment law.21 17 Kher and Hebous. 2020. 18 UNCTAD. 2011. Transparency. UNCTAD Series on Issues in International Investment Agreements. Link: https://unctad.org/system/files/official-document/unctaddiaeia2011d6_en.pdf. 19 2007 Panama-US FTA. Art. 18.2 20 Analogous provisions can be found at NAFTA Chapter 18, Art. 1801; DR-CAFTA Chapter 18, Art. 18.2; US-Colombia FTA, Art. 19.2; US-Peru FTA, Art. 18.2. 27 Box 2. Publication and Advance Publication in the IFD Agreement The IFD Agreement includes an obligation to publish measures and information (Binding Art. 6.1-6.3). It includes the following requirements: Each Member/Party shall promptly publish or otherwise make publicly available and, except in emergency situations, at the latest by the time of their entry into force, all relevant measures of general application with respect to matters falling within the scope of this Agreement in such a manner as to enable investors, other interested persons and other Members/Parties to become acquainted with them. Each Member/Party shall publish, at the latest by the time of their entry into force for the Member/Party, international agree- ments affecting investment to which it is a signatory party. Each Member/Party shall, to the extent practicable, endeavor to allow reasonable time between publication of the text of a law or regulation referred to in paragraph 6.1 and the date on which investors must comply with the law or regulation. In publishing a new law or regulation referred to in paragraph 6.1, or changes thereto, or in advance of such publication, to the extent practicable and in a manner consistent with its legal system for adopting measures, a Member/Party shall endeavor to explain the purpose and rationale of the law or regulation. The IFD Agreement also includes an obligation to publish proposed new or amended laws and regulations in advance (Binding Art. 10.1 and Non-binding Art. 10.2). It includes the following requirements: 21 Venezuelan Foreign Investment Law of 2017. Art. 47. See UNCTAD Investment Laws Navigator at https://investmentpolicy.unctad.org/investment-laws 28 To the extent practicable and in a manner consistent with its legal system for adopting measures, each Member/Party shall publish in advance: its laws and regulations of general application, or changes thereto, it proposes to adopt in relation to matters falling within the scope of this Agreement; or documents that provide sufficient details about such a possible new law or regulation to allow investors, other inter- ested persons and other Members/Parties to assess whether and how their interests might be significantly affected. To the extent practicable and in a manner consistent with its legal system for adopting measures, each Member/Party is en- couraged to apply paragraph 10.1 to procedures and adminis- trative rulings of general application it proposes to adopt in relation to matters falling within the scope of this Agreement. Foreign investment processes benefit from transparency on a wide range of matters, including existing laws, regulations, and government policies that may affect the investment. This includes not only those regulations that address financial matters of direct relevance to foreign investors, such as capital transfer restrictions, establishment fees, operating licenses, and taxes, but also regulation of a more general nature, such as environmental, health, and social welfare law and policy (see theory of change, Figure 27). Beyond publication of existing laws and regulations, providing public notice of proposed regulatory changes ensures a greater level of transparency and reas- surance to investors. This practice provides predictability in the regulatory environ- ment, an aspect that has long been key for firms seeking to make long-term plans. Providing advance notification is also often conceptualized as a key block of the rule of law.22 Public notice does not, itself, constitute consultation, but can be a first step. Prior notification allows stakeholders time to prepare themselves for upcoming con- sultations (see Measure 12: Public consultation on investment measures). 22 OECD. Background Document on Public Consultation. Link: https://www.oecd.org/mena/gover- nance/36785341.pdf. 29 Notifying the general public of a proposed new law or regulation is a common practice. Of 185 countries included in the World Bank Group’s Citizen Engagement in Rulemaking data set, 136 countries follow this practice to some extent.23 A large number of these economies are in the OECD high-income group or Europe and Central Asia, but the practice of providing public notice of proposed regulations is not limited to advanced economies. At the same time, there remains potential for improvements to increase the transparency of general and investment-relat- ed legislation in countries across all regions and all income levels. In LAC, 77% of economies publish proposed regulations before their enactment. Half of these economies have this practice established throughout the government (e.g., Bolivia, Costa Rica, Mexico, Nicaragua) and the other half for some ministries or agencies (e.g., Argentina, Brazil, Colombia, El Salvador). According to WBG’s Global Indicators of Regulatory Governance, LAC countries are not consistent in the way in which they secure advance publication of new laws or regulations. Countries such as Ecuador, Guatemala, Haiti, Honduras, St. Kitts & Nevis, and Suriname do not contemplate publishing texts or summaries before enactment of newly proposed regulations.25 Moreover, it appears that Jamaica, Peru and Trinidad & Tobago are the only countries that publish laws and regulations both on a unified website and on the website of the relevant ministries/regulators,26 thus reflecting that the majority of LAC countries select one approach or the other. Certain LAC countries use an Official Gazette, journal or other publication to disseminate new laws and regulations, according to the WBG’s Global In- dicators of Regulatory Governance. This is the case for Costa Rica, Dominica, Dominican Republic, Jamaica, Peru, St. Lucia, and Trinidad & Tobago. Some LAC countries distribute directly new laws and regulations to stakeholders, including Argentina, Belize, Bolivia, Colombia, Costa Rica, Dominica, Dominican Republic, El Salvador, Grenada, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, St. Lucia, St. Vincent & Grenadines, and Trinidad & Tobago. Table 2 below offers a comparative view of the 5 transparency policies related to publication and advance publication, as well as distribution of laws and regulations. 23 Johns, Melissa Marie; Saltane, Valentina Citizen engagement in rulemaking -- evidence on regulatory practices in 185 countries (English). Policy Research working paper no. WPS 7840 Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/462571475068174273/Citizen- engagement-in-rulemaking-evidence-on-regulatory-practices-in-185-countries. 24 World Bank Group. Global Indicators of Regulatory Governance. 25 On this category we find Antigua & Barbuda, Bolivia, Colombia, Costa Rica, Jamaica, Mexico, Peru, St. Vincent & Grenadines, Trinidad & Tobago. World Bank Group. Global Indicators of Regulatory Governance. 26 The countries following this practice are Argentina, Brazil, Chile, Colombia, Dominican Republic, Jamaica, Panama, Peru, Trinidad & Tobago and Uruguay. World Bank Group. Global Indicators of Regulatory Governance. 30 Table 2. Transparency policies for new laws and regulations in LAC countries Publishes text/ Publishes laws/ Distributes Publishes Uses an Official summaries regulations on directly laws/ Gazette, Country before the website of new laws/ regulations in journalo or other enactment of the relevant min- regilations to unified website publication new laws istries/regulators stakeholders Ntigua & Barbuda a a r r r Argentina a r a r a Belize a r r r a Bolivia a a r r a Brazil a r a r r Chile a r a r r Colombia a r a r a Costa Rica a a r a a Dominicana a r r a a Dominican Republic a r a a a Ecuador r r r r r El Salvador a r r r a Grenada a r r r a Guatemala r r r r r Guyana a r r r r Haiti r r r r r Honduras r r r r r Jamaica a a a a a Mexico a a r r a Nicaragua a r r r a Panama a r a r a Paraguay a r r r a Peru a a a a a Sint Marteen a r r r r 31 Publishes text/ Publishes laws/ Distributes Publishes Uses an Official summaries regulations on directly laws/ Gazette, Country before the website of new laws/ regulations in journalo or other enactment of the relevant min- regilations to unified website publication new laws istries/regulators stakeholders St. Kitts & Nevis r r r r r St. Vicente & the a r r a Grenadines St. Lucia a r r a a Suriname r r r r r Trinidad & Tobago a a a a a Uruguay a r a r r Venezuela a r r r r Source: WBG’s elaboration based on WBG’s Global Indicators of Regulatory Governance. From this table some conclusions can be extracted, assuming that the more these transparency policies are applied in a country, the more accessible laws and regulations will be to relevant stakeholders, including investors: 1. Several LAC countries have successfully increased transparency in the enactment and accessibility of laws and regulations: 5/5: Jamaica, Peru and Trinidad & Tobago. 4/5: Costa Rica and Dominican Republic. 2. There is much scope to increase transparency in the enactment and acces- sibility of laws and regulations in some countries: 0/5: Ecuador, Guatemala, Haiti, Honduras, St. Kitts & Nevis and Suriname; 1/5: Guyana, Sint Marteen and Venezuela. 3. Some LAC countries can benefit from additional efforts in increasing transpar- ency in the enactment and accessibility of laws and regulations: 2/5: Antigua and Barbuda, Belize, Brazil, Chile, El Salvador, Grenada, Nicaragua, Paraguay and Uruguay; 3/5: Argentina, Bolivia, Colombia, Dominica, Mexico, Panama, St. Vincent and the Grenadines and St. Lucia. 4. Some LAC countries fail to publish laws/regulations on single portals or websites of relevant ministries/regulators: Belize, Dominica, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Nicaragua, Paraguay, Sint Marteen, St. Kitts & Nevis, St. Lucia, Suriname and Venezuela. 32 2. Diagnostics The diagnostic should examine whether there are any legal obligations regarding the publication of legal instruments, either for all legislation or in- vestment-specific legislation. The diagnostic should also include a revision of which types of legal instruments (laws, regulations, or other measures) fall under the obligation. In addition, stakeholder consultations should be conducted to verify whether these obligations are upheld, and whether relevant legal instru- ments are published according to the published timeframes. Even if there is no legal obligation, it is still necessary to have consultations. In several countries there are publication or advance publication practices without a legal obligation (see below), and stakeholder consultations may reveal those practices. Several indexes and databases can be consulted to aid with diagnostics and complement in-country information. WBG Investment Law Database: A new database of investment laws codifies the content of publicly available investment laws of 130 countries. This database can be helpful to assess whether transparency obligations are included in a given country’s investment law. This database is accessible only to WBG staff and consultants. WBG Global Indicators of Regulatory Governance:27 These indicators present measures related to transparency, civic participation, and government ac- countability across the life cycle of regulations. The project collects data for 186 countries worldwide. The following indicators are particularly relevant: Accessing Laws and Regulations: This indicator measures whether laws and regulations that are currently in effect are codified and available in a single place, and if so, where. It also measures whether a registry or website is updated regularly and consolidated to contain all amendments and revisions. Transparency of Rulemaking: This indicator measures whether regu- lators commonly communicate with the public about proposed regula- tions, and if so, how. Communication could be through unified websites where all, or substantially all, new regulations are posted before adoption, websites specific to particular ministries, public gazettes, federal journals or targeted outreach to specific stakeholders. 27 Latest data available is from 2018, see: https://rulemaking.worldbank.org/en/rulemaking. The dataset has been discontinued since. 33 3. Implementation Principles Ideally, governments should publish drafts and final versions of all legal instru- ments. Investors should be able to obtain complete information about all the regulatory measures that may materially affect their investments. Investment measures may include laws, regulations, international agreements, administrative practices or rulings, judicial decisions, and policies. To implement this measure, a phased approach may be necessary taking into account capacity constraints, focusing first on laws and regulations and later extending the scope to other legal instruments. There are different ways in which countries publish new laws or regulations and provide advance notice. The most traditional ways are the use of the govern- ment’s official journal or gazette. Ideally, a single website is used, both for pub- lishing finalized legal instruments as well as announcements. Most of the 136 countries included in the World Bank Group’s Citizen Engagement in Rulemak- ing data set follow this practice.28 It is widely followed among economies in the OECD high-income group as well as in Europe and Central Asia. In another 30 percent of these 136 countries, notice is given through the website of the ministry or regulatory institution leading the changes. Half of Latin America and the Caribbean economies use websites to share news of proposed regulations, and most of them through a unified website (e.g., Bolivia, Jamaica or Peru).29 Information that explains the purpose and rationale of the new legal instrument should be included when it is published for public review and comment. In many countries, the public notices include a wide range of information. In Colombia, for example, a short summary of the proposed regulation is provided along with an explanation document that includes why the regulation is needed, its context, what it is intended to change, the alternatives that had been considered, the method used for decision among the alternatives, legal viability, and potential economic, environmental and cultural impact of the draft measure.30 In Brazil, notices include the summary of the proposed regulation, contact details of the agency responsible for the regulation, and the deadline and method for submit- ting recommendations, comments, or feedback.31 28 Johns and Saltane 2016. 29 Ibid. 30 https://www.sucop.gov.co/busqueda 31 https://www.gov.br/participamaisbrasil/consultas-publicas. 34 A reasonable time-period should be provided between the publication of the legal instrument and the date it will take effect. What is reasonable needs to be determined on a case-by-case basis. It depends on the type of legal instrument and its subject matter. Considerations when implementing this investment facilitation measure include the following: a. Legal and Policy Framework Legislative and regulatory requirements may be helpful to institutionalize the practice for publishing draft laws and regulations, procedures, and adminis- trative measures. For example, the investment law can have a transparency clause. Such a transparency obligation can be simple, stating the obligation to publish certain government measures. Or it can be qualified, stating the manner in which the information shall be published, e.g., on a portal of a specific Ministry or IPA, on a central government website, in consolidated modus, with explanations, with a search function, etc. These legal requirements are not necessarily provided in some countries. In Australia, for instance, the consultation process is regulated mostly by “circular letters” from the Office of the Prime Minister, which are not con- sidered legally enforceable, yet these letters are strictly adhered to. In Costa Rica rulemaking bodies have no constitutional requirement to give public notice of proposed regulations, but they do so in practice based on the official gazette, following democratic principles and the principle of publicity of laws, and more particularly based on the Regulation of the Legislative Assembly.32 In Guyana, while there is no legal obligation to give notice, it is common to do so.33 These examples suggest that while legal requirements may be useful in prompting reform in rulemaking practices, they can also be deeply imbedded in the tradition and practice of rulemaking. b. Procedures Typically, the authority or authorities responsible for publication of legal instruments establish formal procedures that would, for example: Identify the types of measures and information that the authority will publish; 32 Reglamento de la Asamblea Legislativa de Costa Rica. Arts. 116, 117 and 121. 33 In Guyana, draft bills are published on a devoted website. See: https://officialgazette.gov.gy/index.php/9- general-info/274-draft-bills. 35 Specify the manner of publication per measure type (e.g., official journal, website or other); Establish processes to collect, compile and otherwise prepare draft documents for publication; Ensure the information is promptly available, accurate and relevant; Establish processes for periodic review and updating published informa- tion; and Ensure agency staff are aware of the obligation. c. Institutional Framework The institutions involved in the publication of laws and regulations can vary depending on the country and legal system. Some common institutions that may be involved in the publication of laws and regulations include: Legislative bodies: In many countries, legislative bodies are responsible for passing laws and regulations. They may also be responsible for pub- lication in the official gazette or alternative outlets. Executive bodies: In some cases, executive bodies such as government min- istries or agencies may be responsible for drafting and publishing regulations. The Judiciary System: In some countries, the judiciary system may play a role in interpreting and clarifying the meaning of laws and regulations. Court decisions may also be published to provide guidance on the inter- pretation of laws and regulations. Official gazettes: Official gazettes are often used to publish laws and regulations, and they may be published by government bodies or other organizations. Official gazettes are typically publicly available and serve as the official record of laws and regulations in a given jurisdiction. Legal publishers: In some cases, private legal publishers may be involved in the publication of laws and regulations. They may publish official gazettes or other legal materials for public use. 36 d. Human Resources and Training The capacity of officials involved in the publication of laws and regulations can vary depending on the specific context and their level of experience, but some common capacity-building needs may include: Legal and technical skills: Officials involved in the publication of laws and regulations may need training in legal and technical skills related to document formatting and electronic publishing. Knowledge of legal and regulatory frameworks: Officials may need training in the legal and regulatory frameworks that govern the pub- lication of laws and regulations in their jurisdiction. This may include training in the legal hierarchy, legislative processes, and requirements for official publication. Communication and stakeholder engagement: These skills may be necessary to effectively communicate legal and regulatory changes to the public, stakeholders, and other government agencies. It may include training in public relations, media engagement, and community outreach. Information management and technology: To effectively manage the publication process training in document management systems, database management, and digital publishing tools may be required. Quality control and quality assurance: To ensure the accuracy and completeness of legal and regulatory documents, training in editing and proofreading, peer review processes, and quality control standards may be required. Project management: Officials should be trained to effectively plan, manage, and implement publication projects, including timelines, budgets, and resource allocation. e. Information and Communications Technology ICT tools may be used to publish finalized or draft legal instruments, such as a website. In this case, general considerations regarding digital govern- ment services (see Measure 5: Digitalizing investment facilitation) should be observed. 37 4. Case Studies Box 3. Regulatory improvement platform of Costa Rica Challenge Costa Rica has focused on improving the business environment by reducing administrative burdens for citizens and business, including administrative simplification.34 Considering that com- petitiveness is a shared responsibility, depending on both the state, which must create a favorable climate for investment and business, and companies, which must strive for efficiency, innovation, and responsiveness to market challenges, the Gov- ernment of Costa Rica established (via the Department of Reg- ulatory Improvement) the strategic goal of promoting actions for regulatory improvement and simplification of procedures.35 Transparency of the regulatory changes is crucial for guaran- teeing predictability for citizens and businesses. Approach All regulations of Costa Rica are published on La Gaceta website.36 Additionally, the Government of Costa Rica launched the platform Trámites Costa Rica: Sistema de Simplificación de Trámites y Mejora Regulatoria, which enables users to search for procedures, regulations or draft regulations; plans for reg- ulatory improvement by agencies; public consultations (active or finalized) by subject and/or by agency; and a calendar of planned activities for monitoring and yearly regulatory improve- ment plans. Each draft regulation has summary information with general information on the agency responsible for imple- mentation, description of the regulation, type of cost involved in the implementation; legal requirement and legal information; form or flowchart, when applicable; comments on the draft regulation; and if the draft is part of the Regulatory Improve- 34 OECD. 2021. Indicators of Regulatory Policy and Governance 2021. Country profile: Costa Rica. 35 See https://tramitescr.meic.go.cr/viewpage//public/Direcciondemejoraregulatoria.html?verensitio=true 36 See https://www.imprentanacional.go.cr/ 38 ment Plan (Plan de Mejora Regulatoria). The platform publishes yearly plans of regulatory improvements for each agency, monitors accomplishments of those plans, and enables citizens to provide comments on those plans. Usually in November of each year, each agency’s Regulatory Improvement Plan drafts for the following year are submitted for public consultations. Results The Ministry of Economy, Industry and Commerce of Costa Rica has compiled a comprehensive list of procedures required to do business in the country, and the information is available to the public through the Trámites Costa Rica website. Draft regu- lations and regulatory improvement plans are made available to the public for comment and feedback. The specific details of the public consultation process may vary depending on the agency and procedure involved. Interested parties are usually given ten days to respond, but the period for public consultation can be longer depending on the complexity of the draft regula- tion. The decision-making process for regulations is supported by scientific or data-driven assessment whenever appropriate, ensuring that regulations are based on reliable information and evidence.37 To ensure accessibility and transparency, all proposed and final regulations and laws from all branches of the government are published digitally in the government registry called La Gaceta. This allows the public to easily access and review the regu- lations that are in effect or being considered. Overall, Costa Rica’s approach to business procedures and regulations aims to be transparent, consistent with international norms, and inclusive of public input. 34 OECD. 2021. Indicators of Regulatory Policy and Governance 2021. Country profile: Costa Rica. 35 See https://tramitescr.meic.go.cr/viewpage//public/Direcciondemejoraregulatoria.html?verensitio=true 36 See https://www.imprentanacional.go.cr/ 37 See https://www.state.gov/reports/2020-investment-climate-statements/costa-rica/ 39 5. Further Resources “Regulatory Risk and FDI”, Chapter 4 of the Global Investment Competi- tiveness Report 2019/20 (2020). “Citizen engagement in rulemaking -- evidence on regulatory practices in 185 countries”. Policy Research working paper no. WPS 7840 (2016). Measure 2: Availability and accessibility of information 1. Introduction In addition to being published (Measure 1), all investment-related information should be easily accessible. Accessibility refers to how quickly and easily investors can obtain the information they need to make informed decisions. If invest- ment-related information is published in a format that is difficult to read or understand, or if it is only available in a language that many investors cannot read or speak, then those investors may not be able to use that information ef- fectively. Similarly, if information is only available in a location that is difficult or expensive to access, then investors may not be able to obtain the information they need in a timely manner. Making investment-related information accessible means guaranteeing that the information is presented in a clear and understandable manner, available in multiple languages if necessary and accessible through multiple channels. This includes online portals or physical locations that are easily accessible to the public. When information is readily available and accessible, it can help reduce informa- tion asymmetry, which can lead to more efficient markets (see theory of change, Figure 27). The importance of availability and accessibility of investment-related information has also been recognized in the IFD Agreement (See Box 4). 40 Box 4. Availability and accessibility of investment-related information in the IFD Agreement The IFD Agreement includes an obligation on the availability of information to investors (Binding Art. 6.4 and Non-binding Art. 6.5). It includes the following requirements: Each Member/Party shall make available via electronic means information of importance to investors, and keep the informa- tion updated, as appropriate. Such information includes: laws and regulations specifically addressing foreign direct invest- ment, where they exist; information on which sectors are open, restricted or prohibited to foreign direct investment; where practicable, information on the practical steps relevant to invest in its territory. This information should cover, inter alia, the requirements and procedures, where they exist, related to: company establishment and business registration; connecting to essential infrastructure; acquisition and registering of property; construction permits; capital transfers and payments; the payment of taxes; public incentives available to investors; and resolving insolvency; contact information of relevant competent authorities Members/Parties that adopt or maintain measures of general application to facilitate outward foreign direct in- vestment, are encouraged to publish them or otherwise make them publicly available, including through electronic means. The IFD Agreement also includes an obligation regarding in- formation to be made publicly available if an authorization is required for an investment (Binding Art. 7). It includes the following requirements: If a Member/Party requires authorization for an investment in its territory, the Member/Party shall promptly publish or otherwise make publicly available in writing, to the extent 41 practicable via electronic means, and keep updated, the information necessary to comply with the requirements and procedures for obtaining, maintaining, amending and renewing such authorization. Such information shall include, inter alia, where it exists: the requirements including the relevant technical regulations and standards applicable to the respective investment; the relevant forms; procedures; indicative timeframes for processing of an application; au- thorization fees; opportunities for public involvement, such as through hearings or comments; procedures for appeal or review of decisions concerning applications; procedures for monitoring or enforcing compliance with the terms and con- ditions of authorizations; and contact information of the relevant competent authorities. To the extent practicable, the information in paragraph 7.1 should be made available in one of the official languages of the WTO. In addition, the IFD Agreement provides that no fees shall be imposed for access to information (Binding Art. 9). It includes the following requirements: No fee shall be imposed on any investor or person seeking to invest in a Member’s/Party’s territory for access to the measures or information provided under this section. Similarly, the IFD Agreement encourages Members to make information on the entry and temporary stay of natural persons for the purpose of conducting investment activities publicly available (Binding Art. 12). It includes the following requirements: Except as set out in paragraph 12.3, this Agreement shall not apply to measures by a Member/Party relating to the entry of natural persons into, or temporary stay in, its territory. For greater certainty, this Agreement shall not apply to measures affecting natural persons seeking access to the employment market of a Member/Party, nor shall it apply to measures regarding citizenship, nationality, residence or employment on a permanent basis. 42 To the extent practicable, each Member/Party shall make publicly available online information on the requirements and procedures for entry and temporary stay of natural persons in its territory, including, where applicable, relevant forms, documents, fees, and explanatory materials that will enable interested persons of any other Member/Party to become acquainted with applicable requirements and procedures. 2. Diagnostics There are several steps that can be taken to conduct diagnostics on whether investment-related information in a country is available and accessible: Identify the types of investment-related information that investors need: Before assessing accessibility, it is important to identify the specific types of information that investors need to make informed decisions. This can include information about investment opportunities, investment risks, regulatory re- quirements, among others (see further Section III below). Assess the availability of investment-related information: Determine whether the necessary investment-related information is publicly available in the country. This can include reviewing government websites, regulatory filings, and other public sources of information. Evaluate the accessibility of the information: Once the necessary informa- tion has been identified and located, evaluate how accessible it is to investors. This can include assessing whether the information is presented in a clear and understandable manner, whether it is available in multiple languages if necessary, and whether it is easily accessible through multiple channels, such as online portals or physical locations that are easily accessible to the public. Consider barriers to accessibility: Identify any potential barriers that may prevent investors from accessing the necessary information. This can include language barriers, literacy barriers, lack of internet access, or physical barriers such as geographic location or disability. Analyze the effectiveness of existing accessibility measures: Assess the effectiveness of existing measures to promote accessibility of investment-re- lated information, such as regulations, policies, or initiatives aimed at in- creasing accessibility. 43 Develop recommendations: Based on the results of the diagnostics, develop recommendations for improving the accessibility of investment-related infor- mation in the country. This can include recommendations for improving the availability and accessibility of information, addressing barriers to accessibil- ity, or implementing new measures to promote accessibility. 3. Implementation Principles Investment-related information may be made available in different ways including by different agencies, in a consolidated guide, or on an easily accessible website that lists the different types of information and provides links to other websites that contain the information. The best possible solution is to set up a single information portal (see Measure 5). If the information pertains to processes, the different steps to achieve different outcomes should be clearly outlined, and users should be able to navigate them easily. The type of information to be made available depends on the specific country context. Ideally, foreign investors should be able to obtain timely information on every regulatory measure that could materially affect their investments. However, the sheer number of laws and regulations and their complexity may mean it is not always possible to list them all. Relevant information for foreign investors may include the following: Laws and regulations specifically addressing FDI. Information on which sectors are open, restricted, or prohibited to FDI. Information on the requirements to invest in its territory, including: Company establishment and business registration. Authorizations. Connecting to essential infrastructure. Acquisition and registering of property. Construction permits. Capital transfers and payments. Hiring workers Payment of taxes. Public incentives available to investors. Imports and exports. 44 Resolving commercial disputes. Resolving insolvency. Access to local finance. Intellectual property protection and competition policy. Environmental and social requirements. Local corporate responsibilities. Other information that can be useful for investors to make a decision, including at a minimum: Macroeconomic data. Labor market data. Information about available infrastructure. Information about key sectors of the country’s economy – and the country’s value proposition. IPA websites are a natural information repository, but they often fail to provide all relevant information. The WBG-WAIPA joint global IPA survey found that just over half (51 percent) of IPAs reported having website sections for each priority sector. This suggests more can be done globally to promote detailed insights on priority sectors.38 In addition, only 70 percent offer an online investment guide available on their website or a printed version. The iGuides online platforms, designed by UNCTAD and the International Chamber of Commerce, provide international investors with essential up-to- date information on rules, economic conditions, procedures, business costs and investment opportunities in developing countries. Thirty economies have launched their iGuide, including Barbados39 and Antigua and Barbuda,40 and several other economies have undertaken measures to launch iGuide (e.g., Dominican Republic and Guyana). 38 Sanchiz Vicente, A. and Omic, A. 2020. State of Investment Promotion Agencies: Evidence from WAIPA-WBG’s Joint Global Survey. https://documents.worldbank.org/pt/publication/documents-reports/ documentdetail/499971594008431029/state-of-investment-promotion-agencies-evidence-from-waipa- wbg-s-joint-global-survey. 39 https://www.theiguides.org/public-docs/guides/barbados 40 https://www.theiguides.org/public-docs/guides/antigua 45 The way information is presented is just as important as the type of infor- mation that is provided. Information needs to be clearly articulated, made available in English and other relevant languages, and accessible through multiple channels. If a process, such as an authorization, is involved, necessary require- ments, relevant forms, indicative timeframes, fees, opportunities for public in- volvement, procedures for appeal, procedures for monitoring and compliance, and contact information of relevant authorities, should be provided. The information provided needs to be regularly updated, and it should be available at no cost. The frequency with which information will be updated should be stipulated. This can be either through incorporating new rules or amendments periodically, or on an ongoing basis. Investors expect to be able to obtain informa- tion about laws at no charge, so there should be no fees to access it. The following sections provide considerations for several dimensions of imple- menting this investment facilitation measure: a. Legal and Policy Framework A legal act or formal policy may be necessary to designate the government agency, agencies, or other entity that shall be responsible for publication via electronic means and updating of the information. At same time, a general empowerment of relevant institutions may suffice. Creating a legal require- ment may help formalize the practice and ensure that fees and charges are prohibited. Such a practice may be established in administrative procedure, regulations, or laws. The requirement could also be included in an investment law or other law or regulation defining the mandate and functions of the IPA. b. Procedures Typically, the authority or authorities responsible for publication establish formal procedures that would: Identify the types of measures/information that the authority will publish; Specify the manner of publication per measure type (e.g., official journal, website or other); Establish processes to collect, compile and otherwise prepare documents for publication; Ensure the information is promptly available, accurate and relevant; 46 Establish processes for periodic review and updating published informa- tion; and Ensure agency staff are aware of the obligation. In the case of an online registry, there is usually one institution in charge of the registry’s management, usually the regulatory oversight body (ROB) or regula- tion agency, but the agencies that oversee different procedures are responsible for submitting the information and for keeping it up to date. Mexico’s National Catalog for Regulations, Administrative Procedures and Services shows how this could be implemented (Box 5). Box 5. Mexico’s National Catalog for Regulations, Administrative Procedures and Services In 2000, the Federal Law on Administrative Procedure (LFPA) was reformed and created the Federal Regulatory Improve- ment Commission (COFEMER), the Mexican ROB, responsible for designing and implementing the regulatory improvement or better regulation policy at the federal level. Among other regulatory policy tools, the law also created the Administra- tive Procedures and Services Federal Registry (RFTS), which was an inventory for all federal administrative procedures and public services and managed by COFEMER. By law, the RFTS is binding, which means that federal administrative procedures not registered cannot be applied at all, and the registered ones cannot be applied in a different way than they are registered in the RTFS (e.g., a requirement that is not contained under the procedures’ form, cannot be requested). The way the RFTS is developed and updated is regulated by the LFPA, which establishes that the agencies in charge of the administrative procedures are also responsible for the informa- tion that is registered in the RFTS and the way it is updated. Through an intra-government electronic system, agencies send the information to COFEMER, and each administrative procedure has a unique ID assigned by the RFTS. COFEMER reviews the information and if it is validated, the informa- tion is published. In case the information is incomplete or with mistakes, COFEMER returns the information to the responsible 47 agency (e.g., Ministry of Environment) to correct the data and send it back for publication. The way the information is updated is through the Regulatory Impact Assessment (RIA) system. The RIA includes a section asking the responsible agency if the proposed regulation creates administrative procedures, or it eliminates or modifies existing ones. If it is a new adminis- trative procedure, the agency must send the information as requested by the RFTS. If it eliminates or modifies existing ad- ministrative procedures, the agency needs to provide the unique ID and indicate the way the information should be updated. In 2017, a Constitutional reform established that authorities from all levels of government (federal, state, and municipal), as well as the legislative and judicial branches, should implement better regulation policies. As a result, the General Law for Regu- latory Improvement was passed in 2018, which replaces the LFPA regarding the implementation of the better regulation policy. Additionally, the National Regulatory Improvement Commis- sion (CONAMER) replaced COFEMER. The new legal framework also replaces the RFTS with the National Catalog for Regula- tions, Administrative Procedures, and Services, which includes the: i) Administrative Procedures and Services National Registry; National Registry for Regulations; and iii) National Registry for Inspections (an inventory of inspections which also contains a list of authorized inspectors across the country). As such, the National Catalog now includes not only Federal but also State and Municipal administrative procedures. Administrative procedures’ information is submitted to 48 CONAMER through the State and Municipal Regulatory Im- provement Commissions or Agencies. The information is reg- istered and updated as described above with an additional subnational layer. Source: CONAMER, https://catalogonacional.gob.mx/. c. Institutional Framework An office or staff member in one of the involved agencies should be assigned the responsibility to prepare and keep updated the relevant information. The main institutions to be involved include: Executive Authority including Trade, Investment, Finance and any other relevant ministry IPA Sectoral regulators Regulatory Oversight Bodies including Governance and Regulatory Reform, Better Regulation agencies or equivalent National and subnational governments including central or federal, state or provincial, and municipal d. Human Resources and Training Capacity-building needs for officials can vary depending on the specific context and type of information to be published. Common skills that may be required include legal and technical skills, knowledge of legal and regulatory frameworks, communication and stakeholder engagement skills, information management and technology, quality control and quality assurance, general business skills, as well as project management skills (see Measure 1: Publica- tion and advance publication of investment measures as capacity-building needs largely overlap). e. Information and Communications Technology See Measure 5 (Digitalization of Investment Facilitation) for considerations around hosting relevant information on a digital platform. 49 4. Case Studies Box 6.ProColombia – Availability and Accessibility of Information Challenge In 1992, Colombia launched its first-ever IPA based on Decree 2505 of 1991, named Coinvertir, funded by government and private contributions managed from a trust fund, with private sector representatives accounting for half the seats on its executive board. After five years, it became financially untenable due to dwindling contributions from both parties. For many years, Coinvertir operated modestly compared to many other IPAs in the region. Despite its financial weakness and being largely short-staffed (15 staff members), it responded well to investor queries, disseminating excellent information and playing a positive advocacy role for improvements in the investment policy framework. Approach In 2005, Coinvertir was merged with Proexport, Colombia’s export promotion agency, a decision taken by a panel comprising several ministries, with the assistance of a consulting firm. Proexport was thus entrusted with the additional missions of promoting Colombia as an FDI and tourism destination, thus becoming Pro- Colombia in 2014 due its increased functions and results. Even if the merging of the two agencies was deemed risky at first, successive reconfigurations of ministries and synergy building exercises with government agencies, as well as several targeted communication campaigns placed ProColombia strongly to attract FDI meaningfully into Colombia as well as promote outward Colombian investment. Results ProColombia through its successive mandate reconfiguration and adaptation to new challenges has developed sound infor- mation tools to attract FDI quite effectively. Its investment 50 section of Procolombia’s website is very complete and com- prehensive. It contains a description Colombia’s value proposi- tion, its key sectors, and a full legal guide to invest in Colombia updated every year comprised of several sections. Sections include foreign investment protection, exchange regime, corporate affairs, foreign trade, labor regime, immigration regime, tax regime, environmental regime, energy market, intel- lectual property, real estate, state contracting, and accounting regime. It also has a portal showing key investment opportuni- ties per sector and value range. See further: UNCTAD (2006). Investment Policy Review of Colombia. https://unctad.org/system/files/official-document/iteipc200511_en.pdf and Procolombia’s website https://procolombia.co/. 5. Further Resources Global Investment Promotion Benchmarking Guide Reference List 1. “Citizen engagement in rulemaking -- evidence on regulatory practices in 185 countries”. Policy Research working paper no. WPS 7840 (2016). 2. “Regulatory Risk and FDI”, Chapter 4 of the Global Investment Competitiveness Report 2019/20 (2020). 3. “Policy Framework for Investment 2015 Edition”, OECD (2015). 4. “Institutions Guaranteeing Access to Information: OECD and MENA Region”, OECD (2019) 5. “Background Document on Public Consultation”. OECD. 6. “State of Investment Promotion Agencies: Evidence from WAIPA-WBG’s Joint Global Survey” (2020) 7. “Transparency”, UNCTAD Series on Issues in International Investment Agreements (2011). []. 8. “Global Investment Competitiveness Report 2019/2020: Rebuilding Investor Confidence in Times of Uncertainty” (2020) 9. “Global Indicators of Regulatory Governance”. World Bank. 51 B. Improving the efficiency and effectiveness of investment-related administrative procedures Efficient and effective authorization procedures can enhance transparency, predictability, and legal certainty and can help improve trust between investors and the government. A sound service delivery framework for au- thorizations reduces the compliance burden for investors by creating more accessible and streamlined procedures. It also reduces the administrative burden for the gov- ernment by leveraging shared assets and infrastructure between the relevant authorities. This section focuses on three key aspects of efficient authorization procedures: 1) Streamlining investment authorization procedures (Measure 3), which focuses on service delivery including principles, fees, procedures, and applications. 2) Streamlining investment screening and approval mechanisms (Measure 4), which focuses on the policies and procedures relevant for ex-ante screening, i.e., screening of the foreign investment project before it can be initiated.41 3) Digitalizing investment facilitation (Measure 5), which focuses on enhancing service delivery through online informational, navigational, and transactional services. 41 Ex ante is a Latin term for ‘beforehand or prior to’. In the current context ex-ante screening means a process where a foreign investment is subject to a scrutiny to decide whether such investment can be admitted into the country. Since this process happens even before the investment enters the country, FDI screening is referred to as an ex-ante approval. 52 Measure 3: Streamlining Investment Authorization Procedures 1. Introduction Over the past 20 years, governments have made consistent efforts to improve gov- ernment to business (G2B) services, including authorizations. The overall objective has been to improve services, increase government efficiency, enhance regulatory oversight and compliance, and reduce opportunities for corruption. These efforts include reforms of the legal framework such as introducing a common framework for authorizations and authorization procedures. They also include reforms to the insti- tutional and administrative framework for managing and processing authorizations, such as realigning regulatory authorities, introducing service delivery standards, and redesigning services. Efforts include reforms to the technology framework, such as digitalizing and integrating authorization procedures through online single windows, leveraging shared assets and infrastructure, and improving data exchange between government authorities to enable more client centric approaches to service delivery. For more information on this see Measure 5: Digitalizing investment facilitation. The trend of these efforts is to standardize and integrate services, but there is a broad spectrum of maturity of reforms across countries. For example, in the case of transactional services, some countries have focused on select authorizations with less regard for the overall end-to-end authorization process from the investor’s point of view. In other cases, governments have streamlined and co-located G2B service delivery through physical One Stop Shops or Single Windows while others have leveraged digital technologies to streamline authorization procedures. In some cases, services may be offered through a single portal but without integration. More mature solutions include streamlining select transactional services through online single windows with full online integration through client-focused services. This chapter discusses Articles 13 - 17 Bis of the IFD Agreement, which focus on the service delivery aspects of authorizations, including principles, fees, proce- dures, and applications. These measures can be broadly summarized as “stream- lining investment authorization procedures.” They are designed to ensure impartial, efficient, and transparent procedures. The overall objective of these measures is to encourage Members to introduce and maintain authorizations based on sound reg- ulatory principles and to set reasonable authorization fees and transparent pricing 53 policies. For a summary of the requirements under these measures see Box 7 below. Also, Figure 28 presents an example of a theory of change for reforms on stream- lining investment authorizations, and Table 10 includes outputs and outcomes KPIs to monitor the reform process progress. Box 7. Streamlining and speeding up administrative procedures in the IFD Agreement The IFD Agreement includes an obligation to streamline and speed up administrative procedures (Binding Art. 13-17 Bis). It includes the following requirements: Each Member/Party shall ensure that all measures of general application within the scope of this Agreement are administered in a reasonable, objective and impartial manner. Each Member/Party shall ensure that authorization proce- dures it adopts or maintains do not unduly complicate or delay investment activities. If a Member/Party adopts or maintains measures relating to the authorization for an investment, the Member/Party shall ensure that: such measures are based on objective and transparent criteria; the procedures are impartial, and that the procedures are adequate for applicants to demonstrate whether they meet the requirements, where such require- ments exist; and the procedures do not in themselves unjus- tifiably prevent the fulfilment of requirements. The assessment by a Member’s/Party’s relevant competent authorities of an application for authorization shall be made on the basis of criteria set out in a measure in accordance with its legal system. If a Member/Party requires authorization for an investment, it shall ensure that its competent authorities: 54 Application periods to the extent practicable permit submission of an appli- cation at any time throughout the year. If a specific time period exists for applying for an authorization, the Member/ Party shall ensure that the competent authorities allow a reasonable period for the submission of an application; Acceptance of authenticated copies accept copies of documents that are authenticated in accordance with the Member’s/Party’s laws and regula- tions, in place of original documents, unless the competent authorities require original documents to protect the integrity of the authorization process; where a competent authority of a Member/Party requires and holds original documents, any other competent authority of that Member/Party shall, to the extent that it is con- sistent with the Member’s/Party’s laws and regulations, accept an authenticated copy from the applicant or, where applicable, a copy from the authority holding the original; Processing of applications to the extent practicable, provide an indicative timeframe for processing of an application; at the request of the applicant, provide without undue delay information concerning the status of the application; to the extent practicable, ascertain without undue delay the completeness of an application for processing under the Member’s/Party’s laws and regulations; if they consider an application complete for processing under the Member’s/Party’s laws and regulations , within a reasonable period of time after the submission of the application, ensure that: the processing of the applica- tion is completed; and the applicant is informed of the decision concerning the application, to the extent possible in writing ; 55 Treatment of incomplete applications if they consider an application incomplete for process- ing under the Member’s/Party’s laws and regulations, within a reasonable period of time after the submis- sion of the application, to the extent practicable: inform the applicant that the application is incomplete; upon request of the applicant, identify the additional informa- tion required to complete the application, or otherwise provide guidance on why the application is considered in- complete; and provide the applicant with the opportunity to provide the additional information that is required to complete the application; however, if none of the above is practicable, and the ap- plication is rejected due to incompleteness, ensure that they so inform the applicant within a reasonable period of time after the rejection decision; and Rejection of applications if an application is rejected, to the extent practicable, either upon their own initiative or upon request of the applicant, inform the applicant in writing of the reasons for rejection and, if applicable, the procedures for resub- mission of an application. An applicant should not be prevented from submitting another application solely on the basis of a previously rejected application. The competent authorities of a Member/Party shall ensure that authorization, once granted, enters into effect without undue delay, subject to applicable terms and conditions. Each Member/Party shall, to the extent practicable, avoid requiring an applicant to approach more than one competent authority for each application for authorization. If an invest- ment is within the jurisdiction of multiple competent authori- ties, multiple applications for authorization may be required. 56 In such cases, to the extent practicable and in accordance with its legal system, each Member/Party is encouraged to utilize a single-entry point for the applications. Members/ Parties may use the single information portal referred to in paragraph 8.1 under Section II for that purpose. Each Member/Party shall ensure that the authorization fees charged by its competent authorities, where they exist, are reasonable, transparent, based on authority set out in a measure, and do not in themselves restrict investment ac- tivities of investors of another Member/Party. Each Member/Party shall accord, to the extent practicable, an adequate time period between the publication of new or amended authorization fees and their entry into force, except in urgent circumstances. Such fees shall not be applied until information on them has been published. Each Member/Party shall ensure that its competent au- thorities, with respect to authorization fees they charge regarding financial services, provide an applicant with a schedule of fees or information on how fee amounts are determined. Members/Parties shall not use such fees as a means of avoiding the Member’s/Party’s commitments or obligations under this Agreement. 57 2. Diagnostics The IFD Agreement assumes a broad definition of the term “authorization”42 and therefore Articles 13-17 Bis have implications for different types of ex-ante reg- ulatory instruments that investors need to obtain such as notifications or reg- istrations, licenses, and permits. These authorizations will naturally be scattered across different laws and regulations. Some of these laws and regulations may be at the economy-wide level (e.g., Horizontal Business Licensing Law), and some will be at the sectoral level (e.g., authorizations required by the Ministry of Health). Some of these laws and regulations may relate to authorizations that apply only to foreign investors, while others to both domestic and foreign investors. Given this scope, the recommended approach would be a comprehensive mapping of all authorizations and authorization procedures within the Member’s juris- diction. Mapping of authorizations and authorization procedures serves as the basis for a gap analysis and should capture all the key information about an authorization (see Box 7 for more information on the key information). In some jurisdictions, some of this information is readily available and consolidated in a registry of regulations, and a registry of administrative procedures. If such reg- istries are available, they can be used as a starting point for the diagnostic. The mapping could even be fast-tracked if the registry of regulations contains consol- idated legal texts in digital form. In this case the mapping can be semi-automat- ed by applying emerging technologies to identify the relevant laws and regula- tions. For more information, see Measure 5: Digitalizing investment facilitation. In the absence of such registries, the mapping will need to be conducted manually. This could result in the creation of a registry which has multiple benefits. First, it facilitates assessing the stock and controlling the flow of authorizations. It can also help with the creation of an effective informational portal.43 It can be used as a building block for future analysis regarding the compliance of existing authorizations with the spirit and the letter of this Agreement, or for any other assessments on authorizations. Lastly, such a registry can provide legal certainty to investors. For example, in Mexico, the law establishes that i) all requirements and administrative procedures should have a legal basis, or they cannot be regis- tered in the registry; and ii) the authorities can only require from investors what is published in the registry. 42 The Agreement defined the term “authorization” as the permission by a competent authority to pursue investment activities, resulting from a procedure an investor must adhere to in order to demonstrate compliance with the necessary requirements. 43 See for example, Article 8 of the IFD Agreement, see Measure 5: Digitalizing investment facilitation. 58 A comprehensive assessment of all authorizations will take time, depending on the resources available for data collection and analysis. Alternatively, a diagnostic could be conducted with a narrower scope by focusing on a select number of authorizations. For example, the diagnostic could prioritize one or more sectors (e.g., all authorizations required in the manufacturing sector), or one or more domains (e.g., authorizations in the environmental domain). See Table 3 below for an overview of the options. Table 3: The scope of the in-depth diagnostic can vary Option 3 - Specific In-depth regulatory area/ diagnostic Option 1 - Economy service (e.g., business Option 2 - Sectoral scope & wide registration, foreign approaches investment licenses etc.) All authorizations, including horizontal authorizations which All authorizations apply to all investors issued in one or more All authorizations in (e.g., foreign, and regulatory areas, or all one or more sectors Scope domestic, across classified based on authorizations issued by sectors), and one or more regulators the ISIC standard sector-specific classified based on the authorizations, ISIC standard classified based on the ISIC standard 1. Initiate comprehensive mapping of all authorization procedures within the diagnostic’s scope. 2. Build database of authorization procedures by codifying each authorization with a unique ID. 3. Conduct gap analysis of mapped authorizations against the requirements in the Agreement and assess the institutional capacity of the competent authorities. 4. Draft high-level concept on reforms needed to address gaps identified in Approach the gap analysis. 5. Draft action plan on how to address gaps and align with the Agreement’s text. 6. Implement necessary reforms (e.g., introduce amendments to laws and regulations, develop Standard Operating Procedures, standardized forms and process diagrams, etc.). 7. Monitoring and evaluation. 8. Design and coordinate further improvements to close implementation gaps. 59 The approach and prioritization for the diagnostic could be determined based on the broader government strategy to attract investment and develop certain sectors. It could also be determined by conducting a rapid diagnostic to identify priority areas based on which authorizations are perceived as most problematic for investors. Alternatively, these could be determined based on a combination of the government’s priorities in terms of facilitating investment to select priority sectors, and the identification of bottlenecks through a rapid diagnostic. The institutions that should be contacted for a diagnostic will depend on the scope. Irrespective of the scope, it may be helpful to involve the Ministry of Economy or equivalent (e.g., Ministry of Commerce or Ministry of Trade & Investment), in the dialogue, as the coordinating Ministry for matters relating to investment and competitiveness. The duration of the diagnostic will largely depend on the type and scope of the assessment. For example, an initial assessment aiming to identify priority areas can be completed within a few weeks. An in-depth diagnostic that includes a detailed mapping and gap analysis will require more time and resources. The latter will depend on the scope of the in-depth diagnostic (i.e. select priority sectors v. economy-wide). This in-depth mapping is the foundation for any subsequent analysis. It is a pre-requisite for the gap analysis which will identify areas of misalignment between the legal framework and practices in the jurisdictions, and the policies in the Agreement. Moreover, the mapping can be used to identify overlaps and du- plications between existing authorizations and authorization procedures. Lastly, it can be used to build the transparency portal which is prescribed in Article 8 of the IFD Agreement. For more information on this see Measure 5: Digitalizing investment facilitation. Sources to be consulted: A diagnostic to implement these measures must combine information from various sources including desk research, interviews with regulators who issue authorizations, and consultations with the private sector. The primary sources for a diagnostic can be summarized as follows: 1. All relevant laws and regulations that govern the authorization procedures within the scope of the diagnostic. This should be the starting point of an in-depth diagnostic and it should constitute the foundation of the legal and institutional mapping. 60 2. Competent authorities who issue authorizations should be consulted to validate the findings of the legal and institutional mapping and understand their capacities and plans for reform. Moreover, the competent authorities can provide information which cannot be accessed through desk research. For example, the extent to which a competent authority exchanges data with other authorities and obtains information ex officio cannot be easily identified through desk research. Additionally, interviews with the competent authori- ties can be helpful in terms of identifying gaps and/or divergence between the legal framework and practice. 3. Businesses could also be consulted to validate specific information on the de facto analysis and identify the most important gaps between the practice and the policies in the IFD Agreement. At the same time, identifying busi- nesses that have up-to-date experience with obtaining authorizations can be challenging. Indices to be consulted: International indices can be used as a proxy for assessing the degree of com- plexity and opacity of authorizations and potentially identifying priority areas. For example, the World Bank’s Enterprise Surveys (ES) includes indicators on the senior management time spent dealing with the requirements of gov- ernment regulation (%), the number of days to obtain an operating license, an import license, and a construction-related permit. More importantly, the index includes an indicator on the percentage of firms that identify business licensing and permits as a major constraint for their operations. Similarly, the now discon- tinued Doing Business Report captured data on select authorization procedures (e.g., starting a business and construction permits). Although the data is not being updated as of 2020, it could still be used as an initial point of reference. The World Bank’s forthcoming Business-Ready survey could also be used as a reference point for select types of authorizations. Moreover, the OECD’s Product Market Regulation (PMR) indicators provide information on product market reg- ulations. They measure the regulatory barriers to firm entry and competition in a broad range of key policy areas, ranging from licensing and public procurement to governance of State-Owned Enterprises (SOEs), price controls, evaluation of new and existing regulations, and foreign trade. In particular, the sector PMR indicators can be used as a proxy for investment related authorizations since they measure regulatory barriers to firm entry and competition at the level of individual sectors, with a focus on network industries, professional services, and retail distribution. 61 3. Implementation Principles The scope of a diagnostic can be adjusted depending on resources and priori- ties. In turn, the implementation approach will largely depend on the gaps iden- tified by the diagnostic, and the scope of the reform. General considerations for the implementation of streamlined investment authorization procedures include: i. Map the key information on business authorizations and business authoriza- tion procedures. ii. Set up technical working groups within the government to validate the findings of the in-depth mapping and identify actionable measures to address the gaps and improve authorization procedures. The technical working groups can also help identify overlap and duplication between au- thorizations, as well as redundancies in authorization procedures, iii. Identify gaps and consider options for mandating improved regulatory practices related to authorizations and authorization procedures. This may require amendments to the legal framework (e.g., Box 8 below), enactment of one or more horizontal laws, and/or activities at a more downstream level, such as developing SOPs, standardized forms etc., iv. Engage with the agencies that issue authorizations during the legislative process is important to assess their potential constraints in service delivery, v. Enact or amend laws to align the national legal framework with the Agreement may be required. At the same time, a legal reform may not be enough to ensure adequate implementation. Additional efforts at the downstream level are typically necessary, such as developing or redesigning Standard Operating Procedures, process workflows and new input and output forms, vi. Monitor implementation, especially in the first year, to address any issues (see the M&E section for more details), vii. Conduct a partial or full redesign of input and output documents, data management, and workflows if appropriate. Investments may be needed in terms of developing these new tools and capacities. In this context, the possibility to leverage digital technologies should also be explored in the new design (see Measure 5: Digitalizing investment facilitation). viii. Consider options to embed feedback collection from the private sector in the authorization process, to validate alignment with the Agreement. The following table (Table 4) provides a summary overview of key implementation measures, as well as the optional measures for streamlining investment authori- zation procedures. The subsequent sections elaborate on details across legal and 62 policy frameworks, procedures, institutional frameworks, human resources, and information and communications technology. Table 4. Key and optional implementation measures for streamlining investment authorization procedures KEY IMPLEMENTATION MEASURES OPTIONAL MEASURES - All authorizations serve a clear public - A legal framework for business licensing policy objective and have a clear legal which is based on risk management basis, ideally in primary legislation. principles (also known as risk-based regulation). - The legal framework clearly prescribes all the key information about an - A “digital-ready” legal framework, that authorization (e.g., processes and enables end-to-end digitalization of the procedures, mandated time-limits, authorization process. grounds for rejection etc.). - Integration of input data requirements - All authorizations are based on (e.g., through a single application form so administrative processes and the that applicants can apply for two or more decisions are based on clearly defined authorizations, without having to submit/ criteria. fill out the same data multiple times). - Standard Operating Procedures - Single entry point through which that incorporate the Agreement’s investors can apply for multiple requirements, such as on how to handle authorizations related to an investment. incomplete applications, how to enable resubmission of applications etc. - Authorization fees which are set at cost recovery. - Standardized forms for data management, such as standard input and - The legal framework for each output documents with clear indication authorization process awards electronic of mandatory and optional data documents the same legal weight as the requirements. original hardcopy documents. - Clear, exhaustive, and publicly available - Common data dictionary/vocabulary for requirements for each authorization integrated forms (including technical, procedural, documentation, and fee-related - Oversight mechanism that monitors requirements). implementation of authorization procedures, identifies implementation - Clear criteria for decision making on gaps and proposes improvements in authorizations, clear grounds for rejection service delivery. and limited scope for discretion by the - Authenticated copies of original competent authorities. documents are accepted in authorization - The authorization fees are not procedures. discriminatory against foreign investors. - When original documents are maintained by a competent authority, other competent authorities in the country shall accept authenticated copies of that document (either by the applicant or ex officio) 63 a. Legal and Policy Framework There is no one-size-fits-all approach to ensure that all authorizations adhere to good regulatory practices, that procedures are streamlined, and that fees are reasonable and transparent. The implementation approach to the legal framework will depend on the scope and findings of the in-depth diagnostic. If an economy-wide diagnostic identifies signifi- cant gaps between the existing legal framework and the IFD Agreement, a horizontal legal framework could be used to define some aspects at a higher level, such as the key principles, high-level processes, timelines for process- ing authorizations, and grounds for rejection. More granular aspects such as the specific documentation requirements and fees that apply to each au- thorization could be regulated through sector-specific laws and regulations. Some countries have introduced horizontal laws, also known as a horizon- tal framework, that apply to all administrative procedures. A horizontal law could be, for example, a law on administrative procedures that sets a framework for the delivery of fair, transparent, and accessible administrative procedures to all citizens and businesses. Creating a horizontal framework can set out the principles and minimum standards that must be followed by administrative bodies to ensure that procedures are conducted in a manner that is consistent with the rule of law and good governance. This framework can apply to all G2B, G2C and G2G procedures. Any sectoral laws on authorizations (e.g., the Investment Law, the Business Registration Law, the sectoral business licensing laws etc.) would need to align to the horizontal law on Administrative Procedures. Therefore, significant efforts are required by each Ministry in terms of aligning their legal frameworks with the horizontal law and developing new processes to implement the new legal framework. Peru, Costa Rica, and Mexico are examples of countries that have enacted such horizontal laws on Administrative Procedures. Some countries have introduced horizontal laws that apply to certain types of authorizations. For example, some countries have enacted a common legal framework for business registration procedures. This approach can enable implementation of a unified approach to processing applications irrespective of the legal entity type. Other countries have enacted horizontal laws that apply to business licensing and permits. These laws typically introduce a framework that 64 establishes the i) principles44 to which every existing and new business license must adhere to, ii) the high- level processes that applicants and competent authorities must follow, and iii) the rights and obligations of applicants and competent authorities. Like the law on administrative pro- cedures, the horizontal business licensing law approach aims to set an overarching framework, while providing some level of flexibility to the competent authorities that issue authorizations to define their require- ments such as the regulatory instrument that applies to each authoriza- tion they issue (e.g., license, registration etc.), the requirements, fees, and criteria for approval. The benefit of this approach is that all authorities must adhere to a common framework for all or most authorizations to businesses. This common framework can be more detailed compared to the law on administrative procedures, since the latter applies to all procedures, not just authorizations. This approach can also help control the flow of new authorizations by establishing minimum criteria that new authoriza- tions must meet before they can be introduced in the legal framework, for example requiring a cost-benefit analysis for all new authorizations. Brazil has implemented a legal framework based on economic freedom principles for a unified approach to business registration, authorization and licensing. In some cases, the horizontal law may also mandate a specific framework for service delivery. A jurisdiction may implement a single information portal and require all competent authorities to publish information about the authorizations they issue in a centralized portal, or they may require that all e authorizations are digitalized through a centralized platform. For more details on this, see Measure 5: Digitalizing investment facilitation. Some countries choose to focus only on reforming the sectoral legal frame- works for authorization, without mandating an umbrella framework. This approach may be easier to implement for some forms of authorization such as business registration or foreign-investment-related authorizations. However, for other types of authorizations such as licenses and permits, this approach may make it more challenging to ensure uniformity. 44 For example, horizontal laws on business licensing typically refer to principles such as the presumption of freedom (i.e., that businesses are free to operate without a license, unless there is a law that explicitly prohibits them from doing so), the principle of least intervention (i.e., that the government should only intervene in the economy when absolutely necessary to protect the public interest), the principle of proportionality (i.e., that any government intervention must be proportional to the risks posed by each economic activity), and the principle of transparency (i.e., that the government must publish all laws and regulations governing business licensing), among others. 65 No matter the approach, the legal framework should adhere to minimum requirements as described in the Agreement. Each authorization must have a clear legal basis, ideally in primary legislation. It should serve a clear regulatory objective (e.g., protection of public health, consumer protection etc.) and it should not discriminate against foreign investors by introduc- ing more onerous requirements compared to domestic investors. In some cases, additional requirements for foreign investors may be necessary (e.g., authenticating documents with a Hague Apostille), but these requirements should be reasonable, proportional to the objective, and non-discriminatory. Authorizations should not be used merely to mobilize revenue (i.e., implicitly introducing para-fiscal charges). They should be based on cost recovery prin- ciples. Finally, the legal framework should clearly articulate all key informa- tion about each authorization (Box 8). Box 8. Legal framework on investment authorization procedures The legal framework should clearly articulate the following information for each authorization to ensure compliance of the domestic legal framework with the Agreement. Identify the competent authority for issuing the authorization including contact information for inquiries e.g., address, main focal point, telephone number, and email address. List any documentation requirements. Detail any technical requirements. Describe all processes and procedures. Define the window during which investors can submit applications. Mandate time-limits for processing including if silent consent is applicable. Lay out criteria based on which applications are evaluated. Outline a framework to handle rejections and clearly state the grounds for rejection, which must be exhaustive, clear, concise, specific, and consistent with the purpose of the authorization. 66 Disclose obligations of the competent authorities towards applicants. Outline the framework for acceptance of authenticated documents and authenticated copies. Outline the framework to handle incomplete applications and any limitations in terms of rectifying and resubmitting applications. List all applicable fees. Include the date of effectiveness of authorization decisions from the time of issuance. b. Procedures Processes and procedures should be prescribed in the legal framework to ensure uniformity across the jurisdiction. At the same time, ensuring implementation of the legally mandated processes and procedures requires efforts by the process owners. For example, implementing this measure typically requires developing or redesigning Standard Operating Procedures (SOPs), and standardized forms for data management (e.g., standard input and output forms). Ideally, the input and output forms should fulfill the data requirements of as many competent authorities as possible. SOPs are an important tool to standardize service delivery practices and ensure consistency on the treatment of applications. SOPs are also a pre- requisite for developing detailed, optimized process diagrams with all the pro- cedures and processes, documentation requirements, decisions, and roles and responsibilities. SOPs are also necessary prior to any digitalization efforts (see Measure 5: Digitalizing investment facilitation). Developing streamlined SOPs typically requires business process analysis. This entails conducting a granular process mapping of the existing service delivery framework (As-is mapping), and identifying opportunities to streamline procedures, and improve data management (of the to-be framework). The development of SOPs is an oppor- tunity to review and assess the efficiency of existing practices. This assess- ment can help identify procedures with limited value addition to the overall process, which may have been maintained due to inertia without serving a clear regulatory purpose. SOPs are necessary to ensure a consistent appli- cation of the legal framework and implementation of the good regulatory 67 practices promoted by this measure. Lastly, implementation of new SOPs and process diagrams may also require developing guidance and training to staff members about how to implement the new framework. Standardized input data and output data forms are an important component of standardizing service delivery practices, ensuring consis- tency, and improving efficiency. Standardized forms for data collection can help integrate authorization procedures between different competent authorities, provided that the relevant stakeholders co-develop the forms. Ideally, the input data and output data forms should satisfy the data re- quirements of as many competent authorities as possible to eliminate overlap and duplication in data submissions. This requires mapping all the data requirements of each competent authority involved in the authoriza- tion process, identifying overlaps and duplications, and designing new forms with the maximum consolidation of data requirements. Developing an inte- grated output form can be facilitated by developing a common vocabulary between the competent authorities who plan to share the same integrated input form. The common vocabulary means all competent authorities use the same terminology, which can simplify service integration and data exchange. The standardized forms can also facilitate the completeness check, which is required by this measure, and allow the competent authorities to provide quick feedback to the investor in the case of errors or omissions in the ap- plication. This task can be fully automated by developing online forms with input data validation rules (see Measure 5: Digitalizing investment facilita- tion for a more detailed discussion on this). c. Institutional Framework Authorizations are issued by different competent authorities across various levels of government and across different economic sectors. As a result, while there can be an overarching framework law on Administrative Procedures or horizontal laws on some types of authorizations, there cannot be a single in- stitutional framework for all authorizations. There are some aspects of the in- stitutional framework which are relevant for this measure: i) ensuring that the competent authorities have an adequate organizational structure to implement SOPs, ii) considering options for oversight, and iii) considering the institutional arrangements for implementing service integration (e.g., single point of entry). The development and implementation of SOPs requires that the competent authorities have a clear organizational structure with well-defined roles and responsibilities for their staff. This is important since the SOPs will need to be developed with reference to the organizational structure in each 68 competent authority. A clearly defined internal structure will need to be in place before the SOPs and the detailed process diagrams are developed. Some countries have implemented oversight mechanisms which are tasked with designing and monitoring implementation of business regu- latory reforms (e.g., a Regulatory Oversight Body or ROB). In some cases, such bodies have a clear mandate to monitor implementation with a specific set of authorizations (e.g., business licenses). In other cases, these bodies have a broader mandate which may include other G2B services as well. Oversight bodies typically sit at the Ministry level, and they are usually housed in the Ministry responsible for the investment and competitive- ness agenda (e.g., Ministry of Economy, Ministry of Trade & Investment, Ministry of Industry & Commerce or equivalent). The oversight body is sometimes formally introduced with a permanent institutional structure and a clear mandate based on the law, but it can also exist based on less permanent arrangements (e.g., cabinet’s decision). An oversight body can help coordinate reforms that require cooperation of several Ministries (e.g., alignment of sectoral laws on authorizations, with an umbrella law on autho- rizations), and monitor implementation of the legal framework. The institutional framework should include monitoring to ensure that reforms are adequately implemented. There are several options to monitor implementation. It may include self-monitoring, whereby the competent au- thorities are responsible to monitor their own implementation efforts. This may involve conducting regular audits of their procedures and processes to ensure that they are in line with the new requirements. It may also involve publicly reporting on their progress in implementing reforms (e.g., annual reports) and aligning their operations with the horizontal framework (if applicable). It could also include external monitoring whereby an independent monitoring body oversees implementation across one or more competent authorities. A complaints mechanism may also be established, whereby complaints are investigated by the competent authorities or by an external monitoring body. It may include a combination of the above options. Regardless of the approach, it may be helpful to develop a performance management framework to monitor implementation and identify bottlenecks in service delivery. The most accurate, scalable, and efficient way to implement a performance management framework is through a digital solution. For example, if process workflows are automated, performance indicators can be implemented at the case file level, or even at the individual process task level. This can enable 69 identifying bottlenecks in authorization procedures at a granular level and help optimize workflows. It can also help automate oversight to some extent by enabling monitoring KPIs through management oversight dashboards. For a more extensive discussion on the KPIs, see the Appendix (Table 10). It is also important to ensure that administrative decisions can be appealed and reviewed by a body that has some degree of independence from the body issuing the initial decision. Depending on the authorization, the second level body could be a higher-level authority in the executive branch such as a Minister, or a designated body such as administrative inspectors who monitor implementation of administrative procedures and take appropriate measures in case of non-compliance. Alternatively, in some countries the Administrative Courts review administrative decisions and actions for compliance with the law and ensure proper implementation of administrative procedures. The benefit of using the Administrative Courts (which is not mutually exclusive with the option of an oversight body in the executive branch), is that they can provide an addi- tional layer of independence in the case of a complaint. See Measure 7: Appeal and Review Mechanisms for a more detailed discussion on appeals mechanisms. Lastly, reforms to the institutional framework may be necessary in the case where the Member aims to assign responsibility to an agency or authority to operate as a single-entry point for the submission of appli- cations. Service integration requires cooperation of at least two or more organizations and depending on the degree of integration pursued, institu- tional arrangements may be required. These institutional arrangements may include softer instruments, such as memorandums of understanding (MoU) and service level agreements (SLA) that define the relationship between two more organizations when delivering an integrated service (e.g., roles and responsibilities, service standards, procedures etc.). The responsibility to operate as a single-entry point can also be defined through more binding instruments, such as a law and be part of a broader government strategy for service integration. d. Human Resources and Training Adequate implementation of the measure may also require change man- agement and capacity-building. This will depend on the gaps identified by the diagnostic analysis, and the level of transformation pursued. For example, in the case where new SOPs are developed, and/or services and forms are integrated, staff in the competent authorities will need to be trained on the new processes and tools. In the case where service delivery for authoriza- tions is overhauled (e.g., by integrating multiple authorizations through a 70 single-entry point) a more comprehensive change management strategy will be required to ensure a smooth transition. For example, it may be helpful to develop process manuals with detailed guidance to staff on how to handle cases, how to troubleshoot on different scenarios etc. These manuals can also be used to onboard new staff. e. Information and Communications Technology Members can complement their efforts to implement this measure by le- veraging digital technologies. This is particularly relevant in the case of Articles 15 and 16 of the IFD Agreement according to which Members are encouraged to permit submission of applications at any time throughout the year and enable the submission of multiple applications through a sin- gle-entry point. Measure 5 includes a more detailed discussion on the ICT measures on this topic. 4. Case Studies Box 9. Implementation of Laws on Administrative Procedures in Peru Challenge Peru has focused on improving the quality of regulations and procedures for at least three decades, by standardizing reg- ulatory procedures and streamlining administrative proce- dures. Peru has issued a framework law for legislative pro- duction and systematization (Ley Marco para la Producción y Sistematización Legislativa) in 1997. Furthermore, Peru also focused on administrative simplification of formalities and issued, in 2001, the General Law of Administrative Procedure (Ley de Procedimiento Administrativo General), which has been amended several times since. Peru has faced several challeng- es for simplification of procedures, including staff turnover, difficulties for integration of systems and cooperation from different agencies. Approach In 2001, the General Administrative Procedure Law is approved, which includes provisions to regulate the approval of admin- 71 istrative procedures, their requirements and costs, as well as their systematization in the TUPA - Single Text of Adminis- trative Procedures. In the last couple of decades, Peru has im- plemented several measures for administrative simplification, such as publication of National Plans for Administrative Sim- plification (in 2010 and 2013), implementation of interopera- bility for service integration, publication of a National Policy of Modernization of Public Management (in 2013), and launch of a platform for elaboration, approval and publication of TUPA (in 2016). This platform, called Sistema Único de Trámites (SUT), enables simplification through reduction of processing fees, times, requirements, deadlines and elimination of administra- tive procedures and services. SUT also provides a repository of all administrative procedures and services. In 2016 Peru issued a Legislative Decree prohibiting public agencies to request unnecessary information or information that could be obtained through interoperability with public agencies. The latter is related to the once only principle… Data sharing has been a key element in the simplification of admin- istrative procedures in Peru, through the Plataforma de Interop- erabilidad del Estado (PIDE). Results The Government of Peru reported 30% reduction of procedures and 1300 requirements from 2017 to 2019. SUT, the single procedures system, enables the Secretariat of Public Manage- ment to monitor enforcement of the rules for administrative simplification, increases transparency and reduces discretion- ary procedures. As of 2021 almost 500 public agencies were in the process of systematizing their TUPA through SUT. In 2021 Peru issued 9 Decrees that standardized 202 administrative procedures for local and regional agencies, including 12 business licenses. And there is an additional proposal for standardiza- tion of 152 procedures related to construction permits. Source: Government of Peru. 2021. Simplificación Administrativa en el Perú – Avances y agenda futura. https://cdn.www.gob.pe/uploads/document/ file/1979797/Simplificacion%20Administrativa.pdf.pdf. 72 5. Further Resources Business Licensing Reform and Simplification (2010), Policy Framework Paper No 55646, Washington DC: The World Bank Investment Advisory Group. Reforming Business Registration: A Toolkit for the Practitioners (2013). World Bank Group, Washington, DC. World Bank, Doing Business (historical archive) and Business Ready (upcoming) https://www.worldbank.org/en/businessready. Integrated Checklist on Regulatory Reform, APEC-OECD (2008): https:// www.oecd-ilibrary.org/governance/apec-oecd-integrated-checklist-on- regulatory-reform_9789264051652-en Achieving Integrated Government-to-Business Service Delivery : A Planning Guide for Reformers: https://documents1.worldbank.org/curated/ en/229401604053492832/pdf/Achieving-Integrated-Government-to- Business-Service-Delivery-A-Planning-Guide-for-Reformers.pdf. Business Licensing and Inspections Maturity Model: Guidance Note (BLIMS): https://documentsinternal.worldbank.org/ search/33913814World Bank Group. 2022. Business Regulation Operational Guide (English). Washington, D.C. : World Bank Group. Link: https://documents1.worldbank.org/curated/en/099430008302220194/ pdf/P175534028ffd30280a2a40fab44d820c4d.pdf. The World Bank, Business Licensing: A Key to Investment Climate Reform, February 2013: https://www.worldbank.org/content/dam/Worldbank/ document/Indonesia-PSD-Newsletter-Jan2013-EN.pdf. 73 Measure 4: Streamlining Investment Screening and Approval Mechanisms 1. Introduction Investment screening and approval is a process whereby an institution or committee in the host economy reviews an application or proposed investment by a foreign investor to determine whether the project can be permitted in the country. Because the review must be completed before the investor can enter and start im- plementing its investment, the screening and approval process is also often referred to as “ex ante” screening.45 The issue of screening46 of investments has re-emerged in recent times as countries seek to strengthen screening requirements motivated by increased global geo-political tensions, rapid technological advancement, and the health-related risks triggered by the COVID-19 pandemic. The sovereign right of host countries to regulate FDI in their territory includes the ability to decide how open the economy is to foreign investors, what restrictions or requirements exist to their entry and the nature and extent of such restrictions and requirements. But the degree of difficulty to enter and establish a project or company in another country matters greatly to investors and it often influences their investment decisions. Screening can have multiple underlying policy justifications. These, usually, range from protecting national interest, public order, health, cultural heritage and traditions, or the environment. Some countries also refer to an economic efficiency justification. They screen investments to make sure that the projects will be of “net economic benefit” to the host economy. This category of screening can be called – for simplicity’s sake- “General screening” (an alternative would be to call it “non-National Security based screening”). Recently, a growing number of countries have been screening investment projects to protect national security or critically strategic sectors. Many governments use the screening process as a justification for a high degree of control over investments, which can be a significant deterrent to investors. From the perspective of investors, screening is usually time consuming and costly 45 In some countries, this process is sometimes called – improperly- licensing or permitting. This handbook is not using these terms when referring to “screening and approval” to avoid confusion with various licensing and permitting processes and requirements that usually apply after “entry” and concern all investors, both domestic and foreign. 46 “Screening” in this section refers to the official process through which a government entity (e.g., Prime Minister’s office, Ministry in charge of investment/economic affairs, Investment Promotion Agency, or inter-ministerial agency) reviews Foreign Direct Investment projects before determining whether a given project is allowed to enter the economy or not. 74 with unknown or, at best, questionable benefits. It also creates a large burden for the government which must review and assess the merits of business proposals in sectors that officials know little about. Assessing the economic viability of a proposed investment is a difficult task and often amounts to a subjective judgement. Furthermore, the process is often discretionary, overly bureaucratic, costly, and ineffective. Screening process may also lead to rent-seeking behavior, as the mechanism is based on the discretion of certain officials. For these reasons, screening mechanisms are generally unpopular with investors. Screening adds to their investment costs in the form of time delays, onerous compliance requirements and uncertainty, which detracts from the country’s competitiveness. For instance, in the case of Suriname, the established investment screening mechanism is un- dertaken by the respective line ministries where special commissions screen the relevant legal and financial documents, a process that is not public and has been considered as a barrier to investment due to its lack of transparency.47 Cumbersome investment approval processes, which include FDI screening, are the most common regulatory barrier for FDI. More than half of all investors surveyed in the 2019 World Bank Global Investment Competitiveness Survey48 reported investment approval processes as moderate or major obstacles to their operations in host economies.49 Investors who face higher obstacles in the in- vestment approval process are more than 40 percent more likely50 to reduce or withdraw investments, compared to those who faced lower obstacles in the investment approval process. The difference suggests that legal and regulato- ry barriers to investment approvals play a key role as multinational enterprise (MNE) affiliates decide how and where to invest. There has been a gradual expansion of investment screening mechanisms, motivated to preserve host country interests such as national security, critical 47 US Department of State. 2023 Investment Climate Statements: Suriname https://www.state.gov/ reports/2023-investment-climate-statements/grenada/. 48 Kusek, P., Saurav, A., and Kuo, R. (2020). Outlook and Priorities for Foreign Investors in Developing Countries: Findings from the Global Investment Competitiveness Survey in 10 Middle-Income Countries. “World Bank Group. 2020. Global Investment Competitiveness Report 2019/2020: Rebuilding Investor Confidence in Times of Uncertainty. Washington, DC: World Bank. 49 On average MNE affiliates wait for more than two months (64 days) to obtain such approvals, but times vary widely across countries and type of investment—and 10 percent of affiliates report wait times of 5 months (150 days) or more. 50 35 percent of respondents planning to reduce or withdraw investments cite investment approvals as a major obstacle, compared to just 26 percent of other respondents. The difference in averages is statistically significant at p<0.05. 75 infrastructure, dual-use technologies, and sensitive information.51 As of 2019, of the 70 countries included in the OECD Restrictiveness Index, 26 had sector screening in place, 16 of which screened investors based on primary sectors, 6 based on secondary sectors, and 4 based on tertiary sectors.52 A level playing field ensures that the most efficient private investors are adequately incentivized to invest, helping to maximize benefits from FDI for host economies. Screening policies may impact the overall FDI market, the effects of which extend well beyond the inward FDI flow in the host country (see theory of change, Figure 27). It can trigger a race to the bottom by motivating other countries to also adopt a similar restric- tive stance, thus imposing on investors overall an increase in transaction costs. Although in the LAC region some countries still maintain investment screening for targeted purposes, most LAC countries are generally considered to be open to FDI and thus do not have in place general FDI screening mechanisms. Trinidad and Tobago, the Bahamas, and Belize are examples of LAC countries that possess ex ante screening mechanisms under certain circumstances. For instance, Trinidad and Tobago maintains an investment screening mechanism for foreign investment related to specific projects subject to sector-specific incen- tives, including the tourism industry. Moreover, the Bahamas maintains approval mechanisms where economic impact, job creation, infrastructure development, economic diversification, environmental protection, and corporate social respon- sibility are considered. Normally its investment screening mechanisms assess the creditworthiness of principals, capital investment, land and personnel re- quirements, financial arrangements, and economic and environmental impacts.53 In the case of Belize, screening mechanisms are normally attached to incentive programs, and they may entail obtaining requisite approvals from the Central Bank of Belize (CBB) and fulfilling performance requirements, as well as adherence to environmental laws and regulations in the case of large capital investments.54 51 FDI screening has now a wider application to include new sectors and activities, it also has lower thresholds, applies to a broader definition of investment or control, has expanded timelines, extended disclosure obligations, and introduces additional penalties (UNCTAD 2019, p 97). The prevalence of FDI screening requirements is on the rise and more than 20 countries accounting for greater than half of global FDI stock have some foreign investment screening mechanism (UNCTAD 2019, p. 16). 52 OECD FDI Restrictiveness Index, 2019. 53 US Department of State. 2023 Investment Climate Statements: The Bahamas https://www.state. gov/reports/2023-investment-climate-statements/the-bahamas/. 54 US Department of State. 2023 Investment Climate Statements: Belize. https://www.state.gov/ reports/2023-investment-climate-statements/belize/. 76 2. Diagnostics A diagnostic starts with desk research followed by in-country fact finding in the following areas: The diagnostics of investment screening should be conducted in two distinct phases. The first phase entails identifying whether the country implements foreign investment screening measures. If it does, the next step is to determine the des- ignated authority responsible for conducting such screenings. The existence of a specialized law or regulation becomes crucial to assess whether the screening process aligns with specific policy objectives and whether it is carried out objec- tively. In the absence of a specialized law, countries must ascertain whether other laws or regulations empower a certain institution or agency to screen foreign investments. These fundamental inquiries lay the foundation for outlining an existing screening framework. The second phase of the diagnostics applies exclusively to countries identified in phase one as having screening legislation or legislation granting specific in- stitutions the authority to oversee foreign investment matters. Phase two involves assessing the efficiency and methodology of the screening process, considering the following factors: 1. Identification of policy objectives: Countries may screen foreign investment to achieve diverse policy goals such as public order, environmental protection, health and safety, and net economic benefits, among others. 2. Transparency of the screening process: This entails the publication of relevant procedures and guidelines related to the screening process, including the iden- tification of triggers that prompt a screening assessment. 3. Non-discriminatory approach: The screening process should not discriminate between investors based on factors such as citizenship or country of origin. It should be impartial and treat all investors equally. 4. Provision of an appeal process: In cases where an investor’s screening applica- tion is rejected, a mechanism for appeal should be in place, allowing the investor to challenge the outcome of the screening process. 5. Consideration of alternatives to screening: Countries should evaluate whether there are viable alternatives to the screening process and make a determina- tion based on the specific circumstances. This ensures that screening is not the default approach if other effective methods exist. 77 By addressing these essential questions, countries can assess the effec- tiveness and investor-friendliness of their current screening framework. For countries that do not currently practice investment screening, it is crucial to identify and strengthen alternative measures to avoid the need for resorting to screening processes. Additional factors to be considered in the screening process shall include the following: Risk assessment: Conducting a risk assessment can help the government to identify potential risks associated with foreign investments, such as national security, economic, or environmental risks. Risk assessment can help govern- ments prioritize their screening efforts and focus on investments that pose the highest risks. Comparative analysis: Conducting a comparative analysis of the govern- ment’s foreign investment screening policies with those of other countries can provide insights into best practices and areas for improvement. This analysis can help the government to benchmark their policies and identify opportuni- ties to learn from other countries’ experiences. Stakeholder engagement: Engaging with stakeholders, such as investors, civil society, and local communities, can provide insights into the effectiveness of the government’s foreign investment screening policies. Stakeholder engage- ment can help the government to identify any issues or concerns related to the policies and make necessary adjustments. Performance measurement: Conducting performance measurement of the existing foreign investment screening policies can help the government evaluate the effectiveness of the policies and identify areas for improvement. Perfor- mance measurement can include monitoring and evaluation of the policy’s outputs, outcomes, and impact. In addition, several indices and databases can be consulted to aid with the diag- nostic and complement in-country information. WBG Investment Law Database (available only to WBG staff members and consultants): A new investment laws database codifies the content of publicly available investment laws of 130 countries. This database can be helpful to assess how countries screen investment in a country’s investment law (if applicable). UNCTAD Investment Laws Navigator: In addition to investment laws, the UNCTAD investment laws navigator includes a database of the FDI screening laws across different countries. This database can be helpful to do a com- parative analysis of how other countries regulate the process of investment screening. 78 OECD FDI Restrictiveness Index: The FDI Regulatory Restrictiveness Index (FDI Index) measures statutory restrictions on foreign direct investment in 22 economic sectors across 69 countries, including all OECD and G20 countries. 3. Implementation Principles If countries do decide to screen foreign investments, it should be done only in limited instances in a non-discriminatory manner and it should be carefully targeted to achieve specific public policy objectives. It is not good practice to screen investment only because it is foreign owned. Screening can have a negative impact when done without objective criteria. Even in situations where there are no viable alternatives to screening due to political reasons or otherwise, establishing clear criteria and procedures can minimize its negative impact. But it is important to keep in mind that the elimination of all risk from FDI screening is virtually impossible. Nor is full automation of the process realistic. There will always exist an element of human judgment and the discretion associated with investment screening but a significant reduction in the risks involved can be achieved. Chile’s FDI automatic route can provide a good model for countries looking to minimize the risks of screening and maximize the impact of FDI. In Chile, FDI is subject to pro forma screening by InvestChile, an expeditious process not normally considered as a barrier as investments are usually approved. Some transactions are subject to antitrust review and sector-specific regulators. Beyond these specificities, the entire investment entry process in Chile is automated and FDI in non-controlled sectors can enter without any approval. When policymakers decide to deploy a screening mechanism, several risk-mitiga- tion measures can be used: Targeted screening. FDI screening, if used, should be limited in scope and coverage. It should not be economy wide. There is no justification for a mechanism that would screen every single foreign investment because the investor is a foreigner. This would not only be perceived as discrimination, but it would quickly become impossible to manage given the number of projects that the screening entity would have to review and decide upon. For these reasons, economy wide screening is rare. Clear definitions of the scope of screening. In every regulatory and administra- tive process, the use of clear definitions and concepts can help minimize risks and provide more certainty to users and investors. This is particularly relevant for investment screening. 79 Pre-screening clearance procedures. This approach is based on an opportu- nity for the investor to request an “ex ante” official confirmation of whether an anticipated transaction falls within the scope of the investment screening mechanism or not. This allows governments to deal with straightforward cases quickly and gives foreign investors more legal certainty at an early stage. Objective criteria for screening decisions. FDI screening should be based on criteria which are as objective as possible to reduce reliance on discretion. Protecting national interest and public order or making sure that the invest- ment project is of net benefit to the host economy are common policy objec- tives. This does not, however, provide the institution, committee, or officials in charge of the screening with any objective criteria they can apply in their decision-making. The degree to which FDI screening is guided by publicly available evaluation criteria influences its transparency and predictability. Screening procedures tailored to specific risks. This approach is based on designing a screening framework that allows for consultations with relevant officials during the assessment of investment proposals so that the balance can be achieved between preserving economic opportunities and safeguarding national security concerns. Tailored responses are a viable solution as they permit foreign investors to proceed with their transaction subject to certain conditions, instead of decisions leading up to blocking the investment. Transparency about screening rules and procedures. Governments that maintain FDI screening should strive to have a screening process that is simple, quick, and transparent. Any excessive reliance on discretion in the screening process carries a risk of corrupt practices, delays in project imple- mentation, discrimination, or preference to investors from certain countries over others, and increased compliance and administrative costs. The following dimensions are important to consider when implementing this investment facilitation measure: a. Legal/Policy Framework According to UNCTAD, at least 37 jurisdictions have a specialized framework law for national security review as of June 2023.55 They are, for the most part, developed economies. In addition, the European Union has established an FDI screening cooperation mechanism. There are also a number of countries that 55 UNCTAD Investment Policy Hub, https://investmentpolicy.unctad.org/investment-laws. 80 conduct national security reviews without specialized legislation. Countries that have not established a specialized FDI screening mechanism based on national security concerns may control such risk through other laws and policies. For instance, many countries use their Negative Lists or domestic investment laws to address such risks. However, these mechanisms found in the negative lists of investment laws are general and broader in scope. At least 27 countries provide a general safeguard to address national security concerns in their domestic investment law.56 In LAC countries, these include Colombia, the Dominican Republic, Guyana, Nicaragua and Venezuela.57 Another type of instrument that can provide safeguards relating to national security is the international investment agreement (or IIA). By establish- ing obligations on Contracting Parties concerning the treatment of foreign investors, IIAs impose certain limits on the sovereign right of each country to regulate foreign investment in its territory, including its regulations in the area of national security. Currently, many IIAs expressly dispense contracting parties from all or parts of their treaty obligations in cases where an invest- ment poses a threat to national security. At least 394 IIAs out of a total of 2577 treaties mapped by UNCTAD contain a general safeguard relating to national security. And 40 percent of those 394 treaties define these safe- guards in more detail. In the case of LAC, it is the case with IIAs signed by Argentina with Germany and the United States; Barbados with Mauritius; Brazil with Mexico, Honduras and Peru with Canada; Colombia with Costa Rica, Panama and Peru, among others.58 Most advanced economies and some transition economies have a mechanism to address national security risks posed by certain foreign investments. All these mechanisms serve the same purpose, but they have different features and scope depending on the country where they are imple- mented. While each of these pieces of legislation focuses on addressing the risks posed by certain inward FDI, criteria used by governments to assess potential risk vastly differ. Although the most used criteria are national security or national interest, public order, public safety, or defense, they are subject to different interpretations. 56 Global Investment Law Database, World Bank Group. 57 UNCTAD Investment Law Navigator https://investmentpolicy.unctad.org/investment-laws. 58 UNCTAD. IIAs Navigator. https://investmentpolicy.unctad.org/international-investment-agreements/ iia-mapping. 81 Several countries have established a threshold for the value of a foreign investment which will trigger a national security review. These thresh- olds are either economy-wide or sector specific. They can be based on the monetary value of the investment, the share of ownership, or type of business. For instance, in Australia there are different ownership percentage thresholds based on the type and nature of investor. A recent proposed rule in Australia requires that when foreign persons seek to acquire a business classified under the list of sensitive national security business59, or where a foreign person starts to carry on the activities of such a business, approval from the Foreign Investment Review Board (FIRB) will be required rior to the transaction regardless of its value. Similarly, entities where foreign gov- ernment investors hold greater than 10 percent ownership will be subject to a national security review. Grenada maintains an investment screening and approval mechanism for inbound foreign investment. The Grenada In- vestment Development Corporation reviews proposals and directs them to specific ministries depending on the type of investment.60 In Canada, the government has the authority to review any transaction re- gardless of the size and percentage of foreign investment. Unlike the “net benefit” review process under the Investment Canada Act (ICA), there is no financial threshold for investments under the ICA’s national security review regime. The global COVID-19 pandemic has prompted many countries to change their screening regimes temporarily or in some cases more permanently. For instance, France lowered the threshold for acquiring voting rights from 25 percent to 10 percent for listed companies in regulated markets. So, any ownership interest beyond 10 percent will automatically subject the investor to a national security review. Because it was COVID-19-related, this measure was temporary and was only valid until December 31, 2022. b. Procedures Complex procedures not only translate into onerous compliance costs for investors and administrative costs for the government, but they can also lead to significant delays in project implementation. Sometimes, they even result in investors reducing, cancelling, or diverting their planned investment. The impact of burdensome procedures can vary dramatically from country 60 US Department of State. 2023 Investment Climate Statements: Grenada. https://www.state.gov/ reports/2023-investment-climate-statements/grenada/. 82 to country, depending on how the screening process is designed, for instance, whether it is applied to all sectors or just to a few, and how it is implemented in practice. Implementation is often dependent on the quality of governance, the institutional capacity, and the existence of effective checks and balances in the host economy. Some human judgement will always play a role in FDI screening so that eliminating risk is highly unlikely. Full automation of the process may not be realistic, but a significant reduction of the risks involved in screening foreign investments can be achieved. Several risk-mitigation measures can be used and combined including, but not limited to, targeted screening, pre-screening clearance procedures, objective criteria for screening decisions, and screening procedures tailored to specific risks posed by investment proposals. i. Targeted screening. FDI screening, if used, should be limited to a small number of sectors. The effort to narrow down or target the screening can be done in many ways, including through a negative list, which can define the sectors subject to FDI screening. Even without a document called a Negative List that spells out the sectors or types of foreign investment subject to screening, the policy or legislative document setting out the screening process can do the same. This type of measure provides greater predictability for foreign investors. Another type of targeted screening is one that is not based on specific sectors but on target companies. This technique is used in national security reviews. This less restrictive approach is to have an entity-specific or target-spe- cific screening mechanism where the host country designates in advance a small number of individual domestic companies, mostly operating in sensitive sectors, where the government reviews any planned foreign participation in, or acquisition of, these “targeted” entities. For instance, in 2019 the US President signed an executive order to prevent a Chi- nese-owned 5G technology company from acquiring a US based tech- nology company on national security grounds. ii. Pre-screening clearance procedures. Some countries give prospective foreign investors an opportunity to request an official “ex ante” con- firmation of whether an anticipated transaction falls within the scope of the investment screening mechanism. This approach allows gov- ernments to deal with straightforward cases quickly and gives foreign investors more legal certainty at an early stage. 83 iii. Objective criteria for screening decisions. When FDI screening is to be used, it should be based on criteria which are as objective as possible with a view to reducing discretion. The degree to which the investment screening process is guided by publicly available evaluation criteria influ- ences the transparency and predictability of the proceedings. iv. Screening procedures tailored to specific risks posed by investment proposals. It is possible to design a screening framework that allows for consultations with relevant officials during the assessment of invest- ment proposals so that a balance can be achieved between preserving economic opportunities and safeguarding national security concerns. If the scrutiny or review mechanism is too broad, it may create uncertainty among foreign investors and lead to significant compliance costs for them, especially because a broad review process is prone to delays. In addition, investors expect that any scrutiny or review mechanism targets national security concerns in a way that is proportionate. The principles to ensure transparency of FDI screening include prior notification, consultation and publication of all relevant laws, regulations and decisions; the enactment of evaluation guidelines, the establishments of time limits to conduct the review process, the use of tacit assent when the authority does not give a response; ex post disclosure of decisions; ensure all decisions are fair and non-discriminatory; confidentiality of all business information; and the availably of legal recourse against negative decisions. As in all regulatory processes, governments that require FDI screening should strive to have a screening process that is simple, quick, and transparent. Any excessive room for discretion in the screening process carries a risk of corrupt practices, delays in implementation, discrimination, or preference to investors from certain countries over others, and increased compliance and administrative costs. While it is in the interest of investors and governments to maintain confidentiality of sensitive information, regulatory objectives and practices should be made as transparent as possible to increase the predictability of outcomes. The following principles should be followed to minimize the negative impact of investment screening procedures: Publication of evaluation guidelines Time limits Tacit assent Post-decision disclosure 84 Fair and non-discriminatory treatment Confidentiality of the information exchanged Right of appeal c. Institutional Framework There are no obvious best practices regarding institutional structure for FDI screening. Rather, the emphasis must be on key elements such as trans- parency of the review process, predictability of outcomes, and the proportional- ity of the action. There is large variance in institutional design across countries that exercise FDI screening on national security grounds. It ranges from very simple to very complex, multi-stakeholder frameworks. Some even involve intelligence agencies or require international cooperation. Institutional design does play a role in determining the efficiency of the investment screening process. The actual structure depends on multiple factors such as the political economy, available resources, capacity, and the overall government structure of the country. There does not seem to be a consensus about the optimal structure for investment screening, but it is not considered a good practice for Invest- ment Promotion Agencies (IPAs) to be the one agency responsible for invest- ment screening. Overall, there are doubts about FDI screening, and the costs may outweigh the benefits. However, looking at a select list of countries that do use in- vestment screening mechanisms, there appear to be two approaches to the design of the institutional mechanism for screening.61 In one group of countries, the responsibility to administer FDI screening is assigned to the Ministry in charge of foreign investment regulation, and often to a specific department within the Ministry. For instance, in Finland, the Ministry of Economic Affairs and Employment is the key authority concerning the monitoring and confirmation of corporate acquisitions. In India, the Department for Promotion of Industry, and Internal Trade (DPIIT) under the Ministry of Commerce and Industry (MCI) is the agency respon- sible for screening foreign investments posing national security concerns. 61 The intention of our assessment is to highlight the different approaches by countries and not to qualitatively assess the efficiency of these approaches. 85 A second group of countries have established a specialized agency or committee for administering the FDI screening process. These agencies, in most instances, are established specifically for the purpose of carrying out FDI screening. For instance, in China, the Foreign Investment Security Review (FISR) Office is jointly led by the Ministry of Commerce (MOFCOM) and the National Development and Reform Commission (NDRC) and is re- sponsible for the conducting of the national security review. In this second approach, we find that the final approval of the FDI screening is generally issued either by the Ministry or by the Government at large, often by the Prime Minister’s office; sometimes by the Office of the President. In both of these approaches, we find that the agency responsible for FDI screening usually consults or engages with a number of other ministries or agencies depending on the sector of application. In both approaches, the task is assigned to the executive branch of government. The main elements of the institutional framework include: Resources: The institution needs sufficient funding, personnel, and access to technology. This may significantly improve the ability of the concerned authority to conduct background checks, perform due diligence, and monitor these investments over time. Autonomy: The institution should be independent of political influence or undue pressure from special interest groups. This can help to ensure that screening decisions are made based on objective criteria in a non-discrim- inatory and transparent manner that shall effectively protect the interest of the host country. Transparency: The institution should be transparent in its operations, including its decision-making processes and criteria for evaluating foreign investments. This can help to build trust and confidence among foreign investors and other stakeholders. Coordination: The institution should have the ability to coordinate with other government agencies and stakeholders, including foreign investors, to ensure that the screening process is integrated with other policies and priorities. d. Human Resources and Training The capacity of the institution responsible for foreign investment screening is a critical factor in ensuring that the screening process is effective, efficient, and transparent. The agency or institution responsi- ble for the process should have the necessary expertise to evaluate and 86 assess the economic, strategic, and national security implications of foreign investments as well as sectorial considerations. This may include expertise in specific sectors, economics, finance, law, and other related fields that are necessary to assess the impact on national security. e. Information and Communications Technology Members can complement their efforts to implement investment screening by leveraging digital technologies. The role of digital tools in government service delivery plays a major role in improving efficiency. However, when it comes to investment screening the presence or absence of digital tools to facilitate investment screening process would have a minimal impact if it was carried out without an underlying policy objective. Digital tools cannot by themselves mitigate the risks involved in the process. Rather, they can be leveraged to improve the efficiency of the screening process that is based on an objective criterion. In this regard, the following can help: a) Informational Portals: Governments often establish dedicated investment screening informational portals that serve as a one-stop destination for foreign investors. These portals provide comprehensive information on the FDI screening process, applicable regulations, and guidelines. These portals may include FAQs, user guides, and sector-specific information to help investors understand the screening process and requirements. b) FDI screening portal: These portals are created with an aim to allow investors to submit their investment proposals, supporting documents, and relevant information electronically. These systems typically guide investors through the application process, ensuring that all required in- formation is provided. The portal shall facilitate secure document uploads and electronic signatures, making the submission process efficient and convenient. Typically, these portals should be collaborative facilitating communication and collaboration between government agencies involved in FDI screening. Such mechanisms can foster secure information sharing, coordination, and document collaboration. Once the screening process is complete the investors can be notified about the outcome through these portals in a secure manner. The use of digital tools may be effective in countries with a well-estab- lished legal and regulatory framework concerning data protection and data privacy. In many instances this is a necessary pre-requisite to ensure the success of digital tools. Additionally, robust data protection laws and regu- 87 lations help safeguard investor data, protect national security interests, and maintain public trust in the screening procedures. By adhering to stringent data privacy standards, governments can mitigate risks associated with unauthorized access, data breaches, or misuse of confidential information, thereby ensuring the integrity and confidentiality of the FDI screening process. Please refer to Measure 5: Digitalization for a more detailed discussion on the communication and information technology measures on this topic. 4. Case Studies Box 10. FDI screening contributed to FDI recovery in Chile Challenge: Chile has been at the forefront in the implementation of FDI promotion mechanisms in Latin America. In 1974, with a view to encouraging FDI into its economy, the Government of Chile decided to modernize its FDI legislation and adopted the De- cree-Law DL600 (updated in 1993), Chile’s Foreign Investment Statute, a legislative piece that until 2015 constituted the main instrument ruling FDI, thus providing stability to Chile’s investment legal framework. Since 1974, more than 85 percent of Chile’s foreign investment has been channeled under the scheme granted by DL600. However, investments under the scheme required both prior authorization for entry into Chile, and the execution of a foreign investment contract between the foreign investor and the State of Chile. Measure: The adoption of law 20.848 of 2015, which substituted DL600, enabled an ex post authorization mechanism by the newly created Investment Promotion Agency, InvestChile. Investors no longer required prior authorization for investment entry into Chile, nor the signature of an investment contract between the foreign investor and the State. As a result of the new law, In- vestChile was vested with the mandate of extending foreign in- vestment certificates within 15 days, allowing foreign investors to benefit from the rights granted by the regime incorporated by Law 20.848. The certificate that can be obtained even after 88 the investment has already been materialized. The new law also protects investments made until before 2016 under the regime of DL600. Results: The new FDI law came at a moment when FDI flows sharply declined in Chile in four consecutive years between 2014 and 2017. From an FDI inflow peak of USD 31.8 billion in 2012, in 2017 FDI inflows were USD 5.24 billion. FDI has since recovered, reaching USD 20.9 billion in 2022. The recovery is partly at- tributable to the operability of the investment law reform, the optimization of permits for investment projects, and Chile’s new strategy to increase FDI into the country adopted in 2022. Currently, Chile’s pro forma FDI screening by InvestChile is deemed to be expeditious and predictable. Sources: https://www.state.gov/reports/2023-investment-climate-statements/chile/. https://www.cepal.org/sites/default/files/publication/files/4948/S050272_es.pdf. https://investchile.gob.cl/wp-content/uploads/2017/03/Minuta-Ley-20848.pdf. https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD?locations=CL. https://investmentpolicy.unctad.org/investment-policy-monitor/44/chile. https://www.bcn.cl/leychile/navegar?idNorma=1078789. 5. Further Resources “FDI Screening and National Security Review: International Trends and Lessons of Experience”, (forthcoming). “The determinants of Foreign Direct Investment: do statutory restrictions matter?” OECD Working Papers on International Investment 2019/01 (2019). “Is investment protectionism on the rise? Evidence from the OECD FDI Regu- latory Restrictiveness Index”. OECD Global Forum on International Investment (2017). “Investment Policies Related to National Security: A Survey of Country Practices”, OECD Working Papers on International Investment, No. 2016/02 (2016). “Acqui- sition- and ownership-related policies to safeguard essential security interests: Current, and emerging trends, observed designs, and policy practice in 62 economies”. Research note by OECD’s Secretariat (2020).  89 Measure 5: Digitalizing investment facilitation 1. Introduction The use of a single information portal and information and communications technology (ICT) for investment authorizations must be considered in a holistic manner. The typical strategy for digitalizing investment facilitation often begins with the establishment of a comprehensive online single information portal. Such a portal consolidates all pertinent information on investment authorizations and regulatory measures and addresses one of the biggest obstacles for investors, lack of transparency, by making information about authorizations and measures easily accessible (see theory of change, Figure 27). When digitalizing the invest- ment authorization process, a phased approach is required in tandem with reg- ulatory streamlining and institutional reforms following the risk-based approach as per Articles 13 – 17 Bis of the IFD Agreement (see the section on Measure 3, Streamlining Investment Authorization Procedures). This allows for a smooth tran- sition from an informational single portal to transactional digital services for online applications and processing of investment authorizations. Jurisdictions that have implemented single information portals and digitalized investment and business authorizations have experienced significant advan- tages, notably in reducing regulatory burden and achieving substantial savings for the private sector.62 Mexico launched in 2015 the National Single Window, which integrates services and information of more than 18 ministries, 299 gov- ernment entities, and 32 Mexican states. As of February 2018, the portal has received more than 726 million visits to carry out government transactions com- pletely online and access information that was previously dispersed in more than 5,000 different internet websites. Several LAC countries have pursued digitali- zation of all services. In Uruguay, 100 percent of government transactions could be started online, 34 percent could be fully completed online, and 100 percent of public entities of the central government were connected to an interoperability 62 From its launch in September 2021, India’s single informational portal, Know Your Approvals, has been utilized by 150,000 investors as of December 2022 (https://pib.gov.in/PressReleasePage. aspx?PRID=1888936). The National Single Window System (https://www.nsws.gov.in/), of which KYA is an integral module, was used to digitally process 75,599 authorizations within the same period. Also, through regulatory simplification and digitalization of business authorizations, Moldova reduced the cost of doing business by approximately US$13.5 million a year, or US$40.4 million over three years (equivalent to US$6.95 in savings for each dollar spent for the regulatory reform of the project) (IEG Review Team. Moldova - Second Competitiveness Enhancement Project (English). Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/099042123184518941/ P1441030d63ce40150a0710b303de239e48). 90 platform by 2017. In Chile half of all national government transactions could be carried out completely online by 2017.63 Costa Rica has a single window website for business registration that brings together municipal and central government agencies.64 The single information portal should contain comprehensive information on investment authorizations and measures. The information includes internation- al agreements, primary legislation, such as laws as well as secondary legal acts, including regulations, rules, procedures, decisions, and administrative actions issued by executive or administrative bodies. The information is consolidated in a way to enhance transparency and easy navigation through authorizations and measures, allowing investors, interested parties, and other members to familiar- ize themselves with the regulatory requirements. An important aspect of this measure is to ensure that all competent authorities and regulatory bodies map authorization and procedures within their jurisdiction and publish them online on a single portal. Another key aspect relevant to the sustainability of the portal is a mechanism to keep the data updated following changes inthe primary or secondary legislation. A feedback loop should be established to inform data man- agement and regulatory design procedures. The digitalization of investment facilitation goes along with the regulatory streamlining, applying a risk-based regulation approach, development of a legal framework, and institutional strengthening (see Measure 3). The digital processing of investment authorizations involves digital transactional services allowing online submission of application forms, online payment of authorization fees, tracking of application status, digital processing of applications along with data sharing for coordination of involved regulatory bodies, and issuing authoriza- tions in a digital form. The prerequisite involves horizontal e-Government services, such as digital ID and signature, cloud hosting, e-Payment, and interoperability for data sharing. The digital transactional services are typically an extension of information services published on a single information portal. Digitalization of in- vestment facilitation requires establishing a range of integrated digital systems and modules that are combined through a concept known as integrated service delivery. The importance of a single information portal and the utilization of ICT for investment authorizations provisions has further been recognized in the IFD Agreement (Box 11). 63 Roseth, B.; Reyes, A.; Santiso, C. (2018). Wait no more. Citizens, Red tape, and Digital Government. Inter-American Development Bank. 64 See https://www.state.gov/reports/2020-investment-climate-statements/costa-rica/. 91 Box 11. Single information portal and the utilization of ICT in the IFD Agreement The IFD Agreement includes the following references to a single informational portal (Non-binding Art. 8). It includes the following requirements: To the extent practicable, each Member/Party is encouraged to make available measures and information referred to in paragraphs 6.1, 6.4 and 7.1 through a single information portal, which includes making available the relevant web links to elec- tronic publications. Members/Parties shall endeavour to ensure that the single information portal is kept updated. Each Member/Party should include in the single information portal the contact information of the focal points or appropri- ate mechanisms referred to in paragraph 22.1. Each Member/Party is encouraged to publish on the single infor- mation portal the measures and information referred to in para- graphs 6.4 and 7.1 in one of the official languages of the WTO. The IFD Agreement also includes an obligation on the use of ICT/E-Government (Binding Art. 18). It includes the following requirements: If a Member/Party requires authorization for an investment, its competent authorities, taking into account their competing pri- orities and resource constraints, shall endeavor to accept elec- tronic submission of applications, including in electronic format. Each Member/Party shall, to the extent practicable, allow the electronic payment of authorization fees collected by relevant competent authorities. 92 2. Diagnostics The diagnostic for implementing a single information portal and digitaliza- tion of investment authorizations can be carried out based on a comprehen- sive desk or online review of government websites, an interview with relevant Ministries, and focus groups with investors and business representatives. The following are considerations for the diagnostics and implementation of a single information portal: i. Availability of consolidated regulation texts in digital form, i.e., digital registry of regulations. The structure of the information in the digital registry must be checked for machine-readable regulations (such as Akoma Ntoso).65 ii. Level of development of e-Government, including the e-Government portal involving a section on investor and business services. An alternative way of implementing a single information portal is to establish a separate system that would eventually be integrated into e-Government ecosystem. iii. Consolidation and mapping of all authorizations and measures. Any previous attempts to implement comprehensive mapping of authorization and measures must be scoped to develop a mapping and data consolidation approach to in- corporate any previous successful work and avoid reform fatigue. iv. Understanding the degree to which businesses are informed about the online availbility of information on the single portal. v. Accessibility of published information, including the use of advanced means of online information sharing (such as AI/virtual agents/chatbots). The diagnostic for digitalizing investment authorizations should include the following considerations: i. Identify investment and business authorization procedures that are digitalized, allowing online applications, and obtaining authorizations in digital form without in-person interactions and paper documents. The diagnostic should differentiate between a fully digitalized service that enables online and paperless transac- tions, and a partially digitalized service that might still necessitate in-person interactions. 65 See https://en.wikipedia.org/wiki/Akoma_Ntoso. 93 ii. Check whether any duplicate data entries and information are requested from investors in online applications, for example, previously issued approvals requested as attachments to online applications. iii. Determine whether the relevant registers and databases are interoperable, available online, and searchable. iv. Determine whether electronic payments are enabled for administrative fees for the business authorization procedures and what are the available electron- ic payment means including online banking, corporate credit cards, e-wallets. v. Determine the level of maturity of horizontal e-Government prerequisites for the digitalization of business authorizations, including digital ID and digital signature, cloud hosting, communication and broadband, and interoperability platform for data exchange. The main institutions that should be contacted for diagnostic and that are involved in the implementation are the Ministry of Economy or equivalent (e.g., Ministry of Commerce or Ministry of Trade & Investment), the Ministry of ICT or e-Government Agency, the Ministry of Finance, and sectoral regulators. 3. Implementation Principles General considerations for the implementation of a single information portal and digitalization of investment authorizations are as follows: i. Develop institutional capacities for the design, implementation, and operation of a digital platform for business authorizations. ii. Map and publish online information on business authorizations. iii. Revise and design a legal and institutional framework to enable digitalization. iv. Carry out digital assessment and develop a high-level concept for the digita- lization of investment authorizations. v. Design technical requirements for the digitalization of investment authorizations according to the prioritized sectors and areas. vi. Digitize paper records, consolidate and make interoperable business registries and databases. vii. Digitalize business authorization enabling online applications and digital pro- cessing of authorizations by applying a phased approach for the prioritized sectors and areas. 94 Table 5 provides a summary overview of key implementation principles, as well as the optional principles for implementing a single information portal and dig- italization of investment authorizations. The subsequent sections elaborate on details across legal and policy frameworks, procedures, institutional framework, human resources, and information and communications technology. Table 5. Key and optional implementation principles for implementing a single point of contact and digital investment authorizations. KEY PRINCIPLES OPTIONAL PRINCIPLES - A comprehensive mapping of investment - The single informational portal should authorizations and procedures. be integrated into the e-Government portal for Government to Business (G2B) - The mapping shall be organized services. according to business sectors and activities applying the standard - Cross-border digital identity and digital classification (such as ISIC). signature. - The online mapping shall include a - Conversational forms for seamless mechanism to ensure the information interactions with investors and advanced is updated following the changes in the validation of applications. underlying regulations. - Use of virtual agents/chatbots to - The online mapping shall include a navigate a single information portal. feedback loop from investors that shall inform data management and - Real-time processing of applications rulemaking. for authorizations applying AI/emerging technologies. - Online application for business authorization shall request a minimum - Use of the private sector data to reduce set of data from an investor. information asymmetry and enhance risk management. - Data and documents are requested only once from an investor applying the ‘Once Only’ principle. - The regulation should ensure that the online application has the same meaning and effect as a paper application and documents without requesting in-person visits and paper document copies. - An online process for obtaining an authorization shall enable electronic payment of authorization fees using various electronic/digital payment means. 95 KEY IMPLEMENTATION MEASURES OPTIONAL MEASURES - Investors must receive online updates about processing status and be allowed to provide online any additional information requested in the process. - Output authorization shall be in electronic form and delivered to an investor without requesting in-person visits. - Investors must be able to provide online feedback about the business authorization service. - Registries and databases that result from authorization procedures must be digital, trustworthy, and interoperable. - I nformation and cybersecurity measures must be applied to ensure data protection and continuity of online service. Source: World Bank Group. a. Legal and Policy Framework The policy and legal framework guiding the deployment of digital solutions for investment facilitation is separated into two key aspects. The first aspect deals with online informational services on the authorizations and measures typically implemented through a single information portal. The second establishes digital transactional services intended to streamline the processing of authorizations. The legal framework shall mandate that national and subnational competent authorities publish relevant information on the authorizations and measures related to the single information portal. The framework should define the portal as a central hub of regulatory information for investors. To maintain the integrity and reliability of the published information, a specific in- stitution should be designated to oversee the recording of accurate and timely data. The legal framework should also set a clear deadline for updating the portal following regulatory changes. This ensures the portal remains current, providing users with the most up-to-date information on authorizations and measures. The framework should outline specific data on authorizations that need to be recorded, such as on involved public authorities for processing the authorizations, processing steps, processing duration, administrative costs, 96 references to the relevant laws and regulations, and other relevant informa- tion, offering a comprehensive view of the investment and business regulatory investment landscape. Countries commonly enact a law governing the single informational portal. For instance, Bolivia enacted a Law on De-bureaucratization in 2016 that created an online platform that stores and centralizes company registration informa- tion.66 Notably, Mexico’s General Law for Regulatory Improvements mandates that all public authorities maintain the current information on investment and business authorization, measures, and inspection requirements in the register.67 In both Bolivia and Mexico, a public institution was appointed to supervise data management on the portal. The Mexican law establishes strict deadlines for updating data in response to amendments to relevant laws and regulations. A recent analysis for Croatia recommended establishing three mechanisms for keeping the data in the single informational portal updated (Box 12).68 The legal framework for the single information portal defines the manage- ment and protection of data on the authorizations and measures. In the interest of balancing transparency and protection of sensitive information, certain data on authorizations and measures are recorded and protected in the portal’s database but are not made publicly accessible online.69 Digital investment facilitation for processing investment authorizations requires a legal and regulatory framework establishing governance for regu- latory delivery. Digital investment facilitation allows transactional services for online application and processing of authorizations, commonly involving most or all business authorization procedures. They involve multiple government agencies, including regulatory bodies that issue investment and sectoral au- thorizations, as well as a company registry that manages a general company 66 World Bank Group. Doing Business database. 67 In Mexico, the General Law of Regulatory Improvement requires consolidating online in the National Catalog (https://catalogonacional.gob.mx/) all regulatory procedures, services, inspection requirements, and regulations. 68 Assessment of Digital Government to Business Services Business Environment Reform II Croatia. Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/099305009072233646/ P171119034c57707e0bf4a04ff6389e8483. 69 For instance, in Serbia, data pertaining to the specific individual who serves as the administrator for a competent authority responsible for recording and updating data is stored in the database. However, such data is protected and not publicly accessible. The Law further stipulates that each bill must be accompanied by the data that will be recorded into the portal upon the bill’s enactment, which contributes to efficient data management (i.e., data on authorization and measures in attached to the regulation and follows the regulatory lifecycle). 97 registration. Setting up an integrated service delivery system for authorizations may require new legislation to define a legal mandate, establish standards, and set up accountability structures for the service agency.70 There are three ap- proaches to governance and institutional structure of service agencies, (i) create a dedicated service organization such as ProPanama,71 (ii) involve the private sector by creating a public-private partnership (PPP) applied by many U.S. states, and (iii) assign the service mandate to an existing ministry or Agency, such as the single window for investors in Mexico, led by the Ministry of Economy. Box 12. Modalities for keeping information on authorization and measures updated A recent assessment conducted for Croatia suggested the im- plementation of three innovative mechanisms: (i) Initially, a notification-based updating mechanism could be adopted to leverage data exchange between the official regulation’s registry and an authorization and measures catalog, ensuring synchronized updates. (ii) Subsequently, an Artificial Intelligence (AI)-facilitated updating mechanism could be introduced. This mechanism would utilize machine learning and natural language pro- cessing to detect changes in authorization data in response to modifications in the corresponding laws and regulations. (iii) The final proposal is the AI Business Process Management (BPM) updating mechanism. This assumes the existence of machine-readable regulations with data on authorization and measures integrated within the structure of the regula- tion. It also presupposes BPM-guided rulemaking procedures, resulting in a more streamlined regulatory process. Source: Assessment of Digital Government to Business Services Business Environment Reform II Croatia. Washington, D.C.: World Bank Group. 70 Achieving Integrated Government-to-Business Service Delivery: A Planning Guide for Reformers (English). Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/229401604053492832/ Achieving-Integrated-Government-to-Business-Service-Delivery-A-Planning-Guide-for-Reformers 71 See https://www.presidencia.gob.pa/Noticias/Presidente-sanciona-la-ley-que-crea-la-Autoridad-para- la-Atraccion-de-Inversiones. 98 The digital transformation of investment facilitation requires risk-based regulation approaches (see Measure 3). Some jurisdictions established hori- zontal framework laws for investment and business authorizations, setting up principles, processes, tools, and approaches, while the specific requirements are prescribed in the substantive and sectoral laws and regulations that must be revised for the risk-based approach. Less mature systems typically lack proportionality, and they impose the same requirements horizontally on all sectors.72 Mature risk-based frameworks involve goal-based sectoral regulations. Risk-based regulation can improve efficiency, effectiveness, and transparen- cy in at least three ways: (1) on the strategic level, for decision-making con- cerning entire sectors and regulatory domains; (2) on the operational level, through decisions on what tools to use and which types of actors to focus on; and (3) on the risk planning, profiling, monitoring and enforcement levels, by deciding which businesses to regulate and inspect and how to do so.73 By adapting the degree of regulatory control to the respective real risks of the sectors of the economy (industry, commerce, services) and to the specific business activities, countries can improve their business environment and fa- cilitate business transactions. Regulators should justify introducing ex ante authorizations based on evidence that indicates a clear need to safeguard the public interest and societal concerns (see Measure 3). The legal and regulatory framework must be digital-ready, allowing con- tactless and paperless service delivery. In an ideal scenario, the legal framework would allow digital enhancement of investment facilitation without mandating regulatory changes to allow contactless and paperless service delivery. A more common scenario is that the legal framework must be modified to accommodate the digitalization of the procedural steps, allowing online applications and payments of related administrative fees, automated data sharing among involved regulatory bodies, and digital delivery of investment and business authorizations to investors. The legal recogni- tion of digitally signed online applications for authorizations and associated documents should be equivalent to in-person submissions. The mandate for competent authorities to issue digitally signed authorizations and to share 72 Business Licensing and Inspections Maturity Model: Guidance Note (English). Equitable Growth, Finance and Institutions Insight Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/ en/099905010062240323/P17553404281830fa0b08200ef69ac4eddc. 73 World Bank Group (2020). Risk-Based Approaches to Business Regulation – a note for reformers. 99 information related to authorizations is subject to the specific legislation within a jurisdiction. Some jurisdictions have adopted laws that compel au- thorities to issue authorizations electronically and implement the ‘Once Only’ principle.74 The foundational requirements for digital investment facilitation systems involve two prerequisite horizontal layers. The first layer is comprised of a legal framework and capabilities for digital infrastructure. This includes elements such as cloud hosting, communication networks, and digital iden- tification. The second layer focuses on the laws and regulations of govern- ment technology, or GovTech, which involves aspects like an interoperability framework for data sharing and the framework for data protection,75 as well as online payment systems for administrative fees. The acceptance of digital payments and electronic receipts for authorization fees is increasingly common, with some jurisdictions even incentivizing online payments through reduced fees. The implementation of digital investment facilitation, which includes a single information portal and digital transaction services for pro- cessing investment authorizations, uses these two underlying digital layers as a foundation. Feedback from investors should support regulatory improvements related to authorizations. Online informational and transactional services for autho- rizations should provide investors with the opportunity to comment or give feedback on the authorization process. Such feedback can serve as a valuable forum for identifying inefficiencies or unnecessary measures for designing regulatory amendments related to the authorization process. Moreover, these digital investment facilitation platforms might facilitate investor engage- ment in public consultation processes for regulatory amendments related to authorizations, such as by incorporating hyperlinks to proposed bills or online public consultation portals. b. Procedures Maintaining reliable and up-to-date information about authorizations and measures in a single information portal, alongside the digital processing of business authorizations, necessitates the design of implementing regulations 74 This principle dictates that an investor only needs to provide required information once, after which it is automatically exchanged between competent authorities, eliminating repetitive requests. 75 The data protection frameworks should align with international guidelines and principles, such as the General Data Protection Regulation (GDPR) in the EU. 100 and operating procedures. These procedures must ensure that the competent authorities diligently update information on authorizations following any regu- latory amendments. Furthermore, these regulations and operational procedures should include the templates for applications and output decision forms, the sequence of processing steps along with time limits, and the competent author- ities for managing authorizations. The mechanism for updating data is vital to the sustainability of a single information portal. Jurisdictions that successfully maintain the single in- formation portal prescribed step-by-step procedures defining the data that must be recorded as well as the procedure for recording the data. This infor- mation includes laws, regulations, and step-by-step procedures detailed in Measure 3. In Peru, a regulation was adopted to outline the data included in the register of procedures, as well as the protocols for updating the data.76 In Mexico, the procedure for updating existing information in the catalog is firmly set out in the General Law for Regulatory Improvement. In practice, this works by requiring all regulatory proposals to be submitted electronically to CONAMER, accompanied by a Regulatory Impact Assessment (RIA). The RIA asks whether the proposed regulation introduces new administrative procedures or alters or removes existing ones, which are already registered in the national catalog. This process serves as the primary method for keeping the catalog information up to date. The procedure must ensure the accessibility of the single information portal to foreign and domestic investors. The data in the portal shall be published in one of the official WTO languages. In India, the single infor- mation portal – Know Your Approvals, publishes information regarding au- thorizations and measures in English, one of the official languages of the WTO. Notably, the procedure for publishing authorizations and measures on the portal also includes information on sectors that may be restricted or prohibited for foreign direct investments, if any. Furthermore, the procedure includes an option for investors to provide feedback on their experience with searching for and utilizing the information published. This feedback mechanism not only improves user experience but also aids in keeping the data accurate and relevant. A good practice is that regular updates on the status of the data are relayed to the government cabinet, ensuring trans- parency and oversight. 76 OECD. 2016. Regulatory Policy in Peru: Assembling the framework for regulatory quality. OECD Reviews of Regulatory Reform. 101 The digital processing of investment authorizations requires a well-articu- lated procedure for online applications and processing of authorizations. A procedure must be adopted that should allow investors to apply for autho- rization online, pay the associated fees electronically, track the processing status, and receive the authorization in a digital format, all available in one of the official WTO languages. The digitalization of investment authorizations and risk-based regula- tory delivery requires systematic procedures for analyzing authorization processes (see also Measure 3). In the case of business licensing, this requires developing risk assessments and benchmarking with other good practices to determine the appropriate level of risk for each business activity. This strategic approach ensures a transition to digital platforms while stream- lining the authorizations and processes following the risk-based approach. Moreover, the procedure must be designed to allow for simultaneous requests of all mandatory registrations, including, but not limited to, the company registry, national and/or state and municipal tax identification number, social security, and pension schemes.77 Furthermore, an emerging practice allows investors to submit an application for multiple business licenses in bulk. Some countries provide guided applications tailored to a specific business profile, such as Single Counter for Business Registration and Licensing in São Paulo, Brazil.78 This concurrent submission capability significantly simplifies the au- thorization process for foreign investments. Online application systems ne- cessitate the integration of online complaint and feedback mechanisms. This allows investors to share their experiences and concerns directly, thereby fostering continuous improvement of service delivery. c. Institutional Framework The responsibility to maintain the single information portal is typically assigned to a designated body. In Mexico, the Ministry of Economy is re- sponsible for the Single Window for Investors (Ventanilla Única para In- versionistas).79 The single portal includes information on authorization and measures for a multitude of competent authorities, and typically a robust 77 An emerging approach is data-driven company registration that embraces data-driven culture through regulations, procedures, and digital solutions for efficient company registry processes, trustworthy business data, and prevention of fraudulent behavior. World Bank. Data-Driven Company Registry - Guidance Note (English). Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/ en/099435008302231899/P17553401702c10490be6e02112bae75050. 78 See https://www.youtube.com/watch?v=IGiSEuuh4AI. 79 Ministry of Economy: https://ventanillaunica.economia.gob.mx/. 102 accountability framework is in place, outlining clear roles and responsibil- ities for recording and updating data on the portal. The responsibility for implementing the data management is assigned to a specific unit or staff member within the competent authorities, often referred to as “informa- tion offices” or administrators. Their role involves continuously monitoring, updating, and ensuring the accuracy of the data published on the portal, thereby maintaining its credibility and usefulness for the users. The institutional framework should delineate roles and responsibilities related to the processing of authorizations, thereby facilitating a transition to digitalization. It ensures that each stakeholder has a clear understanding of their specific duties, which is crucial for maintaining efficiency and ac- countability in the digital authorization process. An emerging practice involves setting up a service agency following the integrated service delivery framework. Additionally, institutional ownership must be defined for data and registers, encompassing aspects of data management such as capture, sharing, data quality, protection, and analysis. Clarity in ownership ensures the integrity and security of the data while also promoting effective data utilization. To further assist investors in navigating the shift to digital, paperless, and contact- less service delivery, walk-in centers can be established for customer service support. These centers provide hands-on customer support, helping investors to transition to the use of digital services effectively. Such service centers can host officers authorized to submit applications for investment authorizations online on behalf of investors. In such a way, the integrity of service delivery is kept, avoiding the possibility of parallel online and paper-based channels. The walk-in service centers must be equipped with adequate computer hardware and network equipment to ensure seamless operation. The institutional funding model must support the sustainability of regu- latory service delivery and adequate compensation schemes. The adminis- trative fees associated with service delivery should adhere to the “cost-cov- ering principle.” This principle necessitates that departments outline both the direct and indirect costs linked to their services. Notably, these costs should incorporate the expenditures required for the operation, maintenance, and enhancement of the digital platform for a single informational portal and for processing authorizations. In instances where multiple regulatory bodies or departments process authorization, the e-payment system should be utilized to allow an investor to make a single payment, and this system should then automatically distribute the funds internally to the appropriate regulatory bodies and departments, streamlining the process for the investor. 103 d. Human Resources and Training The agency responsible for the single information portal should develop specialized training programs and materials for recording and maintaining the data on the portal. These programs should emphasize using non-tech- nical language to appeal to non-experts equipping them with the ability to record data on authorization and measures and update the data following changes in laws and regulations. A specific number of “information officers” or data administrators should be trained by each competent authority to update information on authorizations and measures that fall within their ju- risdiction. For technical support, the responsible agency for a single informa- tional portal must be tasked to provide helpdesk assistance to competent authorities in case of difficulties in recording or updating information on authorizations or measures on the portal. Each agency should host a team of technical support staff for troubleshooting and resolving issues, providing support to “information officers.” To ensure effective service delivery, specific training programs should be implemented to onboard new staff who receive and review applications for authorizations. These programs should equip staff members with the necessary skills and knowledge to navigate the digital system for processing authorizations efficiently, ensuring a smooth and swift application process for investors. The authorities tasked with issuing authorizations must be ade- quately staffed to adhere to the stipulated time limits. This adequate staffing ensures that each application is processed within the mandated timeframe, minimizing delays, and improving the overall efficiency of service delivery. Some jurisdictions, as a prerequisite, may decide to request a computer literacy training program for their staff such as ECDL/ICDL (European/Inter- national Certificate of Digital Literacy). The agency responsible for operating the digital platform for process- ing authorizations must have an adequate service management system in place. An adequate service management system encompasses a robust framework for monitoring the efficiency of digital services, managing the maintenance and upgrades of the digital system, and implementing cyber- security measures to assure business continuity and recovery strategies in case of failures.80 Both in-house teams and external support play crucial roles 80 Some jurisdictions may consider implementing the requirements of ISO/IEC 20000 to ensure alignment of the service management processes with good international practice. Similarly, organizations may consider applying ISO/IEC 27001 for information security management. 104 in this setup. Agencies must be sufficiently staffed and equipped with the necessary training to handle their responsibilities effectively. Based on the structure of the framework, it is imperative to assemble a multidisciplinary team comprised of support engineers, system engineers, database admin- istrators, and computer network administrators, among other specialists. When outsourcing services, it is crucial to establish service level agreements (SLA) that stipulate response times and resolution protocols, categorized according to the severity and potential impact of issues on the operation of the system. This not only guarantees the smooth operation of the system but also helps promptly address any technical issues, thereby reinforcing the reliability and efficiency of the digital services for investment authoriza- tions. Given the notable turnover rate among digital specialists, thoughtful consideration of the service management is needed when deciding between in-house and outsourced support. This strategic decision plays a critical role in ensuring the sustainable operation of the system over time. e. Information and Communications Technology An initial step when digitalizing licensing procedures is publishing online information on authorization and measures on a single information portal. The single information portal should offer a user-friendly interface, allowing investors to filter authorizations and measures according to specific business sectors and activities. For instance, an investor interested in waste treatment and disposal can select that particular activity to view all relevant authoriza- tions or measures. Furthermore, a portal can be organized to collect multiple pieces of information from an investor about the investment in addition to the business activity, including whether a new company would be established and the location and scale of the investment, among other sector-specif- ic questions. This approach was developed in Mexico’s Single Window for Investors. This comprehensive approach simplifies navigation for investors and provides more precise query results, but it demands additional effort from the managing agency to maintain the data and rules on the portal. A single-information portal should be designed to simplify navigation, with linked authorizations or measures cross-referenced. This approach allows investors to follow hyperlinks to pages that publish information on related authorizations or measures. In some cases, such as in Buenos Aires, Argentina, a chatbot (Figure 2) enables users to address queries related to public services (e.g., licenses and authorizations) through multiple commu- 105 nication channels.81 95 percent of consultations made through the AI tool— Boti—are considered satisfactory by users.82 Boti is also integrated to citizen services teams, allowing a public official to answer questions that were not successfully answered by the chatbot. Figure 2. Artificial intelligence tool for public services information in Bueno Aires, Argentina Source: Gobierno de la Ciudad de Buenos Aires. (2022). Informe Boti – El chatbot de la Ciudad. 81 Roseth, B.; Reyes, A.; Santiso, C. (2018). Wait no more. Citizens, Red tape, and Digital Government. Inter- American Development Bank. 82 Gobierno de la Ciudad de Buenos Aires. (2022). Informe Boti – El chatbot de la Ciudad. See: https:// buenosaires.gob.ar/sites/default/files/2023-02/Caso%20Boti.pdf. 106 The single information portal should be linked to the register of regu- lations incorporating a mechanism ensuring data integrity. A simple mechanism for supporting data management involves setting up the data exchange between the single information portal and the digital register of regulations. Such data exchange enables automatic internal notifications to the competent authority to revise authorizations or measures in the portal upon relevant regulation changes. These notifications are also forwarded to the public body responsible for managing the single information portal, ensuring all parties involved are promptly informed about any changes. Further enhancing the efficiency of this process involves the application of AI, machine learning, and natural language processing for a semi-automated data updating process. An ultimate objective should be the implementation of machine-readable regulations following the Akoma Ntoso standard and its derivatives, including OASIS LegalDocumentML,83 USLM XML, 84 or EU AKN4EU.85 This approach allows attaching relevant data on authorizations or measures to a regulation XML schema. Essentially, this means that reg- ulations can be tagged with data on authorizations or measures, to make sure that any change in the regulation automatically triggers corresponding updates on the single information portal. This system not only improves the accuracy of the information presented on the portal but also reduces the manual effort required to maintain it. The availability of a consolidated register of regulations can allow initial semi-automated mapping of invest- ment authorizations and measures by applying AI, machine learning and natural language processing.86 The single information portal can be provided either directly by the gov- ernment or in collaboration with a specialized organization. The institu- tional model depends on the specific requirements and capabilities of the 83 LegalDocumentML is the OASIS adoption of Akoma Ntoso, which is an international technical standard for representing executive, legislative, and judiciary documents in a structured manner using a domain-specific, legal XML vocabulary. See https://www.oasis-open.org/committees/tc_home.php?wg_abbrev=legaldocml. 84 United States Legislative Markup (USLM) is a 2nd generation XML schema and is a derivative of the international LegalDocML (Akoma Ntoso) standard. See https://www.govinfo.gov/features/beta-uslm-xml. 85 Akoma Ntoso for European Union (AKN4EU) is the future machine-readable structured format for the exchange of legal documents in the EU decision-making process. It is based on XML, and more specifically on Akoma Ntoso, an OASIS standard, and should serve as the specification for all future exchanges of legal documents. More information is available on the following link https://op.europa.eu/en/web/eu-vocabularies/ akn4eu. 86 For example, the World Bank applied a semi-automated initial mapping of authorizations and measures in Croatia by applying AI/machine learning and natural language processing. 107 governmental body as described in the previous sections. Portals can be hosted in a variety of locations, preferably in the government data center or cloud, public body servers or data centers, rather than public clouds operated by the private sector. If the portal hosting is outsourced, a service-level agreement must be developed along with data protection considerations. The SLA details the expected availability or uptime of the portal, ensuring that users can reliably access the necessary information. Portal security is of the utmost importance, and several cybersecurity measures must be applied to protect the data and ensure continuity of operation. Cybersecurity measures typically include encryption, multi-factor authentication, firewalls, intrusion detection systems, and regular security audits. Moreover, website analytics (such as Apache Spark or Google Analytics) and user feedback should be used continually to monitor and improve the portal’s performance. This includes tracking metrics such as the average time to fully load a web page, which helps identify potential areas for optimization and ensure the best possible user experience. Digital processing of investment and business authorizations has revolu- tionized the process of obtaining necessary approvals. This solution includes submitting online applications, allowing electronic payments of administra- tive fees, accessing real-time updates about application status, exchanging data seamlessly with relevant registers, and issuing digital business authori- zations. Interoperable business registers are a key prerequisite for digitaliz- ing investment and business authorizations.87 Additionally, the advent of a data-driven, trustworthy, and interoperable company registries has further streamlined the process. Digitalization typically requires a phased process. The first step typically involves implementing simple notification mecha- nisms, such as the foreign investment notification mechanism (FINS) that replaces the investment approval route or online notifications for low to medium-risk business activities replacing issuance of business permits and licenses (Figure 3). Experience shows that significant benefits for investors and the private sector are achieved when the highest priority investment and business authorizations are streamlined and digitalized. 87 Assessment of Digital Government to Business Services Business Environment Reform II Croatia. Washington, D.C.: World Bank73. 108 Figure 3. Example of foreign investment notification mechanism (FINS) as recommended to Nepal by the World Bank Notifications Administration Online portal & module module mobile application Company Receiving online Publish caps and Departamen notifications conditionalities for the of industry automatic route Automatically assign unique Manage notification notification number form Notifies FDI through the Generating Manage user roles automatic route automatically the “notification Generating statistical confirmation” reports Central bank Browsing FDI data base of submited notifications FDI notifications Information on automatic route database Submitting online notifications for FDI automatic route Other Access to the FDI database of authorities submitted notifications * Subject to the propose 100 millon NPR cap for the automatic route Source: World Bank Group: Digitalization of FDI Approval and Investment Climate, Workshop Proceedings, Kathmandu, September 22 and 23, 2022. Setting up a digital transactional system for investment authorizations requires e-Government shared services in place. Those services involve digital ID and signature, cloud hosting, e-Payment, and an interoperabili- ty system sometimes known as a government service bus. Figure 4 below shows horizontal e-Government infrastructure systems as a prerequisite for integrated investor and business service delivery. The lack of these services makes digitalized investment and business authorization transactional services difficult to achieve. Robust cybersecurity mechanisms must be put in place to ensure business continuity and resilience. System hosting must be ensured, either in government data centers or in cloud-based hosting, and relevant authorities should be equipped with digital devices like computers, notebooks, and tablets. Secure internet access and communication channels should be provided to all staff members, ensuring not only the smooth operation of the digital authorization process but also the security and con- fidentiality of sensitive business information. 109 Figure 4. Integrated Investor and Business Service Delivery Integrated Investor and Business G2B Service Delivery Single Point Planning Entry Licensing Life Life Exit Planning Entry Licensing Situations Exit of Single ContactPoint Situations of Contact Single Single Integrated Business Information Business e- e-Business Life e- Catalog of andInformation Service Integrated Registration Construction e- Inspections Licensing Business Life Situations Administrative Portal and Service Business e- Permits e-Business System e-Catalog Procedures of Information - Online– Situations Portal Registration System Construction e-Inspections Licensing Servoces Administrativ Online Information Permits System e Procedures Services System Business Process Management (BPM) Business Web Virtual Process Business Process Management (BPM) Services Repository Business Government Service Bus (GSB) Web Catalogue Agent – Agente VirtualArtificial Process Services - Artificial Repository Government Service Bus (GSB) Catalogue Intelligence Intelligence Content and PKI Registry Document E-ID E-Payment Open Data Infrastructure PKI Generator Content Registry and Management Open Data E-ID E-Payment Document Infrastructure Generator Management Government Organization and Functions Government Organization and Functions e- Government Infraestructure Source: World Bank Group. The design of the user interface should take into account behavioral analytics to ensure usability and promote the use of digital transactional services for investment authorizations. For instance, machine learning methods can be used to identify and address emerging issues that investors encounter during the submission and review of their applications. KPI statistics should be readily available online, providing users with insights into the process performance. 4. Case Studies Box 13. Single Window for Investors and Single Registry for Investment Projects in Mexico Challenge: Mexico has made significant strides in leveraging digital tech- nology for public services through the National Single Window since 2015, allowing users to carry out some government transactions completely online and promoting interoperability 110 between government agencies to enable simplification of pro- cedures. In 2023, Mexico decided to strength the integration of services for investors. The objective of Mexico’s Single Window for Investors (Ventanilla Única para Inversionistas) and the Single Registry of Investment Projects initiatives is to promote transparency and legal certainty and reduce administrative burdens to attract and promote national and foreign invest- ment in the country. The use of information technologies is seen as crucial in achieving these goals, as it allows for faster and more efficient services, access to services from anywhere in the world, and transparency and legal security for individu- als. By implementing a single window for investment, Mexico aims to streamline the investment process and guide interest- ed parties through the various procedures involved in setting up an investment project. This initiative is aligned with inter- national best practices recognized by organizations such as the WTO and the UNCTAD. Measure: A July 2023 decree established the Single Window for Investors as a public mechanism of contact and guidance for planning or installation of an investment project in Mexico, which integrates and makes transparent information regarding the procedures required. This single window provides (i) information related to procedures for installation of investment projects, competent authorities, requirements, and costs; (ii) a guidance mechanism regarding procedures and regulations; and (iii) information on related subjects, such as communication routes, supply chains, workforce, infrastructure and other available goods and services, by geographical location in the national territory. Users can navigate the platform searching by services or pro- cedures by economic sector or by federal entity. The platform provides step by step guides for each service, as demonstrated in the figure below on how to establish a new Mexican company with foreign investment. 111 https://ventanillaunica.economia.gob.mx/procedure/339?l=es The decree also establishes the Single Registry of Investment Projects as the public, electronic and free-of-charge mechanism for administrative facilitation of investments greater than USD 100 million. Interested persons should submit their application through the Single Window for Investors to receive support from the Ministry of Economy. Results: Although some functionalities of the Single Window for Investors are still under development, such as the procedures by economic sector, as of October 2023, services and their related proce- dures and requirements can be easily found. This initiative was awarded with the UN Digital Government Awards 2023 in the category for best digital information portal for creating or operating a business. According to UNCTAD, Mexico’s Single Window for Investors stands out as one of the most user-friend- ly and advanced tools in Latin America. Sources: Diario Oficial de la Federación (México) from 07/26/2023. Available at: https:// dof.gob.mx/nota_detalle.php?codigo=5696825&fecha=26/07/2023#gsc.tab=0. Roseth, B.; Reyes, A.; Santiso, C. (2018). Wait no more. Citizens, Red tape, and Digital Government. Inter-American Development Bank. UNCTAD. UN Digital Government Awards celebrate excellence in online public services. Available at: https://unctad.org/news/un-digital-govern- ment-awards-celebrate-excellence-online-public-services. 112 5. Further Resources Donor Committee for Enterprise Development (DCED). 2020. “Use of New Technologies in Regulatory Delivery.” Donor Committee for Enterprise Devel- opment, Cambridge, UK.. . World Bank Group. 2020. Achieving Integrated Government-to-Business Service Delivery: A Planning Guide for Reformers (English). Washington, D.C. http://documents.worldbank.org/curated/en/229401604053492832/ Achieving-Integrated-Government-to-Business-Service-Delivery-A-Plan- ning-Guide-for-Reformers. World Bank Group. 2021. Assessment of Digital Government to Business Services Business Environment Reform II Croatia. Washington, D.C. http://documents.worldbank.org/curated/en/099305009072233646/ P171119034c57707e0bf4a04ff6389e8483. World Bank Group. 2022. Data-Driven Company Registry - Guidance Note. Washington, D.C. http://documents.worldbank.org/curated/ en/099435008302231899/P17553401702c10490be6e02112bae75050. World Bank Group 2022. Business Licensing and Inspections Maturity Model: Guidance Note. Washington, D.C.: http://documents.worldbank.org/curated/ en/099905010062240323/P17553404281830fa0b08200ef69ac4eddc. Reference List 1. European Commission. “A Common Structured Format for EU Legislative Documents.” Available at: [https://op.europa.eu/en/web/eu-vocabularies/akn4eu] 2. Foreign Acquisitions and Takeover Act, 1975. India. Available at: [https://pib. gov.in/PressReleasePage.aspx?PRID=1888936] 3. Gobusiness.gov. Available at: [https://foodservices.gobusiness.gov.sg/licences/ foodservices?/?src=eservices] 4. Government of the Republic of Serbia, Public Policy Secretariat. “A public policy is a course of action that a Government takes in order to achieve certain economic and social goals.” Available at: [https://rsjp.gov.rs/en/about-us/] 5. IEG Review Team. Moldova - Second Competitiveness Enhancement Project (English). Washington, D.C. World Bank Group. [Online]. Available at: [http:// documents.worldbank.org/curated/en/099042123184518941/P1441030d- 63ce40150a0710b303de239e48] 113 6. InvestIndia. Available at: [https://www.investindia.gov.in/] 7. Kusek, P., Saurav, A., and Kuo, R. 2020. Outlook and Priorities for Foreign Investors in Developing Countries: Findings from the Global Investment Com- petitiveness Survey in 10 Middle-Income Countries. 8. Kyrgyz Republic. Permitting Documents. Available at: [https://elicense.gov. kg/index.php/news/article/12] 9. LegalDocumentML. [Online]. Available at: [https://www.oasis-open.org/com- mittees/tc_home.php?wg_abbrev=legaldocml] 10. National Single Window System. India. Available at: [https://www.nsws.gov.in/]. 11. OECD. 2019. FDI Restrictiveness Index, 2019. 12. UNCTAD. 2019. 13. United States Legislative Markup (USLM). [Online]. Available at: [https:// www.govinfo.gov/features/beta-uslm-xml] 14. Wikipedia. [Online]. Available at: [https://en.wikipedia.org/wiki/Akoma_Ntoso] 15. World Bank Group. 2020. Global Investment Competitiveness Report 2019/2020: Rebuilding Investor Confidence in Times of Uncertainty. Wash- ington, DC: World Bank. © World Bank. 16. World Bank. Data-Driven Company Registry - Guidance Note (English). Wash- ington, D.C.: World Bank Group. Available at: [http://documents.worldbank. org/curated/en/099435008302231899/P17553401702c10490be6e- 02112bae75050] World Bank. Global Investment Law Database, World Bank Group. 114 C. Strengthening the governance of authorization processes Countries with robust regulatory frameworks and fair and effective administrative mechanisms inspire con- fidence among investors. There is a strong correlation between a country’s GDP per capita and the regulatory enforcement framework. For instance, there is a positive correlation between a country’s GDP per capita and the WJP Rule of law index (regulatory enforcement)88 score (Figure 5). Countries are more likely to attract substantial net FDI inflows if investors perceive them as secure and reliable destinations for their capital.89 Figure 5. Correlation between GDP (per capita, 2021) and WJP Rule of Law Index (Regulatory enforcement score, 2021) 160000 140000 PIB per cápita (millones de USD) 120000 R² = 0,70 100000 80000 60000 40000 20000 0 0,20 0,30 0,40 0,50 0,60 0,70 0,80 0,90 1,00 Índice de Estado de Derecho de WJP (puntuación del cumplimiento normativo) Source: Author’s calculation based on World Justice Project and World Bank Group Data. 88 WJP Rule of Law Index measures the extent to which regulations are fairly and effectively implemented and enforced. Regulations, both legal and administrative, structure behaviors within and outside of the government. This factor does not assess which activities a government chooses to regulate, nor does it consider how much regulation of a particular activity is appropriate. Rather, it examines how regulations are implemented and enforced. 89 Regulatory Risk and FDI, S Hebous, P Kher, TT Tran – WBG Global Investment Competitiveness Report 2019/2020. 115 The strength of the regulatory enforcement framework depends on good gov- ernance and the clear separation of powers between the different branches of government. A robust and effective regulatory framework requires a gover- nance structure that ensures the independence, accountability, and balance of power between the legislative, executive, and judicial branches. Good governance ensures that regulatory agencies and bodies operate transparently, ethically, and in the public interest. It involves establishing clear guidelines, standards, and procedures for regulatory enforcement, as well as mechanisms for monitoring and evaluating regulatory activities. Additionally, an independent judiciary plays a crucial role in interpreting and adjudicating disputes related to regulatory en- forcement, ensuring fairness, and upholding the rule of law. The separation of powers is essential in preventing the concentration of reg- ulatory authority in any one branch. It can help avoid potential conflicts of interest, abuses of power, and undue influence in decision making process. When powers are properly separated, the legislative branch can establish regulatory frameworks and enact laws, the executive branch can implement and enforce regulations, and the judiciary can provide oversight and resolve legal disputes. Good governance is key to ensure that investors are subject to a treatment that is objective, fair, transparent, and consistent. This section focuses on two aspects of the principle of good governance as recognized in the IFD Agreement: maintaining independence of competent authorities (Measure 6) and ensuring an effective appeal and review mechanism for investors (Measure 7). These measures together can help promote trust and confidence in the regulatory system and in the authorities responsible for making authorization decisions. Measure 6: Independence of Competent Authorities 1. Introduction Independence of authorities charged with decision-making functions that affect investment is central to administrative fairness and good regulato- ry enforcement. It is crucial that the authorities overseeing the authorization process are free from undue influence, political pressure, or conflicts of interest. The independence of authorities making authorizations refers to the degree of freedom and impartiality that these authorities have when making decisions related to granting permissions or licenses for certain activities, such as con- struction permits or business licenses (see theory of change, Figure 27). 116 The concept of independence is particularly important for regulatory agencies, which are responsible for enforcing laws and regulations to protect public health, safety, and the environment. If these agencies are not independent and are subject to external influence, they may fail to carry out their mandate effectively, which in turn may have serious consequences. On the other hand, investors often rely on a predictable, unbiased regulatory environment to make informed investment decisions and have confidence that their applications for authorization will be evaluated fairly. A 2019 World Bank Survey of 2,400 foreign investors found that an enabling regulatory environment is the top consideration for global investors. Nine out of ten respondents rated legal and regulatory environment, political stability, and macroeconomic stability as “important” or “critically important”, ahead of other considerations such as low tax rates, low labor and input costs, and access to resource endowments.90 To promote independence, authorities that issue authorizations are often estab- lished as separate bodies from the bodies that regulate, with clear mandates, funding, and decision-making powers. By adhering to these principles, govern- ments can foster an investment climate that is conducive to sustainable economic development and investor confidence. The importance of the independence of competent authorities has also been recognized in the provisions of the IFD Agreement (see Box 14). Box 14. Independence of Competent Authorities in the IFD Agreement The IFD Agreement includes an obligation on maintaining in- dependence of the competent authorities (Binding Art. 19). It includes the following requirements: If a Member/Party adopts or maintains a measure relating to the authorization for an investment, the Member/Party shall ensure that the competent authority reaches and ad- ministers its decisions in a manner independent from any enterprise carrying out the economic activity for which au- thorization is required. 90 The Global Investment Competitiveness Report, 2021, World Bank Group. 117 2. Diagnostics To understand the existing framework for maintaining the independence of competent authorities, governments may undertake various diagnostics. Any diagnostics should begin with listing the competent authorities relevant to au- thorizations. Once these authorities have been identified, further diagnostics that can be conducted: a. Legal and regulatory framework: Maintaining independence of authorities issuing authorizations requires establishing independent regulatory bodies or agencies with a clear legal mandate to oversee specific sectors or ac- tivities. As a first step, a government can conduct a comprehensive review of the existing legal and regulatory framework governing the competent authorities. This includes examining the legislation, regulations, and policies that establish the authorities and define their roles, responsibilities, and de- cision-making powers. Depending on the legal tradition of the country, the legal framework may differ. The legal framework should provide details on the organization, powers and duties of administrative authorities, the legal requirements governing their operation, rules on conflict of interest, appoint- ment process, accountability and reporting requirements, and the remedies available to those adversely affected by administrative decisions.91 b. Institutional Assessment: Assessing the institutional structure and gover- nance arrangements of the competent authorities will provide insight into the strength of the existing framework for maintaining independence of those authorities. The review should focus on the organizational setup, ap- pointment processes for personnel, and accountability mechanisms in place. Many high-income countries employ specific processes for selecting qualified personnel that are based on merit, expertise, and integrity, to ensure ap- pointments are free from political interference. In LAC countries, analogue cases can be found in Costa Rica, Chile and Brazil which contain a high degree of merit in selection, promotion and removal decisions of bureaucrat- ic staff, followed by Argentina, Venezuela, Mexico, Colombia and Uruguay, which have been found to combine merit with clientelist tradition.92 Fixed and non-renewable terms of office may also help prevent undue influence or long-term biases. 91 Administrative Law in Civil Law and Common Law Countries, Abyssinia law, https://www.abyssinialaw. com/study-on-line/365-administrative-law/7189-administrative-law-in-civil-law-and-common-law-countries. 92 Longo and Carrió (2008). “La Profesionalización del Empleo Público en América Latina”. CIDOB, Pages 32-33. 118 i. Safeguards: Evaluate whether the authorities have sufficient autonomy and safeguards against undue influence or political interference. Identify any potential structural or operational changes needed to enhance their independence. ii. Financial autonomy: Financial independence can be important to avoid undue influence on the decision-making process. Adequate funding can ensure that competent authorities have sufficient resources to carry out their responsibilities effectively and without relying on external sources. iii. Comparative analysis: A comparative analysis of best practices and ex- periences from other countries, especially those within the same region or with similar governance models will help the government benchmark their framework. It will help identify any lessons or strategies that can be adapted to the country context. iv. Stakeholder consultation: Governments can engage with stakeholders, including competent authorities, industry representatives, civil society organizations, and experts. Interviews, surveys, or public consulta- tions can be conducted to obtain feedback on the existing framework, potential challenges, and areas for improvement. v. Training programs: Evaluating the internal capacity and expertise of the competent authorities and assessing whether there are any training programs, resources, and support mechanisms available to the personnel responsible for or involved in the decision-making. In addition, indices and databases can be consulted to aid with the diag- nostic and complement in-country information. While these may not directly concern the independence of the authorities concerned with authorizations, they are good indicators to determine the strength of the overall governance and regulatory framework in a country. Rule of Law Index, World Justice Project (WJP): WJP Rule of Law Index measures the extent to which regulations are fairly and effectively imple- mented and enforced. Regulations govern behaviors within and outside of the government. This index does not assess which activities a government chooses to regulate, nor does it consider how much regulation of a par- ticular activity is appropriate. It simply examines regulatory enforcement. https://worldjusticeproject.org/rule-of-law-index/. For LAC countries, the first ranked country on regulatory enforcement is found in position #25, with Uruguay on top followed by Costa Rica (#28), and Chile (#33). Six Caribbean countries come next: St. Kitts & Nevis (#34), Barbados (#37), Antigua and Barbuda (#38), St. Lucia (#42), Grenada (#50) and Jamaica 119 (#52). Countries such as Venezuela (#140, last place), Haiti (#137) and Nicaragua (#128) score near the bottom. These findings reinforce the need to improve regulatory enforcement in the LAC region. WBG Worldwide Governance Indicators: The Worldwide Governance In- dicators (WGI) project reports aggregate and individual governance indi- cators for over 200 countries and territories over the period from 1996 to 2021, across six dimensions of governance: Voice and accountabili- ty, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, Control of Corruption. Regulatory quality, rule of law and government effectiveness are partic- ularly relevant for this topic. LAC countries are leaders in a few catego- ries: Barbados for voice and accountability as well as corruption control; Aruba for political stability and absence of terrorism as well as gov- ernment effectiveness and rule of law; and Chile for regulatory quality. https://info.worldbank.org/governance/wgi/. 3. Implementation Principles a. Legal and Policy Framework The legal framework should prescribe the functions and mandates of the entities entrusted with administrative decision making. Legal frameworks for competent authorities can vary country by country and can be found in a variety of sources, including: i. Constitutions: Constitutions often establish the basic framework for government, including the powers of different branches of government. ii. Statutes: Statutes are laws passed by legislatures. They can establish new agencies, grant authority to existing agencies, and prescribe the functions and mandate of those agencies. iii. Regulations: Regulations are rules issued by agencies to implement statutes. They can further define the authority of agencies and the pro- cedures that they must follow. iv. Case law: Case law is the body of law that is created by judges when they decide cases. It can provide guidance on how to interpret statutes and regulations. v. Codes of Conduct: A Code of Conduct is a set of rules, norms, princi- ples and responsibilities or practices expected from the staff of the concerned authority. The legal validity of a code of conduct shall depend on the context of a country and its legal tradition. 120 The legal framework plays a vital role in maintaining the integrity of the authorization process. By establishing clear rules and regulations, the law can help to ensure that relevant authorities are held accountable for their actions and that the authorization process is fair and transparent. For instance, countries can prescribe the grounds for issuance or rejection of relevant investment related authorization(s) in the law. This can help avoid arbitrary decision-making and minimize the influence of any enterprise on authorization decisions. For instance, many investment laws prescribe the requirements and procedures for approval of an investment (see the Global Investment Law database). Other measures may include additional require- ments, such as: i. Competent authorities restate specific grounds as well as the references to the relevant laws or regulations when rejecting an application for an authorization; and ii. Competent authorities implement an audit to ensure that officials are acting free from political or other influences. b. Procedures Applicants must be informed about the application procedures, evalua- tion criteria and the timeline involved in the process. Concerned authori- ties should publish guidelines describing how to comply with procedures and should make all laws, regulations and issued decisions available online or, at a minimum, provide them to investors when requested. Establishing robust conflict of interest policies that apply to the personnel of the competent authority is important to safeguard the integrity of au- thorization-related transactions. Competent authorities that are involved in the decision-making process should consider developing a procedural manual or standard operating procedures. These documents should clearly identify potential conflicts involved in the process of decision making. In addition, they should provide details regarding the type of mitigation measures that should be taken by staff members to avoid potential conflicts. There should be clear procedures regarding reporting conflicts including the rules on recusal from decision making processes where a conflict exists. c. Institutional Framework The provision as presented in the current version of the IFD Agreement does not mandate a particular institutional structure, rather it refers to the decision-making process. However, the strength of the institutional framework depends on the following: 121 Transparency and accountability of the competent authorities. A framework to address conflict of interest and undue political influence either from other parts of the government or investors. d. Human Resources and Training Authorities that issue investment authorizations should be trained regarding the importance of independence and how to avoid conflicts of interest. Ap- propriate training and professional development opportunities ensure that each staff member involved in investment decisions is equipped with the necessary expertise, knowledge of relevant laws and regulations, and ethical standards to make informed and unbiased decisions. e. Information and Communications Technology The use of e-government and technology portals can enhance transpar- ency and accountability, and they can improve service delivery. Together, these features improve the independence of the competent authorities. 4. Case Studies Box 15. Creation of an autonomous telecommunications and broadcasting regulator in Mexico Challenge: For more than 20 years prior to 2013, the telecom sector in Mexico was characterized by low levels of competition and in- vestment in infrastructure, highly concentrated markets (80% of market share owned by a single company in the fixed line market and 70% in the mobile market), high prices, and low quality of services. The regulator—the Federal Telecommuni- cations Commission (COFETEL) under the Ministry of Com- munications and Transport—had limited competencies and was subject to industry capture. There were restrictions on FDI (e.g., up to 49% of foreign ownership for fixed services). The OECD estimated in 2012 that between 2005-2009, the consumer welfare loss caused by the dysfunctional sector rep- resented more than USD $129 billion per year (1.8% of GDP). 122 As a consequence, in 2009 Mexico had the second lowest penetration of mobile subscriptions among OECD countries, just above Canada and for fixed broadband, the third lowest penetration, just above Chile and Türkiye. In terms of af- fordability, during the same year Mexico was the third most expensive OECD country for mobile services, just below the Czech Republic and Chile, and the most expensive for fixed broadband. Measure: Thanks to a constitutional reform, an autonomous telecom regulator, the Federal Telecommunications Institute (IFT), was created in 2013. The reform included: ample powers to the IFT to enforce independent regulation and competition competen- cies for the telecom and broadcasting sectors; the possibility to impose asymmetric regulations on players with substantial market power; the creation of specialized courts and elimina- tion of the suspension of regulations during legal injunction trials; and the elimination of FDI restrictions for all telecom services and satellite communications, as well as FDI restric- tions for the broadcasting sector based on reciprocity rules. Examples of policies and regulatory actions implemented by the IFT during its first three years of existence include: Asymmetric regulations for telecom and broadcasting in- cumbents, with specific obligations for infrastructure sharing and regulated interconnection tariffs for fixed and mobile telephony. Elimination of significant barriers to entry in the Pay TV market by establishing the Must Carry/Must Offer obligation regarding Free-to-Air TV. Launched the Shared Wholesale Network (Red Compartida Mayorista), which takes advantage of the digital dividend of the 700MHz band and had a coverage target of 92 percent of the population by 2024, aiming to increase coverage across the entire country, especially in rural areas. Public tenders for radio spectrum allocation across different frequency bands. 123 Results: By 2016, the reform showed tangible impacts, such as greater competition, significantly reduced prices, a broader service offering, more investment in infrastructure and FDI, technolog- ical improvements, and better quality of services. Some of the reform impacts between 2013 and 2016 are: Prices: National roaming charges were eliminated, internation- al long distance call rates fell 40 percent, and prices for mobile services dropped more than 32 percent. Penetration of services: Pay TV services grew over 30 percent and fixed broadband internet users increased by more than 12 percent. In 2013, only 23 percent of the popu- lation had access to broadband mobile internet and by 2016, this figure was 54 percent. Radioelectric spectrum: Allocation of radio spectrum increased from 222 MHz in 2013 to 314 MHz in 2016, with the objective to reach 604 MHz by 2018. This is crucial to have better quality of mobile services, especially in rural areas. DTT: In 2015, Mexico was the first country in LAC to success- fully switch off its analogue television signal and migrate to digital terrestrial television (DTT). Digital channels increased from 311 to 676 in three years. Domestic and foreign Investment: Private domestic invest- ment increased by almost 35 percent. FDI in the telecom sector in 2013 was USD $219 million. This jumped to USD $2,134 million in 2014 and USD $2,712 million in 2015. This 2015 telecom FDI represented almost 10 percent of total FDI in Mexico, just behind the manufacturing and finance & insurance sectors. Sources: Federal Institute of Telecommunications (IFT). 2016. Telecommunications in Mexico: Three Years After the Constitutional Reform. Mexico City: IFT. OECD (2012), OECD Review of Telecommunication Policy and Regulation in Mexico, OECD Publishing, Paris, https://doi.org/10.1787/9789264060111-en. OECD (2017), OECD Telecommunication and Broadcasting Review of Mexico 2017, OECD Publishing, Paris, https://doi.org/10.1787/9789264278011-en. 124 5. Further Resources CIDOB (2008), La Profesionalización del Empleo Público en América Latina EIOPA (2021), Criteria for the independence of supervisory authorities Federal Institute of Telecommunications (IFT) (2016). Telecommunications in Mexico: Three Years After the Constitutional Reform. OECD (2012), OECD Review of Telecommunication Policy and Regulation in Mexico OECD (2017), OECD Telecommunication and Broadcasting Review of Mexico 2017 OECD (2017), Creating a Culture of Independence: Practical Guidance against Undue Influence OECD (2022), Better Regulation Practices across the European Union 2022 WBG (2019), Institutions for investment, Establishing a High-Performing In- stitutional Framework for Foreign Direct Investment (FDI). Measure 7: Appeal and Review Mechanisms 1. Introduction Appeal or review processes play a crucial role in safeguarding the rights of investors and ensuring that their applications are evaluated fairly. The ad- ministrative decisions made by government agencies can have significant impli- cations for investors. These decisions can cover a wide range of areas including licensing, permits, benefits, zoning, taxation, and more. Like any decision-mak- ing process, errors or excessive use of discretion, or actions that go beyond the delegated powers may occur. An appeal or review process provides a mechanism for investors affected by administrative decisions to appeal or seek a review, either internal or external, of the decision.93 It offers a way to challenge the validity, fairness, or legality of a decision affecting an investment and it aims to ensure that decision-making authorities act in accordance with the law, follow proper procedures, and exercise their powers in a fair, transparent, and non-dis- criminatory manner (see theory of change, Figure 27). 93 https://trade.ec.europa.eu/access-to-markets/en/content/investment-pillars. 125 Appeal or review processes vary across jurisdictions and can be governed by specific statutes, regulations, or administrative procedures. They often involve a hierarchical structure where an aggrieved investor can seek redress through multiple levels of review, starting with an internal appeal within the administra- tive body itself and, if necessary, progressing to external agencies appointed for this purpose, administrative tribunals, or the judicial system.94 The purpose of the appeal and review process is to strike a balance between creating adminis- trative efficiency and the protection of investors and their interests. It provides an avenue for affected investors to present their arguments, evidence, and legal interpretations, and to have an impartial and independent authority review the administrative decision to determine whether it was fair, reasonable, and in com- pliance with the applicable laws and regulations. These are all key tenets of the due process principles enshrined in a country’s legal and regulatory framework. The importance of the appeal and review process has been recognized in the IFD Agreement (see Box 16). Box 16. Appeal or review in the IFD Agreement The IFD Agreement includes an obligation on the availability of appeal or review procedures (Binding Art. 20). It includes the following requirements: Each Member/Party shall maintain or institute judicial, arbitral or administrative tribunals or procedures which provide, at the request of an affected investor, for the prompt review of, and where justified, appropriate remedies for, administrative decisions affecting investment activities. Such tribunals or procedures shall be impartial and inde- pendent of the authority entrusted with the administrative decision concerned and they shall not have any substantial interest in the outcome of the matter. Where such proce- dures are not independent of the agency entrusted with the administrative decision concerned, the Member/Party shall ensure that the procedures in fact provide for an objective and impartial review. 94 This shall depend on the specific legal tradition of a country. 126 The provisions of paragraph 20.1 shall not be construed to require a Member/Party to institute such tribunals or proce- dures where this would be inconsistent with its constitutional structure or the nature of its legal system. Each Member/Party shall ensure that the parties in paragraph 20.1 are provided with the right to: a reasonable opportunity to support or defend their respective positions and submit all relevant information; and a decision based on the evidence and submissions of record or, where required by its law, the record compiled by the administrative authority. The decision in paragraph 20.3(b) shall, subject to appeal or further review as provided for in each Member’s/Party’s law, be implemented by the authority entrusted with administra- tive enforcement. Diagnostics When performing a diagnostic on the appeal and review process in-country information needs to be consulted. The following aspects need to be considered for conducting an effective diagnostic: Policy and legal analysis: A review of the relevant policies and legal framework governing the appeal or review processes, including laws, regulations, guide- lines (usually prepared by the concerned agencies), and procedures (standard operating procedures or administrative manuals that lists out the relevant procedures involved). 1. For an investment approval, the appeal may be directed to the invest- ment agency or ministry that is responsible for issuing such approvals. For instance, under the Kiribati Foreign Investment Act of 2018,95 the investors shall have the right to bring an appeal on decisions issued by the investment registrar. The appeal can be filed with the Investment Appeal Panel formed pursuant to the provisions of the law. 95 UNCTAD Investment Laws, https://investmentpolicy.unctad.org/investment-laws/laws/359/kiribati- foreign-investment-act-2018-. 127 2. Similarly, for tax matters, the appeal may be directed to the tax appellate authority or authorities. In India, there is four-tier appellate hierarchy to deal with tax-related issues. An investor being aggrieved with an order of the Commissioner of Income Tax (CIT) or Commissioner of Income Tax Appels [CIT(A)], or Dispute Resolution Panel (DRP), can file an appeal before the Income Tax Appellate Tribunal (ITAT) within 60 days of the date of receipt of the order along with the requisite appeal fees. The decisions issued by the ITAT are final and can only be appealed judicially, in high courts and then supreme court, in cases where a “question of law” is involved. A survey conducted by the World Bank Group to 23 LAC countries revealed that all countries surveyed offer taxpayers the opportunity to request an internal administrative review of decisions made by the tax authorities, and most mandate at least two stages of administrative review before a taxpayer can appeal to the courts.96 According to this same survey, the second internal review is typically conducted either by the tax authority or by another execu- tive-branch institution supervised by a ministry. In all cases, the outcome of the internal review process is not final and may be appealed in a court of law. Most LAC countries even guarantee the right to such an appeal in their respective national constitutions.97 Understanding the legal and regulatory framework can help identify gaps and inconsistencies to inform areas for improvement. Process analysis: An analysis of the appeal or review process may depend on the type of legal tradition of the country, the type of agency within the country, and the laws that regulate them. For instance, the process of the review may either be within the same agency that issued the administra- tive decision, or it can be elevated to the appellate authority, typically the Ministry. In some instances, there could also be special tribunals to deal with such matters. In the optimum scenario, administrative review would involve several steps, ending with appeal to the responsible minister. This would be followed, if necessary, by an appeal for judicial review in the court system. Judicial and Administrative Recourse: Countries can consider conducting an analysis of the different forums available to investors to appeal or review a decision concerning investments. This will help identify the presence or absence of recourse for investors and the effectiveness of the process. 96 World Bank Group, Swiss Confederation and Canadian Government (2019). The Administrative Review: Tax Objections and Appeals in Latin America and the Caribbean: a toolkit. 97 Ibid. 128 Stakeholder analysis: An analysis of the stakeholders involved in the autho- rization process, including applicants, regulatory authorities, and other in- terested parties, can help identify the interests, needs, and concerns about the current framework. It can highlight opportunities for engagement and collaboration to improve the overall governance of authorization process. This process is also helpful when designing policies that aid in maintaining the in- dependence of the competent authorities. Performance analysis: An analysis of the performance of the existing process of authorization, appeals and their efficacy should include examination of the current performance indicators such as the number of applications received, the number of approvals granted, the number of approvals rejected, the time taken to process or reject applications, the number of investors seeking administrative or judicial remedy, and the time taken to obtain or issue a decision based on the appeal or review process. Risk analysis: An analysis of the risks associated with the authorization, appeal, or review process, including the risks of corruption, bias, non-compli- ance and arbitrary application of laws and regulations. This analysis can help identify vulnerabilities in the authorization process and highlight opportunities for strengthening governance and mitigating risks. In addition, several indices and databases discussed in Measure 6 (Independence of competent authorities) can also be consulted to aid with the diagnostic and complement in-country information. While these may not directly concern the quality of the appeal or the review process, they are a good indicator to identify the strength of the overall governance and regulatory framework in a country. Rule of Law Index, World Justice project (WJP): WJP Rule of Law Index measures the extent to which regulations are fairly and effectively implemented and enforced. Regulations govern behaviors within and outside of the government. This index does not assess which activities a government chooses to regulate, nor does it consider how much regulation of a particular activity is appropriate. It simply examines regulatory enforcement. https://worldjusticeproject.org/rule- of-law-index/. WBG Worldwide Governance Indicators: The Worldwide Governance Indicators (WGI) project reports aggregate and individual governance indicators for over 200 countries and territories over the period from 1996 to 2021, across six di- mensions of governance: Voice and accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, Control of Corruption. Regulatory quality, rule of law and government ef- fectiveness are particularly relevant for this topic. https://info.worldbank.org/ governance/wgi/. 129 3. Implementation Principles Generally, there is no one size fit all approach to ensuring a good review or appeal process. However, there are certain principles that each country needs to adopt not only to promote a positive investment climate but also to maintain integrity of the authorization process. These include the following: Transparency: In practice, this means that the procedures and requirements for appealing are clear and accessible to investors (see Measure 2). Fairness and Impartiality: All authorization decisions, including appeals, must be based on objective criteria and must not be influenced by personal interests or biases. This promotes fairness and impartiality in decision-making and helps to prevent discrimination or unfair treatment of individuals or groups. Consistency and Predictability: All authorization decisions and the process associated with it must be consistent and predictable. This means that arbitrary or discretionary actions by the concerned authorities must be prevented. Overall, reducing uncertainty will promote good governance and shall facilitate planning and investment by individuals and organizations. Accountability: Ensuring a systematic and evidence-based approach to de- cision-making is important. All authorization related decisions need to be well-informed and must be based on sound reasoning and analysis- so that the rationale for decision making is clear. In LAC countries overall, there are normally appeal procedures for administra- tive decisions, normally within administrative tribunals. Some examples are Dominican Republic, Peru, Honduras, and Colombia.98 a. Legal and Policy Framework Laws and regulations should ensure that investors have multiple avenues to resolve their grievances. If investors are not satisfied with the outcome of the review of the administrative decision, they should be able to appeal such decisions in a higher forum. Typically, these shall be the judicial bodies (e.g., courts) or extra judicial bodies (such as tribunals) that are created spe- 98 Dominican Constitution, Art. 165.3; Peruvian Law that Regulates the Administrative Litigation Process (Supreme Decree No 013-2008-JUS); Honduran Law No. 189-87 of the Jurisdiction of Administrative Litigation; Colombian Code of Administrative Procedure and Administrative Litigation. 130 cifically for this purpose. In addition, laws and regulations should typically define the types of administrative decisions that can be appealed, as well as the appeal procedures. The legal framework determines the agencies having authority to make decisions affecting investments and prescribe the functions and mandates of the entities entrusted with handling appeals. The legal framework for the appeal or review process can vary country by country and it can be found in a variety of sources, including: i. Constitutions: Constitutions often establish the basic framework for government, including the powers of different branches of government. Particularly the provisions relating to due process and ability to seek recourse through judicial and administrative means. ii. Statutes: Statutes are laws passed by legislatures. This can generally include civil code, administrative law, and agency specific laws. They can establish new review mechanisms, grant internal or external authority to act as review board, and prescribe the functions and mandate of those agencies. iii. Regulations: Regulations are rules issued by agencies to implement statutes. The procedures concerning the appeal or review mechanism, or the powers and functions of these agencies can be prescribed in the regulations. The legal framework determines whether investors have the right to review or appeal administrative decisions affecting investments. Where laws and regulations have clearly established the process of issuing decisions concerning investments, the regulatory agencies shall have the duty to implement and enforce them. When such implementation or enforcement is not compliant with the process established under the law, investors should have the right to review the decision issued by the concerned authority. Such a review should usually be conducted by an independent authority that was not responsible for making the decision. Where the review is conducted by the same authority, care must be taken to ensure the process remains objective and impartial. b. Procedures To ensure quality and consistency of decisions and observance of required time periods, authorities should establish internal working procedures for processing appeals and reviews. It is a good practice for countries to prescribe standard operating procedures or a manual covering all matters 131 related to the appeals process including the form and manner by which noti- fications should be made to the appellant, the rules for conducting hearings, and the implementation of the decision by relevant offices. They may also define standard forms or templates for decisions and other communications. Introducing standardized templates for filing a request for review or an appeal and a list of the documentation needed improves transparency and predictability of the process. This can be done through the relevant regula- tions issued by the concerned ministry/authority. Including these operational details in the regulation can make it easier for the government to review them periodically and make any necessary adjustments to improve efficiency. c. Institutional Framework The appeal or review process must take into consideration the role and function of each branch of government. This shall include reviewing the structure and governance of the administrative agencies, and the hierarchy of decision-making authorities. The structure and governance of the administrative appeal function will depend on national requirements. Some countries follow an administra- tive appeals mechanism housed in the executive branch. This is typically a higher-level authority (e.g., Ministry, Secretary of State or similar, depending on the jurisdiction), or it can be an administrative appeals tribunal that conducts independent reviews of administrative decisions made by govern- ment bodies. These may take the following form: Board of Appeals or internal review process: Some administrative agencies have internal boards or panels that handle appeals of decisions made by the agency. This can be a higher-level officer, committee or board typically composed of members with expertise in the relevant field that have the authority to reconsider and potentially overturn decisions. For example, in the Dominican Republic, according to its Administrative Law,99 users have recourse to reconsideration, by which the public entity who issued the decision can review its decision and ultimately overturn it; if the public agency has a hierarchical superior, the user can seek appeal before that organ; or even the investor can seek redress before administrative tribunals who have the competency to hear appeals to administrative decisions. 99 Ley No. 107-13 sobre los Derechos de las Personas en sus Relaciones con la Administración y de Procedimiento Administrativo. G. O. No. 10722 del 8 de Agosto de 2013. 132 Ombudsman or external agency: An ombudsman is an independent officer or external agency appointed to investigate complaints against ad- ministrative decisions and actions. They often have the power to mediate disputes, recommend solutions, and sometimes even overturn decisions. In LAC countries, Brazil and Colombia have established a Direct Invest- ment Ombudsman for the former and Investment Ombudsperson for the latter. Ecuador is planning to launch one in the upcoming years. Appeal to a higher-level administrative authority: In certain cases, in- dividuals may have the option to appeal a decision to a higher-level administrative authority within the same agency (e.g., to a Minister or Secretary of State). This involves submitting a formal request for review and reconsideration. In addition to the review mechanisms some countries also use judicial review. Judicial review is the review by a court of a decision made by a public authority to ensure the decision is legal (made pursuant to the law), reasonable, and fair. The review seeks to determine whether an ad- ministrative decision was properly made by focusing on the law, not on the merits of the decision. For example, such administrative review may assess the allegedly questionable actions of administrators against standards of reasonableness and abuse of discretion. d. Human Resources and Training Provide training to the appeal or review bodies to effectively carry out the process pursuant to the relevant law, regulations and or procedural manuals. Other aspects in the training program can include imparting the duties in a fair, transparent, and impartial manner to maintain integrity of the appeal or review process. e. Information and Communications Technology The use of IT systems and technology plays a crucial role in enhancing the efficiency, accessibility, and transparency of the appeal and review process. Some key areas where the IT system can improve the efficiency of the appeal and review process include: Online filing and submission of review or appeal petitions or applications. A notification system to provide updates on the progress and the status of the appeal or review process. The notification system can also be used to issue decisions. 133 Electronic case management systems to handle electronic storage of all relevant information related to the appeal or review process and other relevant documents. A document repository which effectively stores all documents relevant to the case and allows the easy transfer of such documents to appellate bodies or courts. 4. Case Studies Box 17. Strengthening the revenue appeal and review process in Jamaica Challenge: The internal revenue appeals process was established as an al- ternative to an often time-consuming and relatively expensive judicial review process, which effectively restricted small- and medium-sized taxpayers’ right to an appeal. However, the internal appeals process as it was originally formulated did not represent an efficient and credible alternative to judicial review by the courts. This was due to several factors, including an increased demand for administrative reviews, limited human and financial resources, and an expansion of the tax adminis- tration’s mandate. A considerable backlog of cases accumu- lated, so many appeals took over a year to resolve. The length of the review was a result of the fact that: (i) a formal hearing had to be convened for every appeal; (ii) the Commissioner of the Revenue Appeals Division (RAD) had to chair each hearing; (iii) both the taxpayer and the tax authority had to be present at the hearing; (iv) every appeal had to be determined by issuing a formal decision; (v) case files from the tax authorities were submitted late and in some instances not submitted; and (vi) there were no penalties in place in the event that a party delayed or obstructed the appeals process. Approach: The Government of Jamaica (GoJ) undertook reforms in five areas, which included the design of the new process and software requirements, the drafting of the legal instrument, the change 134 management of the appeal institution, a communication plan for the public, the design of KPIs, and the training of the staff. (1) Drafting a new revenue appeals law and implementing its rules. Many of the envisioned institutional changes required legislative backing. (2) Implementing institutional and procedural changes. To make the reform worthwhile, the additional flexibility afforded to the appeals body in the new legislation needed to result in streamlined procedures. This component included an analysis of existing processes and recommendations for im- provements. Outputs included detailed process flow charts, simplified forms and new templates, a Memorandum of Understanding between RAD and the tax authorities, a detailed operations manual and staff training on the new operating framework. (3) Automating the process. The goal of this component was to improve the review process’ efficiency by linking the appeals body to the tax authorities, using digitalized files, assisting officers in processing an appeal, sharing file information within the organization, and producing status reports. (4) Communicating the reform and educating taxpayers on the new appeals framework. (5) Redefining performance indicators and releasing data to the public on the duration of the appeals process and success rate of appeals. Result: The creation of an appeals process that enabled an average appeal time of six months from the time the case was accepted and 60 days from the date the hearing was concluded, without compromising the quality of the appeals decision. Source: World Bank (2019b), Annex 5: Case Study – Reforming the Tax Appeals Process in Jamaica. 135 5. Further Resources “Creating a system of appeal, review, and complaint”, Chapter 28 of New Zealand’s Legislation Guidelines (2021). “Basic Principles on the Independence of the Judiciary”. United Nations (1985). “Identifying and understanding standards of review”, Georgetown University Law Center (2019). Reference List 1. European Commission, “Investment: The Pillars” 2. Federal Institute of Telecommunications (IFT). (2016). Telecommunications in Mexico: Three Years After the Constitutional Reform. Mexico City: IFT. 3. OECD (2012), OECD Review of Telecommunication Policy and Regulation in Mexico 4. OECD (2017), OECD Telecommunication and Broadcasting Review of Mexico 2017 5. WBG (2020), Global Investment Competitiveness Report 6. UNCTAD Investment Laws compendium, Kiribati: Foreign Investment Act 2018 7. WBG, Swiss Confederation and Canadian Government, “The Adminis- trative Review: Tax Objections and Appeals in Latin America and the Caribbean: a toolkit” 136 D. Building strong and effective relationships with investors Effective investment facilitation requires building strong relationships with investors. A direct relationship between the government and investors is key to facilitate investments. The importance of the human component cannot be underestimated, as investors often seek a direct counterpart to contact for information requests or help solving any issues they are encountering. This applies to all stages of the investment lifecycle, including entry, establishment, operation, and exit. This section focuses on two specific measures to build such relationships: identifying focal points (Measure 8) and creating retention mechanisms (Measure 9). While all parts of government should seek to facilitate investment, governments often choose to establish or designate specific focal points that are the key point of contact for any query regarding the investment process. In many cases, IPAs act as this focal point, providing a number of services to investors, including information, assistance, and advocacy services. In addition, developing strong relationships with investors requires making sure that investor issues are dealt with. Achieving this is also important from the per- spective of retaining investments. There are different types of retention mechanisms that governments can employ, including aftercare and grievance mechanisms. Developing effective stakeholder relationships also includes engaging stakeholders in the legislative process (see Measure 12). 137 Measure 8: Focal Points providing information, assistance, and advocacy services 1. Introduction Information plays a key role at a very early stage of the investment decision-mak- ing process. Companies deciding where to invest usually put together long lists of potential investment destinations before visiting them. Relevant, accurate, and complete information reduces uncertainty for investors and influences their decisions in favor of locations that provide complete information (see theory of change, Figure 27). Investors discard locations for which they do not have such information, even if those locations would have been a valuable choice for their project. Several empirical studies confirm that information asymmetries constitute an important constraint on capital flows across international borders.100 In addition to ensuring transparency by publishing relevant documents, ideally in a single place, governments can help overcome information asymmetries by assigning focal points that are tasked with answering investor enquiries and assisting investors in their decision-making and investment process. Their impor- tance has also been recognized in the IFD Agreement (see Box 18). Box 18. Focal points and cross-border cooperation in the IFD Agreement The IFD Agreement includes an obligation on focal points (Binding Art. 22.1 and Non-binding Art. 22.2). It includes the following requirements: Each Member/Party shall establish or maintain one or more focal points or appropriate mechanisms to: respond to enquiries from investors or persons seeking to invest regarding the measures covered by this Agreement; and assist investors or persons seeking to invest in obtaining relevant information on measures covered by this Agreement from competent authorities. Members/Parties are encouraged not to require the payment of a fee for answering enquiries or assisting investors in obtaining relevant information. 100 Gelso and Wei 2005; Portes and Rey 2005; Portes, Rey, and Oh 2001. 138 The IFD Agreement also includes an obligation on cross-border cooperation on investment facilitation (Binding Art. 26.1-26.2 and Non-binding Art. 26.3). It includes the following requirements: On request, a Member/Party shall, to the extent practicable, respond to questions from other Members/Parties on any measure covered by the Agreement. Members/Parties shall designate an enquiry point or use the focal points or appro- priate mechanisms referred to in paragraph 22.1. Members/Parties shall, to the extent practicable, encourage cooperation between their respective competent authorities with respect to any matter falling within the scope of this Agreement. Areas for cooperation may include: exchange of in- formation and sharing of experiences regarding the implemen- tation of this Agreement; exchange of information on domestic investors; and the promotion of facilitation agendas with a view to increasing investment for development, including in- vestment in and by micro, small and medium-sized enterprises. Members/Parties are encouraged to inform the Committee on Investment Facilitation about cooperation activities under- taken under this provision. In many cases, IPAs function as focal points. They play a vital role in alleviat- ing information asymmetries when they provide information-related services to investors that can range from basic to very sophisticated services.101 Research indicates that investors use IPA websites as a primary source of information in their decision-making processes.102 Although IPA websites and online sites of similar bodies have become commonplace and have improved over time, there is room for improvement for a more dynamic provision of information through using new technologies across the investment lifecycle. To serve as an effective focal point, an IPA or other designated institutional body should provide services along all dimensions of the investment lifecycle. Countries without an active IPA may consider designating focal points in insti- 101 Harding and Javorcik 2011. 102 Development Counsellors International. 2017. “Winning Strategies in Economic Development Marketing.” Development Counsellors International, New York. 139 tutions such as relevant Ministries (Industry, Trade, Commerce, Economy, etc.), Economic Development Boards, Special Economic Zones, or similar bodies. The availability and accuracy of information plays a key role at a very early stage of the decision-making process. Companies deciding where to invest usually put together long lists of potential investment destinations without even visiting the location, based on the information that is available from different sources. At later stages, IPAs play a vital role in alleviating market failures linked to information and compensating for deficiencies of bureaucratic systems in their countries.103 Information given to investors looking for a place to invest is meant to influence their decisions, so they select a specific location over competing location. It is the substance underlying the IPA’s promotion and fa- cilitation efforts. Good information is up to date, reliably sourced, and typically covers specific sectors:104 Costs of doing business Logistics and infrastructure Availability of labor, land, facilities, and essential inputs Laws and regulations Set-up procedures Government support Comparisons to competing locations If possible, the following information could also be hosted: Local markets, competitors, suppliers, and service providers Competitor locations and sector benchmarking IPAs often focus on attracting FDI but neglect later stages of the invest- ment lifecycle including the retention and expansion stage.105 While attracting 103 Harding, Torfinn and Javorcik, Roll Out the Red Carpet and They Will Come: Investment Promotion and FDI Inflows (December 2011). 104 More information on the type of information and its availability can be found under Measure 2 section on Availability and accessibility of information. 105 Heilbron and Krofol 2020. 140 investment is key, disregarding the latter stages of the investment cycle may result in lost opportunities for creating linkages and Global Value Chain (GVC) upgrading, and in the worst-case scenario, lead to investors leaving the country. 2. Diagnostics When performing a diagnostic on the existence of appropriate focal points, various sources should be considered. In-country information should be sought out both from government agencies (IPAs or similar bodies) and from the private sector regarding whether there are focal points providing information to investors. Input from the private sector is critical to assess the timeliness and quality of the information provided by the focal point. In some countries there might be a large number of public and even some private institutions tasked with attracting and facilitating investment, however a single institution is normally designated or recognized as a loca- tion’s lead for investment promotion and facilitation. Other agencies with some form of promotional mandate typically include national-level institutions, such as sector-focused ministries; ministries of investment, industry, commerce, and foreign affairs; development banks; subnational bodies, such as provincial or municipal IPAs; provincial or municipal departments of industry, development, and commerce; special economic zones, industrial parks, etc. Investors must also deal with a range of public institutions at every level of government tasked with regulating their business in one way or another. A crowded institutional landscape without designated focal points can lead to overlaps, stakeholder conflicts, investor confusion and frustration, and service gaps. A good institutional landscape needs to be well-coordinated and based on clear delineation of responsibilities at both the national and subnation- al levels. Before setting up or strengthening existing focal points, the institutional framework should be assessed and potential areas for improvement should be identified through a comprehensive analysis of the performance of the existing focal point or the actual lack of existence of a focal point. Key items to be assessed during desk research and in-country discussion phases include: An institutional mapping of investment promotion and facilitation related bodies with information on all the different stakeholders and their mandates, functions, and potential overlaps. 141 The existence of a national body mandated to be the country’s focal point. The availability of a national coordinated approach across relevant public and private actors so that the focal point collects all the necessary inputs to implement its functions (existence of coordination mechanisms). A shared and unequivocal commitment to meeting investors’ needs via the designated focal point (customer service, access to online and face to face information). 3. Implementation Principles Good investment promotion models and facilitation mandates for focal points share some essential functions. Most good mandates will call explicitly for the IPA to deliver specific services, such as marketing to desirable potential investors, provision of information and assistance to companies trying to start operations, and advocacy for a better investment competitiveness. Box 19. Common characteristics of high-performing IPAs Attached or linked to a high-level government office (such as that of the President or the Prime Minister) with the central government granting a high level of priority to investment (or FDI). This is especially important in developing countries. Institutional and financial autonomy (or semi-autonomy) to imitate private-sector flexibility and execute the strategy without undue political influences. Independent Board of Directors with strong private sector representation to adopt the understanding, vision, and direction required to attract private-sector investors. Clear mandate focused on professional, proactive, and persistent provision of well-designed, relevant services to investors around the investment cycle, in particular: Marketing, information, and assistance services during the investment attraction phase. 142 More specific information and hands-on assistance services during investment entry and establishment. Assistance with operational issues or grievances to retain investors and avoid investor-state disputes. Marketing, information, and assistance services to support expansion and diversification of established investors. Information and assistance services to foster linkages with domestic investors and entities, translate their ac- tivities into more and more benefits for the local economy. Advocacy services to promote reforms on behalf of investors for a better investment competitiveness around the investment phases. Regulatory functions (including the One-Stop Shop) are performed by a separate governmental institution to ensure proper delivery of this essential function without compromising IPA’s equally essential promotion role. Focused investment promotion efforts in strategic sectors, industries, or segments which have the best competitive op- portunities to yield highest benefit to cost. Mix of employees with public and private sector experience that ensures the IPA is relevant to both its public sector stakeholders and its private sector clients. Sufficient and sustained funding to perform their mandates, without having to struggle every year or charge fees, providing continuity of strategic effort and direction. Source: Adapted from “Best Practices for Investment Promotion,” Robert Whyte and Armando Heilbron, World Bank Group, 2011. Ultimately, the model will need to be determined based on the full scope of the functions that are needed. In addition, it needs to be adapted to the structure of government of each country. Each focal point must be able to respond to requests for information. This may be through hosting information themselves or by establishing a connection to institutions hosting the relevant data. 143 To deliver quality information services, focal points must maintain informa- tion that is credible, accurate, relevant, and comprehensive. It should include sector- or even segment-level data and be up to date.106 Information may be delivered face to face; through websites, webinars, PowerPoint presentations, apps, and social media; and in printed brochures, promotional pamphlets, fre- quently-asked-question sheets, and white papers, among other materials. The type of information sought by investors varies by investment motivation. For example, market-seeking investors intend to serve their host markets. Therefore, they tend to be interested in the size of local and regional markets and in compet- itors that offer comparable products or services. Efficiency-seeking investors are generally concerned with exports and seek to increase the cost-efficiency of pro- duction by taking advantage of location-specific competitive factors. Such factors might include a competitive labor force; a reliable, low-cost energy supply; research and development, design, and logistics services; and proximity to sea lanes. These investors will look, for example, at benchmarking analysis of the location’s logistical performance against competing economies. Investors in this category are also in- terested in information related to regional and global value chains. Resource-seek- ing investors establish enterprises to access natural resources such as oil, gas, minerals, fertile land, water, and solar energy. Information about specific resource and infrastructure maps, as well as clear guidance on relevant laws and regulatory procedures, is important for these investors. IPAs that can provide these types of granular data and analyses will increase their influence over investors’ decisions and strengthen their own image as valuable investment partners. Beyond information services, focal points, especially if they are housed within an IPA, may proactively provide assistance to investors during exploration, es- tablishment, operation, retention, and expansion. These fundamental services reduce common constraints to investments on the ground. IPAs provide contacts, make introductions, and connect investors with government officials and other stakeholders in the economy, arrange site visits, and even join meetings. IPAs solve problems at all stages of the investment cycle and frequently advise both investors and government officials on how to interact for their mutual benefit. As- sistance services can be especially important to investors from different cultures or whose home economies are far from the investment location. 106 More information on the type of information and its availability can be found under Measure 2 section on Availability and accessibility of information. 144 A knowledgeable, experienced, and well-connected focal point can help investors more easily navigate the investment location. Staff members can make a real difference by taking ownership of the investor’s journey, maintaining close contact with the investor, and helping the investor navigate government procedures at all stages of the investment life cycle. Official procedures are not always clear, and they often differ in practice from how they are written. Assistance services might include expediting permit approval, coordinating with lawyers, liaising with regu- lators, and so on. Assistance services also cover introducing and following up with established investors, local service providers, and partners. Advocacy services may help many investors, and the host country, achieve key reforms needed for their investments. Focal points can advocate to improve processes at all stages of the investment life cycle. for example, the visa-granting process, and they can help systematize day-to-day operations such as expediting customs clearance, eliminating red tape, removing delays in utility connections, or supporting sector-specific reforms. They can coordinate with investors and private sector representatives to identify and solve the challenges that limit FDI, thereby strengthening the investment ecosystem. An effective focal point views investment projects as advantageous for its economy and has access to both investors and policy makers. The focal point can offer the government insight into constraints on the economy’s investment ecosystem and how they affect the location’s attractiveness to investors. The following sections provide a summary of key considerations along several dimensions when implementing this investment facilitation measure: a. Legal and Policy Framework A legal act may be required to designate the authority or authorities that should be responsible for setting up and operating the focal point and defining its functions. The mandate of the designated focal point should be clearly written, describing in detail all the different functions it will be expected to conduct. At the same time, the legal instrument that designates the focal point should provide it with the necessary authority to implement all related functions. If an investment law exists in the country, it is good practice to mention the role of the IPA. The most common types 145 of legal status of IPAs according to the WBG-WAIPA joint IPA Survey107 are the following (Figure 6): Semiautonomous agency reporting to a ministry (37 percent); Subunit of a ministry (26 percent); Autonomous public body (18 percent) Subunit of president´s office (9 percent) Joint public-private entity (4 percent); and Fully privately-owned entity (3 percent) Other (2 percent) Figure 6. Legal institutional Set-up of IPAs (n=89) 37% 26% 18% 9% 4% 3% 2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Semiautonomous agency reporting to a ministry Subunit of ministry Autonomous public body Subunit of president´s office Joint public-private entity Private entity Other Source: State of Investment Promotion Agencies from WAIPA-WBG’s survey World Bank Group. 2020. These legal arrangements have different implications regarding the im- plementation of mandates, reporting lines and coordination with key regulatory agencies at the national and local level. Of the 91 IPAs that were surveyed in this WBG-WAIPA exercise, 71 percent of them had a board of directors providing guidance to the agency and holding it accountable. According to survey results, the five main areas of responsibility are approval of the IPA’s strategy, periodic review of the IPA’s performance, advisory on strategic issues, approval of the budget, and periodic review of manage- ment’s performance. 107 Sanchiz Vicente, Alex; Omic, Ahmed. State of Investment Promotion Agencies: Evidence from WAIPA- WBG’s Joint Global Survey (English). Washington, D.C.: World Bank Group. 2020. 146 b. Procedures SOPs and work processes must be defined and formalized for the operation of focal points. These include: Standards for processing inquiries Response times for inquiries Standard templates and forms for displaying information Modes of communication Inter-agency cooperation protocols If a focal point has problem solving and advocacy functions, additional SOPs and work processes must be defined and formalized: Processes for gathering issues, including aftercare and grievance mechanisms. Cooperation and coordination procedures with other public or private agencies or bodies (e.g., chambers of commerce, business associations). Standard output templates for reports, if applicable. Standard advocacy protocols for engagement with policy-making institutions. c. Institutional Framework Different organizational models are possible for a focal point. It may be set up as a separate body or unit reporting to a ministry or high-level institu- tion, housed within the IPA, or housed in a different government department, such as in a ministry. Alternatively, a central, government-wide focal point could be established that would be staffed with the relevant subject matter experts and would act as a “switchboard” to receive and route requests for information to the appropriate agency and collect and compile the response to the requester. Examples of agencies conducting promotional and facilita- tion functions as lead focal points can be found in Box 20. 147 Box 20. Example of mandate focused on investment promotion and facilitation PRONicaragua was created by a government decree in 2002 as the executing branch of the Special Commission for the Promotion of Private Investments by the Government of Nicaragua to: 1. Attract private investments into Nicaragua. 2. Foster a favorable investment climate. 3. Boost foreign trade. 4. Promote the successful execution and operation of investment projects. 5. Contribute to governmental efforts in matters of invest- ment, exports, and facilitation policies in full coordination with other entities of the public and private sectors. This independent commission was a separate, autonomous entity, not reporting to any ministry, but to an executive board with mixed private and public members. In recognition of its success and importance to government objectives, PRONicara- gua, was formally reconstituted in October 2015 and declared by the National Assembly as a decentralized entity, under the sectoral rectory of Nicaragua’s presidency and a public-private board of directors. Its mission remains to generate economic growth and create jobs by promoting high-quality investments. Source: PRONicaragua web site and World Bank Group. The roles and responsibilities of staff within the agency or agencies charged with the operation of the focal point or other mechanism need to be defined and implemented. Sufficient budget and staffing specifically dedicated to this function are required. Cooperation and coordination re- 148 quirements between the focal point and other agencies hosting information relevant to foreign investors need to be established, e.g., through signing MoUs. The main institutions to be involved in a needs assessment and im- plementation are the following: IPAs Ministry of Economy/Investment/Industry/Trade Specialized agencies (e.g., regarding procurement, Special Economic Zones (SEZs)) Sector-specific agencies Subnational agencies such as IPAs and Economic Development Organizations (EDOs) One Stop Shops d. Human Resources and Training Enough staff members within the focal point must be available and trained to provide all investors with the services they require to invest in a location. This includes maintaining and updating the relevant website and online tools. In addition, staff members should be trained to provide timely responses to specific requests about a wide variety of investment-related issues across all the different stages of the life of an investment project, including its expansion. Focal points should cultivate a private sector mindset by maintaining private sector standards for service delivery and adherence to performance indicators and by recruiting staff with relevant experience in the field of economic development and knowledge of key foreign languages. e. Information and Communications Technology Focal points require a modern, properly designed IT systems that allow staff members to provide investors with relevant services, important in- formation, and even permits or certificates for their projects. The required infrastructure includes customer relationship management software (CRMs), websites, applications, chats, online databases, and other digital tools that allow for efficient interaction between the investors and the focal point. Web security and data privacy protocols need to be considered. Depending on the 149 digital tool used, various features can be integrated to support trust-build- ing, such as feedback and rating tools. Additional information and resources on this topic can be found in Measure 5, Digitalizing investment facilitation, which includes provisions concerning a single information portal (Article 8 of the IFD Agreement) and the utilization of information and communications technology (ICT) for investment authorizations (Article 18). 4. Case Studies Box 21. PRONicaragua, the evolution of the IPA in Nicaraguan Challenge PRONicaragua108 illustrates how an IPA in a small country can be very effective and generate satisfactory results by taking a few critical and proactive steps. Nicaragua’s first IPA was created in 2002 (Special Commission for the Promotion of Private Investments, PRO-NICARAGUA) through Executive Decree No. 75-2002 as a project of the United Nations De- velopment Program (UNDP), and its initial mandate was to become the official government agency for the promotion of investments and exports of Nicaragua. It subsequently evolved from a project to a program, and in 2011 its mandate was expanded through Presidential Decree No. 12-2011 to become a government investment promotion agency, named Presidential Delegation for the Promotion of Investments and Foreign Trade Facilitation (PRONicaragua). In 2015, PRONicaragua emerged from Law Nº 915 becoming the successor of the above-men- tioned institutions as a decentralized entity under the Nicara- guan President’s office with legal personality and own assets with full capacity to acquire rights and contract obligations. As any other IPA within the LAC region, Nicaragua was competing to bring new investments into its territory. Being very diligent and proactive, it secured a major investment in 108 Although PRONicaragua was dismantled by the Government in October 2022 it was a good-performing IPA for some years and a success story from which lessons can learned. 150 its territory from DRÄXLMAIER. Furthermore, motivated by its result in the WBG’s 2009 GIPB exercise (11th place), PRONic- aragua, decided to develop a work plan aimed at achieving a top 5 ranking in GIPB 2012, while improving its inquiry man- agement processes. Approach a. The DRÄXLMAIER Investment By taking a proactive approach in 2008, PRONicaragua secured an investment from DRÄXLMAIER, a global automo- tive supplier that was looking for a new location to expand its Americas business. PRONicaragua impressed from the outset: it was the first IPA in the region to invite DRÄXLMAIER to visit the country. The IPA gained the investor’s confidence and trust as a reliable source of information – and ultimately as a partner. The effective initial contact and provision of informa- tion convinced DRÄXLMAIER to conduct a visit to Nicaragua – and this was followed by follow-up visits. PRONicaragua was very diligent while providing: A full-time liaison officer. Benchmarking analysis on competitive labor costs (including minimum wage increases in the last 5 years). Study on human resource availability within desired region Testimonials with companies already established, proving a good relationship exists between unions and employers. Support in the logistics of executives’ visits, including accommodation and confirmation of the proposed agenda. Information on possible locations Convincing information on Nicaragua’s quality of life Office space to DRÄXLMAIER to conduct meetings and interviews Arrangements for visits from suppliers 151 b. Improvements in its inquiry management processes In order to reach its goal to achieve a top 5 ranking in GIPB in 2012, it began by conducting three “mystery investor’ exercises to diagnose PRONicaragua’s efficiency and quality in handling investor’s inquiries, and to identify opportunities for improvement. “The mystery investor” exercise became a key effort in ensuring and guaranteeing that the agency offered the highest level of investor servicing possible. Given that the results reflected poor performance as in- vestment advisors did not have any guidelines that clearly indicated procedures, deadlines and follow-up protocols in handling investor inquiries, a set of guidelines were developed by PRONicaragua and became a key work tool for investment advisors. PRONicaragua developed 10 initial guidelines: 1. Responding in 24 hours or less 2. Suggesting the investor visits PRONicaragua’s website for additional information and video testimonials 3. Offer a response deadline 4. Complying with the deadline 5. Sending the information package in 7 days or less 6. Follow-up with the investor within 7 days of sending the information package 7. Request confirmation receipt 8. Offer a conference call to do a first-time presentation 9. Suggest a site visit. 10. Systematic follow up until closure 152 Results PRONicaragua successfully secured investment from DRÄXL- MAIER due to its proactive and diligent approach. Moreover, with a team of less than 30 people, it secured ranking #1 in GIPB 2012. Source: WBG Case Studies derived from WBG projects. Box 22. CINDE´s Costa Rica Challenge During the mid-1980s and the 1990s, Costa Rica adopted several FDI-friendly policy reform initiatives to take full advantage of external opportunities. New bodies were established to undertake investment promotion, facilitation and aftercare. The Costa Rican Investment Promotion Agency (CINDE), started to support the establishment of foreign businesses, covering all services related to pre-investment consultation stage. Approach Although CINDE is a private sector-led IPA with significant autonomy, it has benefited from high levels of government support and strong partnerships since the late 1990s. These factors helped the IPA land not only technology giant Intel in 1996—which subsequently shaped the country’s economic landscape (MIGA 2006a; Nelson 2000, 2005, 2009; Spar 1998)—but also Abbott Laboratories (now Hospira), P&G, and other anchor investors in the country’s most dynamic segments (health sciences and information technology [IT]-en- abled services). CINDE has continuously sharpened its strategic focus, evolving from an all-purpose development agency when founded in the mid-1980s to a fully focused IPA attracting and expanding foreign direct investment (FDI) projects by providing all type 153 of services to investors by the turn of the century. It has also refined its sectoral focus from broad light manufacturing in the early 1990s to strategic and specific global value chain (GVC) links by the late 1990s, including the assembly and testing of electronic circuits, assembly and sterilization of therapeutic devices, and legal and financial global shared services. At the same time, CINDE improved its service offerings beyond the initial stage of attracting investment. Results CINDE now proactively accompanies strategic investors throughout their investment journeys. Advocating on behalf of investors and proactively connecting investors and govern- ment, CINDE has helped catalyze key reforms, unlock strategic investments and increase the country’s participation in GVCs tenfold in the past three decades. Source: World Bank. 2020. Global Investment Competitiveness Report 2019/2020: Rebuilding Investor Confidence in Times of Uncertainty. Wash- ington, DC: World Bank Group. 5. Further Resources “Increasing the Development Impact of Investment Promotion Agencies”, Chapter 5 of the Global Investment Competitiveness Report 2019/20 (2020). “Institutions for Investment” (2019). “Strengthening Service Delivery of Investment Promotion Agencies: The Comprehensive Investor Services Framework” (2020). Joint WAIPA-WBG “Global IPA Survey Report” – information on IPA activities, mandates, and practices. (2020). Lessons in Investment Promotion: The Case of Invest India (2021). National-Subnational Coordination for Investment Attraction: The Case of Spain (2021). High-level Structures Supporting the Institutional Framework for Foreign Direct Investment Promotion (2022). 154 Planning for Success: Strategies of Investment Promotion Agencies (2023). “Roll Out the Red Carpet and They Will Come: Investment Promotion and FDI Inflows” (2011). “Looking Beyond the Horizon: A case study of PVH’s commitment to Ethiopia’s Hawassa Industrial Park” (2017). “State of Investment Promotion Agencies: Evidence from WAIPA-WBG’s Joint Global Survey” (2020). “Best Practices for Investment Promotion” (2011).  Measure 9: Retention Mechanisms 1. Introduction Policies that bolster existing FDI by inducing foreign investors to remain and reinvest in host countries are as important as those used to attract new invest- ment. During the last decade, reinvested earnings as a share of global FDI have fluctuated between 20 and 40 percent, indicating the relative importance of host countries retaining already established firms. Reinvested earnings tend to account for a larger share of FDI inflows in developing countries compared with higher income countries, suggesting that developing countries’ governments should place particular emphasis on ensuring investment retention and expansion.109 Retention mechanisms are tools that help identify and resolve investor issues, thereby enhancing investment expansion and retention. Investors may experi- ence a multitude of issues running their operations in countries. Some of these issues, if not addressed, can lead to divestment decisions or to legal disputes and thus entail significant risks for host countries. Experience and investor surveys show that there are two types of risks that can lead to divestment: political risk and operational risk.110 Political risk arises from government conduct and can result in divestment and legal disputes. Operational risks are linked to the country’s operating environment and can put the survival of the investment at risk and may lead to withdrawal or cancelation of investments (see theory of change, Figure 27). The importance of investor retention mechanisms, for example 109* WBG 2019. 110 Kher, Obadia, Chun 2021. 155 investor grievance management mechanisms for political risk issues or aftercare programs for operational risks, has also been recognized in the ongoing negotia- tions on the IFD Agreement (see Box 23). Box 23. Focal points in the IFD Agreement The IFD Agreement includes a reference to focal focal points that allows for retention mechanism functions (Non-binding Art. 22.3). It includes the following requirements: Members/Parties may assign additional functions to the focal points or appropriate mechanisms established under paragraph 22.1 such as assist in resolving problems of investors or persons seeking to invest that may arise regarding measures covered by this Agreement or recommend measures to improve the investment environment. Addressing investor issues and more broadly the issues of divestment has become particularly important in the context of recent multifaceted crises including the COVID-19 pandemic, the war in Ukraine, inflation, growing geopolit- ical tension between the world’s two largest economies, volatile energy prices and climate change.111 With countries adopting increasingly protectionist approaches regarding FDI, investors will likely experience more issues. Strained budgets and unpredictable supply and demand are affecting contract performance and could result in an increase in investor-State disputes.112 Furthermore, economic crises are positively associated with the number of investor-State arbitration cases.113 Retention mechanisms can be classified based on the types of risk they address. Investor-State conflicts can be depicted on an investor-State conflict continuum with investor concerns on the one side and full-blown disputes on the other side (Figure 7). Countries typically focus on the beginning of the spectrum, meaning the problems faced by investors to make their investment operational through aftercare programs. Other times, they focus on the other end of the spectrum on mechanisms to manage 111 Kher and Griffin 2023. 112 Kher and Chun 2020. 113 Bellak and Leibrecht 2019. 156 investor-State disputes. To bridge the gap between the two sides of the spectrum, several countries have implemented systemic investment retention mechanisms that support foreign investors throughout the investment cycle, thereby preventing major international disputes. For example, the Federative Republic of Brazil developed the Direct Investment Ombudsman (DIO) and introduced an online portal enabling officials to receive, track and follow up on investors’ grievances. During the first year of implementation, the cases that have been solved through the DIO amount to US$ 591 million in FDI and preserved approximately 3,400 new jobs. Costa Rica has also developed a successful mechanism for preventing disputes. Investment retention mechanisms operate in the ‘retention space’ and address the missing middle of the conflict continuum. They include mechanisms that (i) address operational risks through setting up targeted aftercare programs, (ii) address political risks through setting up grievance management mecha- nisms, and/or (iii) address both types of risks through a comprehensive retention program.114 In some cases a focal point agency, as described under Measure 8, can also serve as a lead agency managing the retention mechanisms, provided the critical elements identified in the implementing guidelines below are duly adopted. Figure 7. Investment Retention and Investor-State Conflict Continuum AFTERCARE RETENTION No Disagreement SPACE SPACE Conflict becomes a dispute (notice of intent for investor- state arbitration) Fling of ISDS Case (institution of preceedings) Dispute PROBLEM/ ISSUE/ Resolution DISAGREEMENT GRIEVANCE Stage “Cooling Off” Period (attempt to settle the dispute) No impact on Issues putting Investors decision investment investment at risk to withdraw and/or retention of withdrawal canvel expansion of FDI projects Source: World Bank Group. 114 Kher, Obadia and Chun (2021). 157 2. Diagnostics A diagnostic of the existence of effective retention mechanisms in a country can be broken down into five steps: 1. Preliminary Desk Research: The objective is to assess the risk profile of a specific country. Indexed risk ratings of a country can provide a first overview of a country’s performance with regard to its institutions, stability of legal and policy framework, rule of law, regulatory efficiency, policies, and other related factors. The main types of indexes that can be consulted are listed below. It should also be noted which IIAs a country is participating in to identify the risk that a country may be sued in potentially costly In- vestor-State Dispute Settlement (ISDS) procedures.115 Reviewing a country’s experience with ISDS may further help establish to what extent a country has issues with failing to address investor grievances.116 In other words, if a country is subject to a high number of ISDS disputes, that may be an indica- tion that an effective retention mechanism is needed. 2. Assessment of private sector perceptions on regulatory conduct and issues impacting business continuity: It is important to consult with private sector stakeholders (e.g., investors, business associations) to understand the types of issues prevalent in a country, their impact on investment and jobs, the main agencies involved, and existing mechanisms and their success handling issues. This can be done through focus groups, investor surveys, and based on information tracked by the IPA. 3. Stakeholder and process mapping: The objective is to identify key stake- holders, for example, ministries dealing with investment and economic de- velopment, investment promotion agencies, and political economy dynamics involved in dealing with investment grievances, and to mine available data and evidence on handling of investment problems. 4. Assessment of legal mandates, powers and attributions, operating pro- cedures of agencies involved in handling of investor issues: As part of the diagnostic, it is important to determine the competences of the various institutions involved in investment issues. This usually includes IPAs, SEZ authorities, the ministry in charge of negotiating and implementing IIAs, line ministries, sector regulators and inter-ministerial commissions. 115 See https://investmentpolicy.unctad.org/international-investment-agreements 116 See https://investmentpolicy.unctad.org/investment-dispute-settlement 158 5. ICT Assessment: The objective is to identify any existing ICT tools tracking investment issues arising over the different stages of the investment life cycle, and to assess ICT staff capacity. For ease of reference, existing indicators on investment protection and retention can be classified into five categories. While some overlap between these catego- ries is inevitable – classification of indicators can help better organize diagnostic work on investment protection and retention. The categories are as follows: 1. Corruption: Corruption in the host country can be a major administrative and financial burden to investors. It creates an unfavorable business environ- ment by undermining the operational efficiency of firms and raising the cost and risks associated with doing business. Corruption indicators, in general, measure perceptions of corruption in the public sector in different countries around the world. Key indicators include: Transparency International – Corruption Perception Index (CPI), which scores and ranks countries based on how corrupt a country’s public sector is perceived to be (https://www.transparency.org/en/cpi/2023). World Bank Governance Indicators – Control of Corruption (CC), which captures perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests (http://info. worldbank.org/governance/wgi/index.aspx#home). World Bank Enterprise Surveys Data – Corruption, which captures the prevalence of different types of bribery or unofficial payments in 139 countries (http://www.enterprisesurveys.org/data/exploretopics/ corruption). 2. Rule of law: Economic and social progress cannot be achieved without respect for the Rule of Law. A country that respects Rule of Law attracts foreign investments and increases the confidence of investors that their rights are duly protected. Rule of Law ensures that a government and its officials and agents as well as individuals and private entities are all accountable under the law. It means that laws are clear, publicized, stable, and just, that they are applied evenly, and that certain fundamental rights are protected, including the security of persons and property and other core human rights. Rule of Law ensures that process by which the laws are enacted, administered, and enforced are accessible, fair, and efficient, that justice is delivered in a timely 159 manner by competent, ethical, and independent representatives who are of sufficient number, have adequate resources, and reflect the makeup of the communities they serve. Key indicators include: World Economic Forum – Global Competitiveness Index – Property Rights Protection, which measures to what extent are the property rights, including financial assets are protected in a country: (http://reports.weforum. org/global-competitiveness-index/competitiveness-rankings/#series=G- CI.A.01.01.01) World Justice Project – Rule of Law Index, which presents a portrait of the rule of law in each country by providing scores and rankings organized around eights factors (http://data.worldjusticeproject.org/). World Bank – Worldwide Governance Indicators – Rule of Law, which captures perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence (http://info.worldbank.org/governance/ wgi/index.aspx#home). 3. Transparency and rulemaking: How transparent the government and its functions are, and how well the government incorporates stakeholder views in the rule-making process, gives an indication of the overall quality of governance and protection of investors in that country. Equally important, is the enforce- ment of those laws, ensuring consistency in their implementation across govern- ment agencies and due process in implementation, which includes transparency and proper communication when dealing with regulatory changes etc. Lack of transparency and access to laws and regulations, or unpredictable and arbitrary action by the State increases perceptions of political risk. Key indicators include: World Bank Group – Global Indicators on Regulatory Governance,117 which explores how governments interact with the public when shaping regulations that affect their business community (http://rulemaking. worldbank.org/). 117 The GIRG is a World Bank project that was discontinued. However, its findings are still relevant in a large number of countries. See https://rulemaking.worldbank.org/en/rulemaking. 160 World Justice Project – Open Government Factor (Rule of Law Index), which measures the openness of government defined as a government that shares information, empowers people with tools to hold the gov- ernment accountable, and fosters citizen participation in public policy deliberations (http://data.worldjusticeproject.org/). World Economic Forum, Transparency in Govt. Policy Making which measures how easy is it for companies to obtain information about changes in government policies and regulations affecting their activities (http://reports.weforum.org/global-competitiveness-index/competitive- ness-rankings/#series=EOSQ049). 4. Institutions: The legal and administrative framework within which indi- viduals, firms, and governments interact with the public institutions of a country have a strong bearing on competitiveness and growth. The quality of institutions in a country, its public services and its independence from political influence from government, individuals or firms can influence in- vestment decisions of investors. Another dimension of the quality of insti- tutions is how effectively public institutions implement government policies and whether they have the adequate capacity to provide an effective service to individuals and business. Key indicators include: World Economic Forum – Global Competitive Index (Institutions), which measures concepts related to the protection of property rights, ef- ficiency and transparency of public administration, independence of the judiciary, physical security, business ethics and corporate governance (http://reports.weforum.org/global-competitiveness-index/competitive- ness-rankings/#series=GCI.A.01 (For Institutions Index); http://reports. weforum.org/global-competitiveness-index/). World Bank Group- Worldwide Governance Indicators – Government Ef- fectiveness, which captures perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies (http://info.worldbank.org/governance/wgi/index.aspx#home). World Economic Forum – Judicial Independence, which measures how independent is the judicial system from influences of the government, individuals, or companies (http://reports.weforum.org/global-competi- tiveness-index/competitiveness-rankings/#series=EOSQ144). 161 5. Other Indicators: Additional indicators can be used covering other aspects of investment protection and retention. Some of the indicators in this category can be used on a “stand-alone” basis to assess a country’s degree of openness to FDI, to determine if there are any restrictions on core guaran- tees of investment protection (e.g., expropriation, free transfer, and currency convertibility) and to evaluate whether a country’s policies, institutions, and legal systems facilitate international integration by adhering to international standards. Key indicators include: Credendo – Expropriation Risk & Transfer and Currency Convertibility Risk. The risk of expropriation encompasses all discriminatory measures taken by a host government which deprive the investor of its invest- ment without any adequate compensation. Currency inconvertibility and transfer restriction risk refer to the inability to convert and transfer out of the host country any funds related to the investment (https://www. credendo.com/country_risk). Milken Institute – Global Opportunity Index – International Standards and Policy (SP), which reports the extent to which a country’s insti- tutions, policies and legal system facilitate international integration by following international standards. 3. Implementation Principles There is no “one-size-fits all” retention mechanism model, but some general principles are valid for each mechanism. Each retention mechanism is designed to be tailored to the political economy of the country. At the same time, a number of general principles have proven to be effective across countries:118 Empowering a lead agency: There should be one government agency, ideally empowered by laws or regulations, that is responsible for implementing measures to improve retention of investment. This lead agency should coor- dinate problem solving processes and the diffusion of relevant information to national, subnational, and sector-specific agencies, which are more likely to generate or become involved in investment issues. The lead agency should also have recourse to advocate for the reform and improvement of invest- ment conditions. Where needed, an escalation mechanism should be estab- lished for raising issues requiring high level political decisions. 118 Kher, Obadia and Chun 2021 162 Detecting and recording of investor issues: The lead agency’s response to investor issues can be proactive (e.g., lead agency visits the private sector) or reactive (e.g., private sector communicates with the lead agency). To support proper data collection and monitoring of the resolution process, a tracking tool should be developed and customized to client’s needs. This helps monitor whether the problem is resolved and how much investment is retained and expanded as a result of the resolution of the problem. Conducting legal and economic assessments: For political risk, it is crucial that the grievance be analyzed from an economic and a legal perspec- tive before the lead agency coordinates with other agencies to resolve the grievance. Issues caused due to operational risks also need to be assessed in terms of their economic impact, that is, the amount of investment and the number of jobs at risk. The economic assessment is complemented by a legal analysis to determine the likelihood of liability of the host state should the grievance escalate into a full-blown investor-State dispute. Using a variety of problem-solving methods: Based on the political economy of the country, government capacity is built to empower the lead agency to use different problem-solving methods to directly address and negotiate a solution with the agencies involved in the problem. These methods range from simple exchanges of information to mechanisms of mutual account- ability or legal advisory opinions. Making political decisions: Often the lead agency may not have the political authority to discipline another peer agency. In this case, the problem is elevated to higher political levels, such as the Ministerial Cabinet and in some countries special Ministerial Councils chaired by the President or Prime Minister. Support is provided to determine the right institutions for such escalation as well as processes for the lead agency to monitor and track the resolution process. Retention mechanisms can also be useful for promoting broader investment climate reform, through systematic advocacy efforts.119 Although a retention mechanism follows a firm-level approach, the tracking of issues over time will enable the Lead Agency to identify and facilitate resolution of systemic issues that may be impacting a broad group of investors. Retention mechanisms can identify patterns of conduct across institutions, re-incidences by “offending” in- stitutions, or any other recurring problem placing FDI at risk. This develops an ev- 119 Ibid. 163 idence-based, systematic approach to forge a reform agenda and discuss issues with a variety of investment stakeholders. A retention mechanism can also be integrated with a public-private dialogue (PPD) platform. Because the PPD es- tablishes systemic communications between the relevant stakeholders, it can be tailored to improve the investment climate of a country by addressing issues that hinder investment retention and expansion. a. Legal and Policy Framework To deal with the challenges of intra-governmental coordination, the lead agency should be empowered through an instrument. This can be a legal instrument such as a law, regulation, or other binding instrument. It may also be a less formal instrument such as an internal government procedure or other administrative instruction or guideline. This instrument provides the Lead Agency with the mandate and authority to carry out its work. By their nature, retention mechanisms entail the involvement of many govern- mental agencies that have regulatory powers impacting investors. Therefore, a proper instrument is critical to ensure clarity about the role of the lead agency, enabling information sharing and coordination and ensuring collab- oration among the various stakeholders. It also helps to convey the govern- ment’s political commitment to ensure that the mechanism works properly. b. Procedures Once the institutional set up has been validated, it is crucial to develop standard operating procedures incorporating detailed information. Such procedures will help government officials, in particular the lead agency, to follow the appropriate steps and requirements of the process. Formulating such guidelines and distributing them to staff can be a simple and useful way to capture the institutional knowledge of the most experienced deci- sion-makers in an organization. It can also help to capture and cement the process. The operating procedures should reflect the overall strategy and goal of the retention mechanism, for example, saving investment projects and jobs in general, or in specific sectors, segments, or regions at risk, or focusing on specific types of issues, supporting early detection of common or systemic issues. At this early stage, aspects such as key beneficiaries of the mechanism, resources, tools, and partnerships required, as well as per- formance indicators of the mechanism should be determined. The typical process of a good practice retention mechanism involves six steps: 164 1. Issue recording: This entails the registration of an issue in a database using MS Excel or an automated tracking tool, such as the IPA Investor Relationship Management System. Information about the issue received in writing, in person, on the phone, online or during site visits, is recorded. Either a proactive approach, in which the lead agency reaches out to investors and other agencies to collect issues, or a reactive approach, in which an agency responds to issues reported by other agencies or investors, may be used. The most suitable approach can be determined based on the country context, resources, and capacity. 2. Filtering: Once the issue is received, staff from the lead agency should filter it—based on a broad review of the issue—to determine whether it falls within the scope of the retention mechanism, that is, if the source of the issue is under immediate control of the government, and if it places the investment project at high risk of cancelation or entails possible liability for the host state. This would allow for the transfer of business-to-business issues to other units or agencies since they are not under the control of the State and are not investor-State issues. Furthermore, the filtering process would make the distinction between general aftercare issues that are not within the scope of the retention mechanism and high-risk issues which are impacting retention of invest- ment. The purpose of this filtering is to allow the lead agency to focus on high-risk issues, and not to be overburdened by other issues. Once an issue has passed the initial filter, a further assessment is undertaken. 3. Legal and economic assessment: The issue should be analyzed from an economic and legal perspective before the lead agency coordinates with other agencies to resolve it. The economic assessment estimates the potential impact of the issue in terms of the amount of investment and the number of jobs at risk. It can also estimate the other potential economic impacts, such as the costs in terms of potential taxes lost, or even fiscal costs related to international legal fees and possible compen- sation should the issue escalate to a dispute. Depending on the nature of the issue, the economic assessment is complemented by a legal analysis to determine the likelihood of liability of the host State should the issue escalate into a full-blown investor- State dispute or to propose legal or regulatory reforms. 4. Problem-solving: The problem-solving process begins with direct in- teraction between the lead agency and its peers, based on economic and legal analysis. Solutions to issues vary by case, and may require 165 different problem-solving techniques, such as applying pressure, rule- based negotiations, interest-based negotiations, power-based negotia- tions, mediation, factfinding, or obtaining an early neutral evaluation. The goal is to convince the agency causing the issue to take a corrective measure or to negotiate a solution with the investor based on mutual interests. 5. Escalating to political decision making: If the lead agency is unable to resolve the issue due to a lack of cooperation by other agencies or because the underlying issue is too politically sensitive, then the lead agency will escalate the issue to a higher political level. This higher level is typically a political authority that allows for political decision-making where needed, such as by the Ministerial Councils. High-level political en- dorsement and support would guarantee that any solution to the issue would be effectively implemented. 6. Communication and follow-up on implementation: In all situations, whether the issue is registered, a solution is found, or an escalation occurs, it is important to communicate clearly and substantively with the investor. Letting investors know about the progress and outcome of the process is key. Independent of the outcome, the investors must also feel that their issues have been heard and that they have been given due consideration. For this purpose, and to track the services provided, the lead agency must monitor the situation to ensure effective imple- mentation of the agreed solutions. Furthermore, the lead agency should create a feedback loop mechanism to check the investor’s satisfaction and measure the impact of the service through a phone call or an online survey or both. c. Institutional Framework Having the right institutional frameworks is essential for attracting and retaining FDI.120 A key component of each mechanism is the design of specific intra-governmental coordination protocols among agencies dealing with investors to address issues. As outlined above, a lead agency is critical for an effective implementation of the retention mechanism. The availability of a high-level body, inter-ministerial committee, or board is also necessary to serve as the escalation body if political decision-making or higher-level advocacy is needed. 120 Heilbron and Whyte 2019. 166 The main institutions to be involved in the implementation, as well as a needs assessment/ or diagnostic, are: IPAs Ministry of Economy/Investment/Finance Specialized agencies (e.g., regarding government procurement, SEZs) Sector-specific agencies Subnational agencies d. Human Resources and Training The capacity of the lead agency is key to a functioning retention mechanism. Staff members require extensive skills such as legal, economic, public admin- istration, business operation, problem solving, and stakeholder management skills, to perform legal and economic analyses of issues and negotiate with other agencies causing grievances. Thus, a key aspect of implementation entails the development of a systematic and consistent capacity-building program for the lead agency, as well as other involved agencies. The capacity-building and information-sharing activities should properly inform peer agencies about the importance of investment retention, the content of IIAs, investment protec- tion, and other issues with which they may not be familiar. In addition, these activities could be used as part of a communications campaign to promote greater interaction between the lead agency and their peer professionals, whose collaboration may later be sought in the context of subsequent issues. e. Information and Communications Technology A tracking tool helps governments monitor and track investor issues, as well as the associated amount of investment and number of jobs at risk due to those issues. The tracking tool is a customized technology applica- tion, which can be as sophisticated or as simple as the host country wants. It can vary from a simple MS Excel sheet to highly sophisticated, customized software. The tool should be used to comprehensively document key informa- tion about each issue registered with the retention mechanism. Typically, the tracking tool is populated by the staff of the lead agency. Although a tracking tool is critical to the functioning of the lead agency, it is a supporting tool, not the main aspect of the mechanism. The idea of having one single integrated tracking system to centralize all the stages of 167 the FDI cycle has clear advantages; however, developing a single compre- hensive tracking system for all FDI transactions would significant efforts and expense. Country projects have shown that it is usually faster and more economical to adopt tracking approaches limited to the retention mechanism. These should be focused on identifying investment projects at risk of withdraw- al or cancellation of expansion plans, thereby ensuring the ability to measure investments and jobs retained. Of course, where country capacity and resources allow, more comprehensive end-to-end IT tools can be implemented. 4. Case Studies Box 24. Investment Retention Mechanisms in Brazil Challenge Although Brazil receives the largest FDI inflows of any country in the region, investments are mostly directed toward ex- ploiting natural resources or setting up subsidiaries to serve the domestic market and are geographically concentrated in large and developed states. Efficiency-seeking FDI to establish stages of production in regional value chains remains limited. Approach To increase efficiency-seeking FDI and address bottlenecks faced by foreign investors, which included increased opera- tional costs, corruption, frequent changes in laws and regu- lations, and issues with the implementation of investor rules, Brazil established the Direct Investment Ombudsman (DIO) with the support of the World Bank Group and the UK-funded Improving Business Environment for Prosperity Program. In April 2019, the Brazilian government issued Decree No. 9770 establishing the DIO covering all investors regardless of their nationality. DIO’s two main functions are to address (i) inquiries to provide information to potential and existing investors concerning legal and regulatory procedures to enter and operate in the country and (ii) investors’ grievances. Both 168 inquiries and grievances are jointly addressed with the public agency responsible for the specific matter at the federal, state or municipal level with the help of a Network of Focal Points designated across the government. In addition to providing recommendations on the establishment and operating proce- dures of the DIO, the World Bank provided support towards implementation at the subnational level through engagement with the local governments of 5 states and through extensive dissemination. The DIO also benefits from a grievance tracking tool and external website. Through this website and tool, officials can receive, track, and follow up on all investors’ issues and griev- ances from the time they are submitted by investors to their resolution—capturing all actions taken by the government towards the resolution of each grievance. The platform also allows the government to obtain aggregate data on the most recurring types of grievances, the agencies involved, the time it takes to solve grievances, and other measures. Results Between April 2019 (launch of the DIO portal) and November 2021, a total of 25 cases were received (13 consultations for information and 12 investors’ grievances). Source: World Bank project. Box 25. Investor Grievance Mechanism in Costa Rica Challenge Costa Rica’s motivation in establishing a retention mechanism was driven by two factors. First, Costa Rica wanted to retain the sizeable investment attracted to its territory for which maintain- ing good relations with investors is paramount. Second, it seeks to prevent ISDS disputes which are costly to the small Central American country, both in monetary and reputational terms. 169 Approach To manage this challenge, an investor grievance mechanism was established within the Ministry of Trade (COMEX) comprised of three lawyers, with the possibility of accessing the President’s office in complex cases. The investor grievance unit has its legal foundation in the 2009 Regulation for the Prevention and Man- agement of International Trade and Investment Cases (Reglamen- to para la Prevención y Atención de las Controversias Internacio- nales en Materia de Comercio e Inversión N° 35452-MP-COMEX). Costa Rica’s investor grievance mechanism allows for surveillance to detect and prevent trade and investment cases through filtering and economic and legal analyses. It also undertakes trainings at various levels of government to avoid cases derived from govern- ment conduct. The mechanism has effectively resolved issues due to: (i) direct involvement of the President’s office in the Inter-Insti- tutional Commission for the Settlement of Trade and Investment Disputes (Comisión Interinstitucional para la Solución de Contro- versias Internacionales en materia de Comercio e Inversión), which allowed for high-level engagement with other agencies; and (ii) the delineation of aftercare and grievance management functions, with regular communication between the units in charge of these separate functions (CINDE and COMEX). Results Thanks to Costa Rica’s advocacy efforts, in 2022 it secured 61 reinvestments and 41 new companies investing in the country, all of which generated 22,000 jobs, out of which 50% are occupied by women Source: Costa Rica’s COMEX (2023). Interview and presentation from the Dispute Prevention Department (dated February 2023); US Department of State. 2023 Investment Climate Statements: Costa Rica. 170 Box 26. National System for the Prevention of Trade and Investment Disputes in the Dominican Republic Context and Challenge The Dominican Republic has made significant efforts to improve its investment climate. However, it can still increase its per- formance in terms of investment attraction and retention. It has partnered with Costa Rica, Ecuador and Panama under the Alliance for Development in Democracy (ADD), an initiative having under its investment component the possibility to explore synergies to benefit from nearshoring trends. Even if the country’s performance in FDI attraction is remarkable, it still faces some challenges regarding transparency, predictability, and contract enforcement. Approach To improve the investment climate and prevent costly disputes (both in economic and reputational terms), the Dominican Republic issued Decree 303-15 which created the National System for the Prevention of Trade and Investment Disputes, under the Ministry of Trade (MICM). As a relatively small economy, the Dominican Republic realized the importance of ensuring a proper coordination of government agencies to prevent investment issues from esca- lating into fully blown investment disputes. By addressing investor grievances arising from government conduct on a timely basis, the system contributes to investment attraction and retention. Results Currently, the Ministry of Trade is operating the Dominican Repub- lic’s Investor Grievance Mechanism. With a small group of analysts, it is working effectively towards strengthening the mechanism and fully implementing Decree 303-15. With increased attention paid to dispute prevention under the new government administra- tion, the Dominican Republic has prevented new cases since 2022, from a record of almost one case per year on average since 2014. Source: World Bank project. 171 5. Further Resources Global Investment Competitiveness Survey 2019. Policy Options to Mitigate Political Risk and Attract FDI (2020). Report on Retention and Expansion of FDI (2019). “Regulatory Risk and FDI”, Chapter 4 of the Global Investment Competitiveness Report 2019/20 (2020). Institutions for Investment (2019). Strengthening Service Delivery of Investment Promotion Agencies: The Compre- hensive Investor Services Framework (2020). Innovative Mechanisms to Address Investor Issues (Forthcoming). Joint WAIPA-WBG Global IPA Survey report (2020). Managing Investor Issues Through Retention Mechanisms (2022) “The Association of Economic Crises and Investor-State Arbitration Cases.” Department of Economics Working Papers Series 284, WU Vienna University of Economics and Business (2019). “Political Risk and Policy Responses: Summary of Research Findings and Policy Implications”. Vol. 1 and 2 (2019). “Annual Report on the OECD Guidelines for Multinational Enterprises 2020: Update on National Contact Point Activity”. OECD (2021). “Global Investment Competitiveness Report 2019/2020: Rebuilding Investor Confidence in Times of Uncertainty” (2020). “Investment Policy and Promotion Operational Guide” (2022). Reference List 1. “Winning Strategies in Economic Development Marketing” Development Counsellors International (2017). 2. “Roll Out the Red Carpet and They Will Come: Investment Promotion and FDI Inflows” (2011). 172 3. “Increasing the Development Impact of Investment Promotion Agencies”, Chapter 5 of the Global Investment Competitiveness Report 2019/20 (2020). 4. “Establishing a High-Performing Institutional Framework for Foreign Direct Investment” (2019). 5. “Divestment Drivers and FDI Retention” (2023). 6. Portes and Rey. 2005. 7. Portes, Rey, and Oh. 2001. 8. “State of Investment Promotion Agencies: Evidence from WAIPA-WBG’s Joint Global Survey” (2020). 9. “Best Practices for Investment Promotion” (2011). 10. Global Indicators of Regulatory Governance. 173 E. Fostering MNC-Supplier Relationships Ultimately, countries seek to attract FDI to leverage its potential benefits for the local economy. In addition to the direct benefits, FDI brings indirect benefits in the form of increased capital, employment, and exports. Con- nections to multinational corporations (MNCs) can also help improve the productivity of local firms and they offer an important channel for local firms to diversify their pro- duction and integrate into GVCs. These indirect effects, which are the result of a general increase in productivity, are among the main benefits of investments by MNCs. Domestic firms are able to absorb and implement tech- nologies and new skills and improve their performance, through demonstration effects, inter-firm labor mobility or inter-firm linkages.121 Yet, these benefits are not automatic. Simply attract- ing FDI and creating an enabling policy environment are necessary but, most often, insufficient conditions for meaningful spillovers to occur in most developing countries.122 A range of market failures and constraints faced by the investor, the local business community, and the host government, shape spillover potential across countries, business sectors, and value chains.123 Espe- cially when MNC affiliates are new to a host country, input markets provide incomplete information about the availability and quality of domestic suppliers. Similarly, domestic firms often do not know what types of inputs affiliates may want to source locally, what their product 121 Jordaan, J., W. Douw, and C. Z. Qiang. 2020. “Foreign Direct Investment, Backward Linkages, and Productivity Spillovers.” In Focus Note, World Bank, Washington, DC. 122 Moran (2010): Foreign Direct Investment and Development: The New Policy Agenda for Developing Countries and Economies in Transition; Washington, DC: Petersen Institute for International Economics. 123 Jordaan, J., W. Douw, and C. Z. Qiang. 2020. “Foreign Direct Investment, Backward Linkages, and Productivity Spillovers.” In Focus Note, World Bank, Washington, DC. 174 standards and requirements are, and so on. This lack of information becomes even more constraining when domestic firms need to improve their performance before they are able to meet any potential demand. Because it is costly and time-consuming to solve these informational market failures, they often result in fewer linkages between MNC affiliates and domestic firms and fewer of these indirect benefits. This section focuses on two specific measures to overcome market failures and facilitate spillovers: domestic supplier databases (Measure 10) and supplier development programs (Measure 11). Domestic supplier databases can provide MNCs with information about local suppliers and they can provide local suppliers with information about opportunities offered by MNCs.124 Supplier development programs address information asymmetries by arranging special matchmak- ing events at which local suppliers and MNCs can explore possible partnerships. These events help begin the process to improve the quality of local suppliers since local firms often do not meet the requirements of MNCs but can be reluctant to bear the costs of upgrading their production capabilities, such as in management, skills, or technology, without a supplier contract.125 These measures need to be developed as part of comprehensive programs that address underlying issues with supply dynamics. Before setting up or amending supplier databases or supplier development programs, the underly- ing supplier relationships and potential distortions should be analyzed through a demand-supply gap analysis. Just like private businesses study the market potential before starting a new venture, governments should understand the demand- and supply-side characteristics in their economy before investing in a supplier database or a supplier development program. An MNC demand survey can be used to identify specific goods and services a foreign investor might prefer to source locally. Such a survey should focus on an MNE sourcing strategy, barriers to sourcing locally, supplier development, potential reloca- tion of international suppliers, and specific inputs and capabilities. As a com- plement, a domestic supplier assessment can generate information about the existence of suitable local supply capacity and availability, and whether any information failures, missing capacity, or policy or regulatory constraints are hampering linkages between MNEs and domestic firms. 124 Qiang, Christine Zhenwei; Liu, Yan; Steenbergen, Victor. 2021. An Investment Perspective on Global Value Chains. Washington, DC: World Bank. © World Bank. https://openknowledge.worldbank.org/ handle/10986/35526 License: CC BY 3.0 IGO. 125 Ibid. 175 Measure 10: Domestic Supplier Databases 1. Introduction Domestic supplier databases can help MNCs identify and match with local suppliers. This can be done in combination with the provision of qualification and certification programs for domestic firms that make it easier for MNC affiliates to identify suitable local suppliers. Supplier databases reduce search costs for MNCs by making information readily available and they increase a country’s at- tractiveness as a destination for foreign investors,126 promote linkages with local suppliers, and help boost the local economy (see theory of change, Figure 27). The importance of supplier databases has been recognized in the IFD Agreement at the WTO (see Box 27). Box 27. Domestic supplier databases in the IFD Agreement The IFD Agreement includes references to supplier databases (Non-binding Art. 24.1-24.2 and Binding Art. 24.3) as follows: Each Member/Party is encouraged to promote the establish- ment of one, or more, domestic supplier database(s) with the aim of making available to investors and persons seeking to invest information on possible relevant domestic suppliers, including micro, small and medium-sized enterprises. This database may exhibit, inter alia, the following features, where possible: be searchable by sector or industry, company, product or service, location, certifications, etc.; be available online; and be available in one of the WTO official languages. Members/Parties shall endeavor to ensure that domestic supplier databases are kept updated. 126 In a firm survey, WAIPA and WEF found that 81% of investors state that such database is important for investors’ decision-making. WAIPA and WEF, “What can governments do to facilitate investment?”, December 2019. 176 The design, set-up, and features of supplier databases may vary significantly to fill specific information gaps. While they may be operated by government institutions, they are in many cases hosted by the private sector. The rise of digital technology and B2B platforms has transformed buyer-supplier relation- ships, offering new ways for buyers and suppliers to connect and network.127 Supplier databases can include traditional supplier databases, B2B platforms, and digital marketplaces. These types differ in functionality, adaptability, and cost-effectiveness (see Section 3), so it is critical to select the tool(s) that fit the market conditions and firm behavior in a particular context. While each type differs in complexity and functionality, they all provide information on potential business partners with the aim to create new business relations or to market the supply capacity at a specific investment location. LAC countries have much room to benefit from developing linkages between local suppliers and MNCs. Desk research reveals that LAC countries are not prolific in establishing fully fledged domestic supplier databases. Few examples have been found, including Costa Rican matchmaking database under PROCOMER. Moreover, a recent study revealed that in Colombia there is scope to strengthen links between national and multinational suppliers to set the stage for greater technol- ogy transfer and there is significant potential for Colombian companies to further integrate into global value chains by supplying to multinational companies.128 2. Diagnostics When performing a diagnostic on the existence of supplier databases various sources should be considered. In-country information should be sought out both in government agencies and in the private sector regarding whether there are any existing databases. It is important to consider whether traditional supplier databases, B2B marketplaces or digital marketplaces exist that may fulfil a similar function. To assess the de facto functioning and scope of databases, private sector validation is critical. 127 Atkin, D., Khandelwal, A. K., and Osman, A. 2017. “Exporting and firm performance: Evidence from a randomized experiment.” The Quarterly Journal of Economics, 132(2), 551-615; , Cai, J., & Szeidl, A. 2018. Interfirm relationships and business performance. The Quarterly Journal of Economics, 133(3), 1229-1282; Bisztray, Márta & Koren, Miklós & Szeidl, Adam. 2018. “Learning to import from your peers,” Journal of International Economics, Elsevier, vol. 115(C), pages 242-258. 128 World Bank Group (2021). Inversión Extranjera Directa y Promoción de la Inversión: Un Análisis para Colombia para dar Apoyo a la Misión de Internacionalización. P. 11. 177 3. Implementation Principles Having established that information asymmetries create distortions in MNC-supplier markets, governments need to be sure any potential new databases are carefully designed to add value for investors and suppliers. Supplier databases and other information tools can be either privately owned, implemented by industry associations, or established by government agencies. The difference between the public and private databases results mainly from their objectives, while their functions tend to be similar. Private platforms collect data on local suppliers and sell it to MNCs for a profit. Government-owned tools tend to appear in places where such private sector initiatives are missing, and industry associations or the government, often through its agencies to promote investment, exports, or enterprise development, pursues an active role in facil- itating linkages between MNCs and domestic firms by closing the information gap. Such tools aim to increase the visibility of vendors and promote domestic firms as viable partners. Should private initiatives be available, policymakers should assess why information frictions still appear and how it could be fixed before setting up an additional tool. There are three types of information tools that can fulfill the functions of a supplier databases: (i) Traditional supplier databases: In contrast to business directories, which tend to cover a large number of firms in many business sectors, supplier databases only include a subset of firms operating in relevant sectors. These firms are generally the most com- petitive local firms that have greater potential to supply MNCs at home or abroad. Data in business directories is basic, often limited to contact details and the main business sector. Supplier databases contain far more detailed data on each firm. The content of a good supplier database should closely match the buyer’s selection criteria and often includes detailed information on firm size, product groups, production facilities, relevant quality certifica- tions, and main customers and markets served. This enables MNC buyers to target suppliers based on suitable technology, production capacity, and range of product offering. Supplier databases are relatively low maintenance and do not usually require significant assets or direct management efforts. Databases usually have limited matching capability if the data source is inaccurate, so the quality of the data is key to establish trust in the tool. Data should be relevant, up-to-date, and 178 vetted. Eligibility criteria should be set so that inclusion in the database is regarded as an additional sign of quality. This is important to motivate both buyers and suppliers to use it. Then, local firms can raise their profile across the industry by creating an online profile in the database and getting access to matching opportunities, thereby reducing their marketing costs. (ii) Online marketplaces: Online marketplaces feature increased functionalities and interaction options designed to serve both buyers and suppliers. The depth of online market- places varies. In the B2B space, they are often clustered around sectors and, in contrast to business databases, they have added functions to facilitate matching, but online marketplaces do not process the actual transaction, in contrast to B2B platforms. In addition to assisting buyers in gathering infor- mation on existing and potential new suppliers, marketplaces often facilitate the sending of Requests for Information (RFI) or Request for Quotation (RFQ) or the publishing of tenders in a standardized and easy-to-track manner. Mar- ketplaces give MNCs access to validated information on local firms and they give local firms firsthand information on new business opportunities, along with the requirements to become validated as suppliers. (iii) B2B platforms: The B2B market is increasingly dominated by platforms. Some of the biggest companies in the world are platform enterprises or so-called matchmakers.129 These platforms bring together B2B sellers and buyers and enable them to do business in one place online. Compared to databases or marketplaces, they offer the largest set of tools, including, for example, e-commerce infrastruc- ture to manage commercial transactions, business and market analytics, rating services and communication and marketing services. In contrast to the B2C model in consumer retail, it is important to note that even though platforms reduce search and matching costs and broaden market reach, they cannot simply do away with the complexities of B2B transactions. Due to the investment and expertise necessary to build the technology and to gain a trustworthy reputation, all notable B2B platforms 129 Drewel, M., & Gausemeier, J. (2018, September). Digital B2B-platforms and how to find the right one. In European Conference on Innovation and Entrepreneurship (pp. 926-XIV). Academic Conferences International Limited. 179 are run by private firms such as Alibaba.com, Amazon Business, eWorldTrade, Global Sources, ThomasNet, EC21, and IndiaMart.130 They differ in buyer base, popularity, technology, tools, and other value-added services and operate different profit models where fees are based either on subscription, commis- sion, or listing. Linking up to commercially operated B2B platforms is often a daunting task for local firms venturing into new markets and e-commerce. Experience from China shows that the top obstacles have been high cost of advertisement and promotion, fierce competition, and a lack of skills at the firm. Subsequent- ly, business owners rely on government support to improve the information exchange, support fair competition, and provide training.131 For this reason, governments around the world increasingly provide support to connect local business with large B2B platforms. In response to COVID-19, Enterprise Singapore partnered with Alibaba and its local partner Innovative Hub to bring more SMEs in Singapore onto the platform. The subsidized support package to SMEs includes online marketing, understanding demand, setting prices, digitizing their inventory, and fine-tuning business strategies.132 Digital tools should be selected based on functionality, flexibility, and invest- ment needs. Digital marketplaces can start as simple databases with a search function and incorporate multiple functionalities designed to serve their users. For example, the feedback function is one of the most attractive features of digital platforms. It contributes to building trust, allows buyers to scan sellers and sellers to get key information on user experience. Other key functionalities for B2B marketplaces and platforms include the ability to advertise expression of interests from buyers, e-mail notifications for selected events, advertising all standards and certification requirements. Some include even more sophisticated options such as an automated matchmaking function that fits suppliers to buyers based on pre-set criteria. When governments implement these tools for the first time, it may be best to select a system that is flexible enough to start with basic options and incorporate more sophisticated functions over time, as usage and 130 https://seller.alibaba.com/businessblogs/px601plc-what-is-a-b2b-marketplace-and-the-best-way-to- utilize-it (accessed 16 December 2020). 131 World Bank Group. 2019. Results Briefs: Stimulating jobs, growth, entrepreneurship, income in rural China through e-commerce. Link: https://www.worldbank.org/en/results/2019/11/22/ stimulating-jobs-growth-entrepreneurship-income-in-rural-china-through-e-commerce; see further World Bank and Alibaba. 2019. 132 The Business Times Singapore 2020 (https://www.businesstimes.com.sg/singapore/smes/b2b-digital- platforms-open-new-markets-local-smes, access 12 December 2020). 180 membership develops. Involving potential users via stakeholder workshops can be very useful in identifying priority functionalities and collect user feedback early in the design process. From the outset, it is crucial to ensure the sustainability of a supplier database. The survival of business-run tools depends strictly on their profitability. Public sector-run digital solutions depend on public spending to survive which is subject to political changes. In some cases, digital tools may be set up with the help of international donor organizations and fall into disrepair once the funding is no longer available. For this reason, it is important to consider how to sustain the tool over time to cover the cost of maintenance of the IT platforms, the quality of the data, and the marketing to continue to attract new members. The reputa- tional impact of hosting a poorly functioning and outdated tool is considerable. Although this is not necessarily an indicator of success, experience shows that self-funded platforms tend to have a better survival rate than those funded by the government. Self-funding models are based on users paying a fee for all the services they have access to through the platform. The following sections provide considerations along a number of dimensions when implementing this measure: a. Legal and Policy Framework A legal basis is not strictly necessary to enable the setup of a supplier database. Oftentimes, there is no specific reference in a law or regulation, but a government authority is provided with a broad directive that includes setting up domestic supplier databases or similar tools. A specific mandate can be helpful to ensure the existence of a budget and continuity in op- erations. If a legal instrument is used to set up a database, an office or staff should be assigned responsibility to keep the databases updated and to enter new suppliers. b. Procedures Standard Operating Procedures (SOPs) and work processes must be defined and formalized for public or public-private initiatives. These include: Standards for pre-screening and verifying company profiles including contact and basic company details, description of business operations and products, main markets and business clients, certification or main equipment used, etc. 181 Format for displaying information - searchable by sector or industry, name of product or service, certification or key technologies and machinery, location, company name or through other full text or keyword searches, sustainability criteria. Interoperation protocols with investor services, aftercare, matchmaking, or firm upgrading functions of the same agency or other agencies, as applicable. Procedures to ensure agency staff members are aware of the existence of different databases and their connections with other functions such as investor services, aftercare, matchmaking, firm upgrading. Processes for periodic review and updates need to be established. To ensure information in the database is relevant for investors and persons seeking to invest, feedback may be sought from foreign investors about firms contained in the databases. Routine quality checks may also need to be undertaken. In addition, surveys of database users can be conducted to assess the reliabil- ity and validity of the information contained in the databases. c. Institutional Framework When digital solutions are not run by a private economic agent, it is vital to find the right institutional framework that can balance business ob- jectives and policy goals. Some countries opted for a database hosted by a public institution, such as the IPA (e.g., Costa Rica) or the Enterprise De- velopment Agency (e.g., Ireland, Singapore, Vietnam). Other countries have trusted industry associations to lead the effort, as in Chile where the mining platform is hosted by the Antofagasta Industry Association or in the UK where the British Society for Motor Manufacturers and Traders hosts the online marketplace. In countries with low capacity and lack of transparency in government, the platform can be run by a nonprofit organization monitored by a board with public and private sector stakeholders. In all cases, it is important to find an institutional home that can provide the most relevant content and engagement opportunities for platform users. For public or public-private supplier databases, the roles and responsibil- ities of staff within the agency or agencies charged with the operation of the database need to be clearly defined. Effective database manage- ment requires sufficient budget and staffing specifically dedicated to this function. Cooperation and coordination requirements are also necessary between the host of the database and other agencies involved in investor 182 services, aftercare, matchmaking, or firm upgrading functions. One office or staff member should be assigned to keep the databases updated and to enter new suppliers. The main institutions to be involved in the implementation (as well as a needs assessment/diagnostic) are: IPAs Ministry of Economy/Investment/Finance Business/Industry Associations Sector-specific agencies hosting databases Subnational agencies hosting databases. d. Human Resources and Training Sufficient staff must be available and trained to operate the supplier database, including maintaining the relevant website and updating the in- formation. Capacity-building efforts for this investment facilitation measure are generally low. Instead, the focus should be on raising awareness of existence of different databases and their linkage to investor servicing and aftercare. To effectively operate supplier databases, staff members need to possess a range of technical and non-technical skills. Some capacity-building needs for staff operating supplier databases include: Procurement knowledge: Staff members should have a good understand- ing of the procurement process, including supplier selection, evaluation, and performance management. They should also be familiar with pro- curement regulations and guidelines and be able to ensure compliance with these requirements. Communication skills: Staff members should have strong communication skills to be able to effectively interact with suppliers and internal stakehold- ers. They should be able to articulate requirements and expectations clearly and concisely and be able to negotiate and resolve any issues that arise. Technical skills: Depending on the technical complexity of supplier databases, staff members should have an understanding of database management and be proficient in using database software such as Microsoft Access, SQL, or Oracle. They should also have the ability to design, develop, and maintain the database, and troubleshoot any technical issues that may arise. 183 e. Information and Communications Technology Supplier databases require a relevant IT structure/solution that allows staff to input information and investors to filter for different categories. The databases further require an online presence/website where they can be hosted as well as the option to track user statistics. Web-security and data privacy protocols need to be considered. Moreover, depending on the digital tool used, various features can be in- tegrated to support trust-building, such as feedback and rating tools for instance. 4. Case Studies Box 28. Guinea Online Local Supplier Marketplace (GOSLM) Challenge Economic growth in Guinea is closely linked to the develop- ment of the mining sector, but despite the fact that 25 percent of GDP comes from extractives, the local economy has seen disproportionately low benefits from the exploitation of the country’s rich mineral deposits. Due to low local capacity and an unskilled labor force, mining operators tend to import products and services rather than seek to work with local suppliers. Countries in the region adopted legal requirements for local procurement quotas, even though such intervention- ist measures often backfire in the absence of competitive local supply chains or a skilled labor force. The Government of Guinea chose a different strategy. Approach Contrary to other countries in the region, Guinea focused efforts and resources on improving local supplier competitiveness, closing the information gap between foreign investors and local suppliers, and helping local suppliers get more contracts in the sector, access new markets, and create better jobs. As part of this strategy, in 2018 the Government of Guinea launched the Guinean Online Local Supplier Marketplace (GOLSM, which is based on Decree 278/2018 on the Creation 184 of the Guinean Online Local Supplier Marketplace. The Decree includes provisions on: Implementation of the GOLSM by a not-for-profit organiza- tion with a supervision board composed of representatives of public institutions. Functionalities of the GOLSM, including: a. To close the information gap between FDI and Guinean suppliers, by allowing mining operators to access infor- mation on Guinean suppliers and by allowing Guinean companies to access information on tenders and procure- ment plans and become validated suppliers. b. To create visibility for local suppliers and confer cred- ibility as to their production capacities and quality of services with the goal to facilitate partnerships with mining operators. c. To increase competitiveness of Guinean suppliers. The GOLSM organizes training sessions for Guinean companies on procedures required for validation and access to the supply chain, standardization, improving managerial functions, increasing access to finance, etc. Obligation of agencies—such as the Investment Promotion Agency, the Labor Force Agency, and the National Social Security Agency—to provide data to the GOLSM to facilitate the validation of data for private companies registered on the platform. The tool was designed based on multiple stakeholder partic- ipation workshops with both potential buyers and suppliers, including several supplier workshops. It is self-sustainable fi- nancially with both supplier and buyers paying annual fees to access the information on the platform. The tool also includes a capacity-building component; the team managing the platform is mandated to organize training and workshops for local suppliers to help them improve their competitiveness. 185 Results By June 2021, the GOLSM had resulted in US$17 million in total contracts facilitated through the platform from which 44 Guinean firms benefitted. Registration expanded to include 1,600 local firms, including 111 women-owned businesses, and five major mining operators. To address a critical access to finance constraint of Guinean firms trying to meet FDI buyer requirements, six commercial banks were brought onto the marketplace and provided US$9 million in loans for upgrading technology, skills, and capacities. The Government of Guinea has recognized the digital marketplace as a tool to engage the domestic private sector and to complement regulatory measures to increase local content with those that enable con- nections and emphasize competitiveness improvements. Source: World Bank Group Box 29. Costa Rica and the Matchmaking Database Challenge Costa Rica realized that an important step to ensure FDI linkages in its territory entailed facilitating connections between MNCs based in Costa Rica and local suppliers. Approach In Costa Rica, PROCOMER (export promotion agency) runs a matchmaking program between export companies and local suppliers. This initiative started in 2001 as a pilot program funded by the IADB and focused on “high-technology internation- al companies”. In 2005 it was broadened to include all exporters and institutionalized as “Costa Rica Provee”. This program evolved into the Export Linkages Department in PROCOMER that manages a database of 720 providers. It has facilitated to date the establishment of over 1,000 linkages between local and foreign companies, valued at around US$46.5 million. 186 Results In Costa Rica, CINDE (national IPA) reports that its local supplier directory has been a key component in helping companies start operating in Costa Rica. In 2015, CINDE attracted a total of 39 new projects in the services, advanced manufacturing, life sciences, light manufacturing and food industry sectors. Each of the new investors made use of the service provider directory during their scoping and establishment phases. Source: https://www.procomer.com/wp-content/uploads/ESTRATE- GIA-PROCOMER-IED-C2.pdf; https://www.oecd.org/costarica/E-book%20 FDI%20to%20Costa%20Rica.pdf. 5. Further Resources “Multinational Corporation Affiliates, Backward Linkages, and Produc- tivity Spillovers in Developing and Emerging Economies: Evidence and Policy Making” (2020). “Investment Linkages and Incentives: Promoting Technology Transfer and Productivity Spillovers from Foreign Direct Investment” (2020). “Foreign Direct Investment, Backward Linkages, and Productivity Spillovers: What Governments Can Do to Strengthen Linkages and Their Impact” (2020). Measure 11: Supplier Development Programs 1. Introduction Supplier development programs (SDPs) can be a useful tool to promote FDI linkages and upgrade local firm capacity. These programs address information asymmetries by arranging special matchmaking events at which local suppliers and MNCs can explore possible partnerships. The programs can then work together with the MNCs to develop appropriate training and capacity-building programs so that the local suppliers can produce the necessary inputs at the required quality standards in return for supply contracts.133 Targeted incentives for skills upgrading and supplier engagement may be deployed as successful features of SDPs (see theory of change, Figure 27). 133 Steenbergen, V., & Sutton, J. 2017. Establishing a Local Content Unit for Rwanda. Policy Note. Technical report, International Growth Centre. 187 SDPs can substantially increase the competitiveness of local SMEs, even though they are costly.134 SDPs can help local firms meet international standards for quality, cost, delivery, flexibility, and technology, and thereby enable them to enter business relationships with MNEs. Skills development policies will simulta- neously increase local firms’ absorption capacity as well as an economy’s overall competitiveness and attractiveness for FDI. Even though these programs may be costly, most successful examples of linkages programs include some aspect of demand-led and targeted local SDPs, albeit with varying degrees of MNE involve- ment, focus, and success.135 The importance of supplier development programs has also been recognized in the IFD Agreement (Box 30). Box 30. Supplier Development Programs in the IFD Agreement The IFD Agreement includes a provision on supplier develop- ment programs (Non-binding Art. 25). as follows: Members/Parties are encouraged, where appropriate and in a manner consistent with their legal systems and their in- ternational trade and investment obligations, to implement programs that strengthen the capabilities of local suppliers, especially micro, small and medium-sized enterprises, to meet sourcing demands of investors of other Members/Parties. 2.Diagnostics When performing a diagnostic on the existence of supplier development programs, various sources should be considered. In-country information is required to understand whether any government agencies, industry associations, or other actors are currently implementing relevant programs. These could be 134 World Bank. 2018. Global investment competitiveness report 2017/2018: Foreign investor perspectives and policy implications. The World Bank; Ureña, A. A., Manelici, I., & Vásquez, J. P. 2019. The Effects of Joining Multinational Supply Chains: New Evidence from Firm-to-Firm Linkages. Foro de Investigadores de Bancos Centrales del Consejo Monetario Centroamericano; Arráiz, I., Henríquez, F., & Stucchi, R. 2013. Supplier development programs and firm performance: evidence from Chile. Small Business Economics, 41, 277-293; Mariscal, A., & Taglioni, D. 2017. GVCs as a Source of Firm Capabilities. World Bank, Washington, DC. 135 Qiang, Christine Zhenwei; Liu, Yan; Steenbergen, Victor. 2021. An Investment Perspective on Global Value Chains. Washington, DC: World Bank. © World Bank. https://openknowledge.worldbank.org/handle/10986/35526 License: CC BY 3.0 IGO. 188 horizontal or sector- or industry-specific and cover the entire country or specific regions. In some cases, there may exist literature providing information on the current status of supplier development programs in the country. This may include reports, academic papers, government publications, and industry surveys. Stake- holder consultations with stakeholders involved in supplier development programs, including government officials, industry associations, and program implementers, can help to identify the strengths and weaknesses of existing programs and potential areas for improvement. 3. Implementation Principles When designing a supplier development program, the following key principles should be observed: Adopt a demand-driven approach rather than imposing local content on MNCs: Influencing the demand side requires a thorough and realistic under- standing of MNCs’ business needs and requirements. Thus, it is advisable to integrate MNCs into the governance structure of SDPs or to have the international private sector either closely advise or even run linkage initia- tives. Because trust and information gaps can arise, MNCs should be involved as partners from the beginning. Countries that have passed laws requiring investors to use local goods or services in host-country operations often undermine their own long-term competitiveness. These requirements tend to increase the cost or lower the quality of production in those countries, deterring investors who might have brought capital, technology, and jobs – exactly the investors that those governments were hoping to attract. Target appropriate MNC affiliates. Host economy governments need to focus on attracting and facilitating the operations of MNC affiliates that have an interest in increasing local sourcing and improving local suppliers. At- tracting MNC affiliates that are technologically substantially more advanced than domestic firms ensures that there is sufficient scope for local suppliers to benefit from productivity spillovers. Target appropriate domestic firms. To maximize the benefits of partner- ships with MNCs, host economy governments need to target new policies at domestic firms that are potentially best suited to act as long-term suppliers to MNC affiliates and those that stand to improve their capabilities. Policies should be targeting those local firms that have high levels of absorptive capacity, show a clear commitment to want to work with MNC affiliates, 189 and are willing to take ownership of the performance improvements that are required to create successful partnerships and reap the benefits. In contrast to more broad-based small and medium enterprise development, these efforts should focus on firms that are close to meeting MNCs’ supplier criteria or capable of becoming long-term partners of MNCs, such as for design or research and development activities. Recognize that location matters and support localized development policies. Concentration of economic activity in a region enhances the creation of linkages, technology dissemination, and productivity spillovers. Policy making aimed at attracting MNC investments and creating linkages with domestic firms needs to incorporate regional development policies that promote and facilitate efforts to locate foreign and domestic firms in the same cities and regions within host economies to maximize the extent and impact of backward linkages. Establish and maintain long-term goals and commitment to partnerships. Host economy governments must recognize that it takes time for MNC in- vestments to build targeted, inter-firm linkages with domestic firms, and for productivity spillovers to occur. This is especially important in cases where governments need to invest in developing the capabilities and ab- sorptive capacity of domestic firms—often before any meaningful economic effects from backward linkages have occurred. Governments need to devise and openly commit to long-term goals in their policy making that support diverse connections between MNC affiliates and domestic suppliers. Inter- national experience suggests that programs should have a duration of at least 18 months, while many take longer especially in economies that have not yet been exposed to such programs at scale. Systems and structures are often not yet in place to ensure that program implementation will proceed smoothly. If programs are too short, the money already invested will not yield the targeted results which in the end make it an inefficient program for all stakeholders. Should funding be the bottleneck, it is better to work with a smaller number of companies rather than cutting support short. Adopt a sector-specific approach: Criteria for selection of sectors can include a critical mass of FDI, continuing growth potential, demand from MNCs for local supply, government priorities, and potential supplier capability. 190 Figure 8. Implementation phases for supplier development programs Pre-implementation Implementation Post-implementation * Identifying the market constraints and needs the * Business reviews * Systematically collecting qualitative program must tackle * Selection of firms feedback, especially view from companies, Securing all necessary * Support service providers, and actors buy-in and understanding of their roles * Business Development Plans stakeholders so that the program can be launched * Matching with market opportunities Source: World Bank Group. Pre-implementation There are a number of steps that need to be taken before implementation, often within a 6-month period, in particular: Identifying the central managing agency, and the responsible team within, so that the main focal point is part of all discussions and decisions around the SDP. Inform the private sector as well as other stakeholders participat- ing in the SDP. Liaising with other potential partners, such as other Government depart- ments, business agencies and financial institutions, so as to assess the types and quality of business support already available—and thus the key gaps the program needs to fill—and to build the necessary relationships to maximize support to program delivery. Establishing a monitoring and evaluation framework upfront based on the program design setting out what indicators will constitute achievement of aims and objectives and what planned activities and expected benefits are. Identifying and establishing relationships with FDI/MNCs to confirm that MNCs are indeed looking to increase local sourcing, are willing to share selection criteria for approving suppliers, commit to helping with identifying suppliers with potential for inclusion in the program, as well as preparedness to consider making in-kind contributions. 191 Selecting local companies to participate in the program, with the aim to identify those local companies with the highest potential to succeed in becoming long-term suppliers to MNCs, and over time, increase the range and sophistication of their business operations. The nature of the selection process can take various forms—such as simple application from the widest possible field, more detailed expression of interests (EOIs) from a selected number of companies, or by invitation following internal analysis and asking for nominations from MNCs and other relevant bodies. These are not mutually exclusive and have been combined in various ways in different programs. Developing links with financial institutions to provide a comprehensive support package to participating companies that need to invest in making improvements and securing contracts with MNCs. Selecting business review consultants that carry out the business reviews and related training activities in the first phase of the program. It is important that the consultants are contracted and the precise approach for the business reviews is agreed before the program is officially launched. Setting up project management: Given the complexity of handling internal and external demands of an SDP, a strong project management system and team needs to be set up at the implementing agency. Weak coordination of activities leads to frustration for business and external experts involved, which is detrimental for a program founded on partnership to realize what can be a win-win situation. Setting up an advisory group, which forms an integral part of the partner- ship approach. It provides the forum for interaction with main stakeholders, build transparency and commitment, and allows the program management to tap into MNC expertise and experience, ensuring the meeting of their needs and realization of supply opportunities. Thus, it ideally ensures high level political and business support and ownership, raising the profile of the program, and reinforcing day-to-day working relationships. Launching the program: The advantages of a high-profile launch involving the media, program participants, and public and private sector stakeholders are to raise the visibility and standing of the program in government depart- ments and agencies, start to create a brand awareness, and reinforce the partnership approach crucial to the success of the program. 192 Implementation The implementation phase depends on the type of implementation design chosen. Box 31. describes the different advantages and drawbacks of choosing either a competitive 2-phase format or a non-competitive 1-phase format. Box 31. Types of Supplier Development Program Implementation Designs Two different types of implementation designs can be envisioned: A competitive 2-phase format: This approach has two phases, which has the advantage of being able to prioritize firms that upgrade during the first phase. Short-term action plan & implementation support 1st 2st business plan & general business review review Group training (improvement modules basic & leadership) 6-9 months Phase 1: Competitive stage Selection New business One-on consulyancy and for intensive opportunities matching support support phase 12-18 months Phase 2: Intensive support A non-competitive 1-phase format: This format places more emphasis on selecting the right cohort of suppliers. The participating companies are selected based on existing information, the quality of EOIs to join the program that suppliers submit, and the views of MNCs. 193 1st Action plan and one- 2st New business business on-one consultancy business opportunities review support review Factors that affect the choice of model include: Amount and detail of knowledge on potential participants and firm-level capacity at the managing agency and imple- mentation partners. Degree of existing engagement of MNCs with local suppliers and MNC’s knowledge of their potential. Scale and timeline of the program. It needs to be considered that the competitive model is more complex and adds to implementation time. Previous experience in SDPs. When an SDP is first introduced in a country, it is important to test out and prove its effec- tiveness. Follow-on programs can build on this foundation. Advantages of the competitive format include: (i) the SDP focuses its main development support on those companies with the most potential and the greatest management com- mitment, (ii) the support approach and acceptance can be tested in a shorter phase 1, and (iii) trust and relations among all actors can be built. In contrast, the non-competitive model provides earlier impact on company improvement but requires more upfront knowledge of the companies invited to join the program to avoid committing limited support resources to companies with less potential. It also makes it harder to introduce companies not yet known to MNCs. Source: WBG. 194 For a competitive 2-phase format, the following steps need to be taken in the first phase: First business reviews: The objective of a business review is to look at the whole of a business and its overall competitiveness against international benchmarks to assess its priority needs. Business reviews are not simple audits in terms of standard external analysis of a company that might be made by a typical MNC. Standard analysis tends to focus mostly on op- erational aspect, but business reviews look at all aspects of a company’s business (including e.g., strategy, business planning, leadership, product inno- vation, etc., with external assessors acting as facilitators to help company management determine the way forward for their business. First business reviews involve a significant commitment of resources, typically deploying two assessors over two days, plus preparation and follow-up. The investment of time and resources reflects their significance as the critical initial building block on which the improvement of participating companies would be based. First business reviews are the first step in developing an im- provement road map through to the second business reviews, and on to the final intensive support stage. Since they are the first activity engaging par- ticipating companies, the way in which these business reviews are conducted will also play a crucial role in establishing the credibility of the program and the buy-in from company management. Selection, integration, and development of local assessors: No assessor can be expected to be an expert across all areas of business transformation. However, an assessor needs to understand how to develop overall business im- provement plans. Key characteristics are prior experience in relevant sectors, proven track record of planning and implementing business improvements, project management skills, good communication skills and relationship man- agement. The selection should follow a rigorous screening and interview process since the success of developing local capabilities much depends on the caliber of local consultants chosen at the outset. Training workshops: To support companies in implementing their self-im- provement plans, training workshops should be provided based on common weaknesses identified in the first business review. Local consultants as well as MNEs should be involved in the process. Second business reviews: Second business reviews measure progress on the company’s short-term improvement plan, reassess selected capabili- 195 ties and themes of concern in meeting immediate MNC requirements. They also develop suggested ongoing improvement activities in the form of a lon- ger-term plan and conclude with a report to the company leadership team. Second business reviews: Second business reviews measure progress on the company’s short-term improvement plan, reassess selected capabili- ties and themes of concern in meeting immediate MNC requirements. They also develop suggested ongoing improvement activities in the form of a lon- ger-term plan and conclude with a report to the company leadership team. Phase 2 in a competitive implementation design (or Phase 1 in a non-compet- itive design) is critical to improve participating companies to meet interna- tional standards and obtain or increase business with MNCs. Support in the previous phase is limited to business reviews and off-site training. The focus in this phase is on on-site hands-on consultancy and mentoring. It is important to deliver the support in a way that will enable suppliers to reap business benefits quickly and that equips their staff for the future development and growth of the company. It comprises 2 main elements: One-on-one consultancy support on-site from technical experts which should be customized to meet the individual priorities and needs of each par- ticipating supplier. The ‘learning by doing’ approach by addressing current and real issues at the plant has proven most effective in other SDPs. The focus of the consultancy support is guided by the business development plans drawn up together with the company management. An individual mentoring team for each company, consisting of an interna- tional and a local mentor. Their role is to ensure that the company receives the necessary external support needed to achieve its business development objectives and to provide coaching in implementing the change processes. Post-Implementation Once the program has ended, it is essential to gather not only quantitative results but also systematically collect qualitative feedback, especially views from companies, service providers, and stakeholders. The collection of evidence and feedback should include: A more qualitative but immediate end of program review, bringing together the views of the consultancy provider, mentors, suppliers, MNEs and other stakeholders on benefits, lessons learned, and gaps and ideas to be consid- ered for follow-on programs. 196 An end program assessment measuring improvements in company perfor- mance against the international benchmarks of the business reviews over the period of the SDP. Results in terms of the benefits obtained by companies measured should be collected from the perspectives of both local suppliers and MNCs. An impact evaluation covering the relevance, efficiency, effectiveness, impact, sustainability, and additionality. This can inform the design of a scaled-up program if the initial program is a pilot. The following sections provide considerations for implementing this measure: a. Legal and Policy Framework A legal basis is not strictly necessary to enable the setup an SDP. Often- times, there is no specific reference in a law or regulation, but a government authority is provided with a broad competence that includes conducting supplier development programs. That said, it may be helpful to institutionalize the program and provide it with a sufficient and consistent budget. b. Procedures SOPs and work processes must be defined and formalized, including for (see further description above): Selection of local companies for participation in programs Interagency cooperation protocols Selection, integration, and development of local assessors Setup and functioning of advisory groups Trainings for consultants and for local firms Business reviews Consultancy and matching support protocols c. Institutional Framework SDPs touch upon multiple thematic areas and require a committed and co- ordinated institutional landscape. Institutional setups may vary, but what they have in common are relatively well-funded mandates (which are based on widely communicated policy agendas) and high-level political buy-in. 197 SDPs are complex programs to manage and implement since they typically involve many parties (public vs. private, national vs regional, consultants, etc.), support schemes, and processes to be coordinated. It therefore requires a strong lead agency that can drive the agenda on behalf of the government, provide a well-equipped project team, and regularly attend key meetings. It is important that the lead agency has: The resources, mandate, and credibility to act as a central managing agency, The capacity and drive to develop and push forward what is a demanding and tailored program, and The ability to coordinate all potential contributors and manage stake- holders at both the national and regional level. The main institutions to be involved in the implementation (as well as a needs assessment/diagnostic) are: Customers/buyers (MNC/OEMs and Tier1 suppliers) Local suppliers External experts (assessors, mentors, and consultancy providers) Government delivery agency d. Human Resources and Training HR requirements and capacity-building needs are substantial for SDPs. Effective supplier development programs require a range of skills across different areas. Here are some of the skills that can help ensure success: Communication: Effective communication is crucial for supplier devel- opment programs. A supplier development professional must be able to clearly convey expectations, feedback, and suggestions for improvement to suppliers. They should also be able to listen to suppliers and under- stand their concerns. Relationship building: Building strong relationships with suppliers is essential to the success of an SDP. A supplier development profession- al must be able to establish trust, collaborate effectively, and maintain positive relationships with suppliers. 198 Analytical skills: Analyzing data and identifying areas for improvement is a critical part of supplier development. A supplier development profes- sional must be able to use data to identify trends, pinpoint issues, and develop solutions to improve supplier performance. Analytical skills: Analyzing data and identifying areas for improvement is a critical part of supplier development. A supplier development profes- sional must be able to use data to identify trends, pinpoint issues, and develop solutions to improve supplier performance. Project management: SDPs often involve managing multiple projects si- multaneously. A supplier development professional should be able to plan and execute projects effectively, while managing timelines, resources, and budgets. Technical knowledge: Depending on the industry and type of suppliers involved, a supplier development professional may need technical expertise in areas such as manufacturing processes, quality manage- ment systems, or supply chain logistics. Problem-solving: SDPs often require addressing complex problems and finding innovative solutions. A supplier development professional must be able to think creatively, identify root causes, and develop effective solutions to improve supplier performance. Cultural sensitivity: SDPs often involve working with suppliers from different cultural backgrounds. A supplier development professional should be able to understand and respect different cultural norms and practices and adapt their communication and approach accordingly. Capacity-building for local consultants and mentors is also key to ensure the sustainability of supplier development programs. e. Information and Communications Technology There are several IT infrastructure components that can be relevant for supplier development programs. These include: Supplier Relationship Management (SRM) systems: SRM systems are software platforms that can help manage supplier relationships and improve supplier performance. These systems can provide real-time data on supplier performance metrics, enable supplier communication and collaboration, and help automate procurement processes. 199 Enterprise Resource Planning (ERP) systems: ERP systems are software platforms that can help manage and integrate various business functions, such as supply chain management, inventory management, and financial management. These systems can help provide a holistic view of supplier performance and enable data-driven decision making. Business Intelligence (BI) tools: BI tools can help analyze and visualize data from various sources, such as SRM and ERP systems. These tools can help identify trends, track KPIs, and generate insights that can improve supplier performance. e-Sourcing tools: e-Sourcing tools can help automate the sourcing process and improve supplier selection. These tools can include request for proposal (RFP) software, reverse auctions, and supplier discovery platforms. Contract management systems: Contract management systems can help manage supplier contracts, track compliance, and monitor supplier performance against contract terms. Collaboration tools: Collaboration tools such as video conferencing, instant messaging, and file sharing can help facilitate communication and collaboration with suppliers, particularly for remote teams. Cybersecurity and data protection measures: As supplier development programs involve collecting and managing sensitive supplier data, cyberse- curity, and data protection measures such as firewalls, data encryption, and access controls are essential to ensure the security and privacy of this data. 4. Case Studies Box 32. Intel in Costa Rica - The transformative potential of attracting an anchor investment Challenge In November 1996, Intel announced a monumental decision to establish a microprocessor assembly and testing factory in Costa Rica—positioning the firm as the largest foreign investor in the country at the time. Intel’s engagement in Costa Rica evolved to move up the value chain from assembly and testing to higher value-added operations such as Global Shared Services 200 Centers, an Engineering Development Center for both pre- and post-silicon development, and a mega laboratory for testing new microprocessors. As part of its attraction and post-investment strategy, the Costa Rican Government worked resourcefully and with a novel sense of urgency to enhance the country’s technical education, incentives law, regulation, and infrastructure to attract this “anchor investment” and maximize its linkages and spillovers. Approach Targeted proactive investment promotion and high-level Gov- ernment support. In the 1990s, the Costa Rican government, in collaboration with its Investment Promotion Agency, CINDE, engaged in highly targeted investment promotion—courting large electronics corporations in the United States. Deliberate- ly vying to make its way onto Intel’s list of investment location options, the Government and CINDE demonstrated agility in showing how the country’s investment landscape would adapt to meet Intel’s stringent requirements. For example, recognizing Intel’s concerns about potential interruptions in production, the government committed to infrastructure upgrades supported directly by the President of Costa Rica at that time, including modernizing the national airport, vital for expediting shipments. Skills upgrading. Intel required a highly skilled labor pool for its complex operations. The government worked with Intel’s HR specialists to co-design vocational training programs. Ad- ditionally, reforms were initiated in the existing educational curricula, backed by the Ministry of Education, to meet Intel’s requirements. Supplier Networks. CINDE’s role went beyond promotion efforts targeting Intel; they also worked to attract supporting indus- tries and suppliers, to eventually transform the FDI landscape through a vibrant electronics cluster. Local Suppliers. In the late 1990s, Costa Rican officials, inspired by visits to Asian countries with robust local industry upgrade programs, launched Costa Rica PROVEE, a program to develop local suppliers. Spearheaded by organizations like CINDE, the Chamber of Industry, and PROCOMER (Costa Rica’s trade 201 promotion agency), along with private sector companies like Baxter Healthcare, this initiative aimed to deepen the economic impact of foreign investment through the multiplier effect and anchor foreign investors via strong local supplier relationships. Intel worked with local companies to help raise their quality and cost competitiveness to meet global standards, for example, in cardboard packaging. Global Suppliers. A direct consequence of Intel’s investment was the establishment of satellite offices for several global suppliers beginning in 1998—providing building blocks for the budding electronics support industry. Most of these firms, under contract to provide easily accessible technical support for manufacturing and testing equipment sold to Intel, opened a small service center or located an engineer at the Intel facility. Results Costa Rica’s effort to attract and support Intel shows how even a single “superstar” investor can lead the way in trigger- ing structural transformation of the national export profile.136 It was a turning point of the country’s insertion into global value chains, as well as the development of an export-oriented sector producing high-technology and sophisticated manufacturing and value-added services.137 Providing important demonstration effects, within three years of Intel’s arrival, the country tripled its stock of FDI to $1.3 billion. Its effects on the local economy were far-reaching. Backward linkages. Initially Intel was sourcing its key inputs for assembly and testing of microprocessors internationally. But as it shifted toward higher value activities, the percentage of Intel’s domestic purchases jumped from 26% in 2013 to 69% in 2016. By 2016, services accounted for all local purchases, as Intel moved assembly and testing to Asia. The company began sourcing more specialized local services, particularly in IT and R&D, increasing from 5% in 2013 to 17% in 2016. 136 Freund and Moran, 2017; Spar 1998, World Bank 2006, Nelson 2009, UNCTAD 2014. 137 Monge-Gonzalez and Zolezzi, 2012. 202 Domestic Value Addition. Intel’s climb up the value chain not only increased average salaries of its worker but also increased domestic value addition. For each dollar that Intel produced and exported, 18 cents stayed in the country (in the form of payments for production factors and inputs produced by Costa Rican companies) in 2013, jumping to 44 cents in 2016.138 Table 1. Intel Costa Rica´s imported and domestic inputs, 2013 and 2016 2013 2016 Purchases No. fo US$ Porcentage of No. of Percentage of US$ Million suppliers million purchases suppliers purchases Imported 231 143.1 74% 99 10.2 31% Domestic 190 49.5 26% 150 22.4 69% Total 421 192.6 100% 249 32.6 100% Source: The author, with data from Intel Costa Rica. Table 2. Intel Costa Rica´s local purchases for 2013 and 2016 as a percentage of the total Type of Purchases 2013 2016 Corporate services (construction, maintenance, facilities, electricity) 71% 77% Consultancy services in finances 1% 3% Consultancy services in human resource 4% 2% Information technology services 4% 7% R&D services (software, logistics, training and consulting) 1% 10% Manufacturing inputs (packaging suppliers) 19% 0% Total 100% 100% Business Culture, Standards and Knowledge Sharing. Exposure to Intel’s world-class business environment helped raise the per- formance standards of its workforce and suppliers. Following Intel’s practices, the National Insurance Institute (INS) created the first national Job Safety and Health Standard. There is also data indicating that the arrival of Intel and other multina- tionals in Costa Rica supported a more skilled labor force and fostered labor mobility from multinationals to local firms. Source: World Bank Group. 138 Monge-González, Ricardo. 2017/18. 203 Box 33. Supplier Development Program in Türkiye Challenge In Türkiye, rising GVC participation has gone hand-in hand with increased value-added from exports. But Türkiye’s participa- tion remains relatively low, its products are of limited sophisti- cation and innovation earnings are limited. Market failures and a lack of capabilities constrain the ability of firms to join GVCs. Supplier development programs are seen as one of the mecha- nisms that can help support firm capability development and ultimately foster integration into GVCs, but while many GVC lead firms operating in Türkiye are running their individual SDP activities, these buyers naturally focus on the current (short- er-term) position and capabilities of suppliers, driven by cost reduction and product cycles. Such initiatives do not neces- sarily consider developing the capabilities needed for medium- to long-term competitiveness. Currently, the domestic supply base lacks awareness and certainty on which new services and approaches would strengthen its competitive position and how to acquire them. Approach In June 2021, the Ministry of Industry and Technology (MoIT), with support from the International Finance Corporation of the World Bank Group, launched a pilot Supplier Development Program in the automotive sector, with a focus on electronic vehicle (EV) production. It aims to expand the participation of Turkish firms in the supply chains of large automotive Original Equipment Manufacturers (OEMs) based in Türkiye, leading to increased linkages and business between Turkish firms and au- tomotive OEMs. This will be achieved through targeted and sys- tematic business consulting and upgrading support, designed in close collaboration with three OEMs (Ford Otosan, Isuzu, and Mercedes-Benz) to ensure alignment with industry needs. Each participant supplier is individually assessed and receives an improvement plan based on performance gaps and OEM re- quirements. The assessment looks at the whole of the business, 204 via 360-review, to identify improvement areas most important for the stability and long-term competitiveness of the firms. It benchmarks each participant along four core capabilities (com- petitive strategy & management systems; new product intro- duction & life cycle management; manufacturing operations; and supply chain management) and six dimensions of com- petitiveness (quality, cost, delivery, flexibility, product/technol- ogy, and customer experience). Senior international experts are coaching and working with each firm to assist them in the implementation of these improvement plans over a 12 to 24 month period as needed. More formal group training workshops on common topics of learning are also part of the pilot SDP. Results To ensure that this demand-led and partnership initiative is taken forward in the most effective way, a MoIT-chaired Steering Committee, bringing together OEMs, industry associ- ations, senior MoIT officials, and representatives from other private and public sector stakeholders, has been set up with the mandate to (i) oversee the strategy and implementation of the SDP based on agreed-upon performance indicators, (ii) coordi- nate and leverage the various support that each stakeholder can bring to ensure performance improvements result in new business opportunities, and (iii) pull together the widest range of experience and expertise in promoting the growth and sus- tainability of the automotive supply industry in Türkiye. 5. Further Resources Multinational Corporation Affiliates, Backward Linkages, and Productivi- ty Spillovers in Developing and Emerging Economies: Evidence and Policy Making (2020). Investment Linkages and Incentives: Promoting Technology Transfer and Productivity Spillovers from Foreign Direct Investment (2020). Foreign Direct Investment, Backward Linkages, and Productivity Spillovers: What Governments Can Do to Strengthen Linkages and Their Impact (2020). 205 Reference List 1. “What is a B2B marketplace? and the best way to utilize it” (2020). 2. “Supplier development programs and firm performance: evidence from Chile” Small Business Economics (2013). 3. “Exporting and firm performance: Evidence from a randomized experiment.” The Quarterly Journal of Economics (2017), 132(2), 551-615. 4. “Learning to import from your peers.” Journal of International Economics (2018), Elsevier, vol. 115(C), pages 242-258. 5. “Interfirm relationships and business performance”. The Quarterly Journal of Economics (2018), 133(3), 1229-1282. 6. “An Investment Perspective on Global Value Chains” (2021). 7. ”Digital B2B-platforms and how to find the right one.” (2018). 8. “Foreign Direct Investment, Backward Linkages, and Productivity Spillovers.” (2020). 9. “GVCs as a Source of Firm Capabilities.” (2017). 10. “Foreign Direct Investment and Development: The New Policy Agenda for Developing Countries and Economies in Transition” (2010). “An Investment Perspective on Global Value Chains” (2021). 11. “Establishing a Local Content Unit for Rwanda.” Policy Note. Technical report, International Growth Centre (2017). 12. “The Effects of Joining Multinational Supply Chains: New Evidence from Firm- to-Firm Linkages.” Foro de Investigadores de Bancos Centrales del Consejo Monetario Centroamericano. (2019) 13. “What can governments do to facilitate investment?” (2019). 14. World Bank and Alibaba. 2019. 15. “Results Briefs: Stimulating jobs, growth, entrepreneurship, income in rural China through e-commerce.” (2019). 16. “Global Investment Competitiveness Report 2017/2018: Foreign investor perspectives and policy implications” (2018). 206 F. Improving investment policy-and law-making processes A regulatory framework that provides legal certainty and predictability to investors is key to attract and retain investments. An effective way to improve the law-making process is to provide the opportunity to citizens and the business community to comment in advance. This promotes transparency, informed deci- sion-making, and legitimacy, by allowing stakeholders to understand and contribute to the development of laws and regulations. Regulatory Impact Assessments (RIAs) can also help policy makers to ensure quality of govern- ment intervention and evaluate the potential economic, social, and environmental impacts of new regulations. Periodic reviews to assess whether a regulation has achieved its original objectives are another important element of the regulatory policy cycle. This section focuses on three important aspects of the reg- ulatory governance process: Public consultation processes (Measure 12), main aspects of the RIA, including a “Light RIA” for countries with low institutional capacities (Measure 13), and periodic review of regulations (Measure 14). Measure 12: Public Consultation on Investment Measures 1. Introduction Providing the opportunity to comment in advance to citizens and the whole business community, including foreign investors, is an effective way to improve the law-making process. It promotes transparency, informed de- cision-making, and legitimacy, by allowing stakeholders to understand and contribute to the development of laws and regulations. It aligns interests, mitigates conflicts, and fosters shared ownership, leading to greater accep- tance and compliance. It also enables early identification of issues. A better law-making process that includes feedback from citizens and investors 207 enhances economic growth and innovation and improves enforcement through increased understanding and cooperation (see theory of change, Figure 27).139 Its importance has also been recognized in the IFD Agreement (Box 34). Box 34. Opportunity to comment on proposed investment measures in the IFD Agreement The IFD Agreement includes an obligation on opportunity to comment on proposed measures (Binding Art. 10.3). It includes the following requirements: To the extent practicable and in a manner consistent with its legal system for adopting measures, each Member/Party shall provide investors, other interested persons and other Members/ Parties a reasonable opportunity to comment on such proposed measures or documents published under paragraph 10.1 or 10.2 and shall consider the comments received. Public consultation as part of the rulemaking process is common. Based on data from the World Bank’s Global Indicators of Regulatory Governance (GIRG), 138 out of 186 countries’ ministries or regulatory agencies requested comments on proposed regulations in 2018.140 While all OECD high-income countries carry out consultations on draft policies with stakeholders, 68 percent of countries in Latin America and the Caribbean (LAC) conducted this practice in 2018 (Figure 9). In about a third of the 138 economies where consultations took place, consultative practices were not adopted throughout the entire government and only some min- istries consulted with the public. In LAC countries that had consultative regulatory process, 48 percent established it throughout the government while 52 percent were conducted by some ministries.141 139 Johns, Melissa; Saltane, Valentina. 2016. Citizen engagement in rulemaking: Evidence on regulatory practices in 185 countries. Washington, D.C.: World Bank.; IFC. 2010. Op. cit. 140 The GIRG is a World Bank project that was discontinued. However, its findings are still relevant in a large number of countries. 141 GIRG database, see: https://rulemaking.worldbank.org/en/rulemaking. 208 Figure 9. Consultation with the public across the globe (2018) Share consultation Consult with result the public OECD high incomne 97% 100% Europe & Central Asia 74% 100% East Asia & Pacific 36% 84% Latin America & Caribbean 45% 68% South Asia 14% 57% Sub-Saharan Africa 26% 54% Middle East & North Africa 15% 50% Percent of countries Source: World Bank Group. 2. Diagnostics To carry out public consultations with stakeholders on draft or proposed regula- tions, some basic steps should be followed. First, identify whether there is a legal framework in place comprised of basic principles and mechanisms to carry out public consultations. Secondly, determine the scope of consultation mechanisms (e.g., whether consultation is open to anyone or limited to specific stakeholders). These diagnostics should include the use of digital platforms. Additionally, if public consultation mechanisms are already in place, responsible authorities should have periodic check-ins with users to get feedback on the consultation system, including if the platform is easy to use, which features should be improved or added, and whether the periods to provide comments are long enough. Governments can use in-country indicators and international benchmarks that assess the degree of public consultation and engagement. Key indicators include: In-country information on metrics on consultation processes for draft or proposed regulations, such as laws, by-laws, sectorial secondary regulations, etc. WBG’s Investment Law Database WBG’s Regulatory Risk Index OECD’s Indicators of Regulatory Policy and Governance Surveys (iREG)142 142 The OECD assesses the quality of regulatory policy practices through its “Indicators of Regulatory Policy and Governance” (iREG). The iREG covers three main dimensions: “ex ante Regulatory Impact Assessment”, “Stakeholder engagement” in the design of new regulations, and regulatory “Ex post evaluation and administrative simplification”. These three dimensions are measured across four categories: Methodology, Systematic adoption, Transparency, and Oversight and Quality Control. 209 3. Implementation Principles Particularly in low-capacity contexts, consultation mechanisms and transpar- ency are important in the process of designing and drafting new regulations, especially because data from stakeholders helps to address information gaps. In Colombia, Brazil, Chile, Peru, Mexico, Jamaica, El Salvador, St. Lucia, and St. Vincent and the Grenadines there has been progress in the area of consultation. In Brazil, one of LAC’s most participatory rulemaking systems, the 1988 Citizens Constitution laid the groundwork for a broad participatory governance system and the Constitution itself had participatory mechanisms, with over 72,000 sug- gestions from citizens.143 a. Legal and Policy Framework Formal obligations to conduct public consultation can assist the consul- tation process and help focus stakeholders on key issues and impacts.144 Public consultation legal frameworks vary from country to country. For example, consultation processes could be established in the constitution (e.g., Panama) or in secondary legislation in the form of petition rights or consulta- tive referenda (e.g., Dominican Republic or Costa Rica). Additionally, in some countries, consultation mechanisms are not bound by a legal instrument, but by codes of conduct (e.g., the United Kingdom or Canada).145 By 2018, around 70 countries out of 186 surveyed had a legal require- ment to conduct consultations for draft regulations. Nine countries in LAC have established legal requirements to solicit comments on proposed regu- lations (Argentina, Bolivia, Brazil, Colombia, Costa Rica, Dominican Republic, Mexico, Panama, and Peru). Consultations with stakeholders took place in twelve other LAC countries even though they were not required by law (e.g., Nicaragua, Paraguay, Uruguay).146 To provide certainty, laws and regulations should define certain aspects of the involvement of stakeholders, such as: The criteria for identifying stakeholders that must be consulted during the periodic review process. 143 BRAZIL, Câmara dos Deputados. 30 anos Constituição da Cidadania. https://www.camara.leg.br/ internet/agencia/infograficos-html5/constituinte/index.html 144 IFC. 2010. Op. cit. 145 IFC. 2010. Op cit. Bteddini, Lida. 2013. “MENA and Public Consultations.” MENA Knowledge and Learning: Quick Notes Series, Number 101. Washington, D.C.: World Bank. 146 GIRG database, see: https://rulemaking.worldbank.org/en/rulemaking. 210 The obligation to provide materials in advance to guide the public discussion with citizens and businesses. The duration of the consulting process. The obligation for authorities to provide a written response when comments are not considered. The coverage and duration of public consultations should be proportionate to the significance of the regulation and its impacts, as well as the degree of public interest or concern.147 In 2015, 43 out of 185 countries surveyed had established in law a minimum period for which the draft regulations must be publicly available for review and comment.148 Additionally, in 26 of the 185 countries, reporting the results of public consultations was required by law, including 11 economies in Europe and Central Asia (ECA) region and 9 in the OECD high-income group (Figure 10).149 Based on the 2018 GIRG, only Costa Rica and Mexico from LAC had established public consultation timeframes in a law.150 Additionally, the LAC countries where reporting on the results of the con- sultation is required by law are Argentina, Colombia, Costa Rica, and Mexico.151 Figure 10. Legal requirements to solicit comments and report consultation results (2015) 100 90 Legal requirement to publish text of proposed regulations before enactment Share of economies with feature (%) 80 Rulemaking body legally required to solicit comments on proposed regulations Regulatory agency legally required to report results of public consultations 70 60 50 40 30 20 10 0 Europe & OECD high East Asia South Latin America Sub-Saha- Middle East & Central Asia income & Pacific Asia & Caribbean ran Africa North Africa Source: World Bank Group. 147 Stakeholder preparation for a review can require considerable data gathering and analysis, which takes time and resources. 148 In more than half of these 43 economies the consultation period is 30 days or more. 149 Johns, Melissa. 2016. Op. cit. 150 The consultation period established by law in Costa Rica is 10 working days and in Mexico is one month for general regulations bills, but for Official Mexican Standards (NOMs) the consultation period is 60 days plus additional 15 days after is publish in the Official Gazette. 151 GIRG database, see: https://rulemaking.worldbank.org/en/rulemaking. 211 b. Procedures Engagement of stakeholders should commence early in the decision-making process and before a decision to regulate is made. In 2019, while Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, and Peru engaged stakeholders at an early stage of the regulatory process, this was only for some subordinate regulations. For all subordinate regulations, Colombia, Costa Rica, and Mexico engaged stakeholders but only at a later stage of the regulatory process (Figure 11).152 Figure 11. Stakeholder engagement at different stages of rule-making, 2015 and 2019 For all subordinate regulations For major subordinate regulatons For some subordinate regulations Never 100 ARG C0L 90 BRA CRI 80 CHL MEX 70 BRA C0L MEX ARG 60 CHL CRI BRA BRA 50 C0L MEX CHL CHL 40 CRI PER C0L DOM 30 MEX DOM CRI ECU 20 ECU ECU ECU PER 10 PER SVL PER SVL 0 2015 2019 2015 2019 Late stage consultation when the prefered Early stage consultation before a decision solution has been made Identified and/or to regulate has been made regulation has been drafted Source: OECD (iReg for Latin America 2015 and 2019). There are some risks that should be considered when designing and imple- menting a public consultation process. Consultations should be accessible to a wide range of community and business interests to broaden the range of perspectives and prevent the reinforcement of vested interests. It is also important to avoid consultation fatigue. Box 35 describes the different types of consultation.153 152 OECD. 2020. Government at a Glance: Latin America and the Caribbean 2020, OECD Publishing, Paris. 153 Johns, Melissa. 2016. Op. cit. 212 Box 35. Types of public consultation Informal consultation Notification of pending regulatory reviews (or decisions) Public notice-and-comment Circulation of draft regulations (and RIA) for comment Public hearings Focus groups Business test panels Business and/or community advisory bodies Source: World Bank Group. Governments conduct public outreach through websites, open meetings or by reaching out directly to known stakeholders. They conduct both fully public consultation through websites, gazettes, newspapers, and public hearings, and more “closed door” outreach to specific parties. Highly specialized or complex regulatory areas (e.g., sectorial regulations) need more selectivity in consul- tation than regulatory regimes of wider public interest and impact. In the same way, more contentious areas of regulation (e.g., taxation) may require formal proceedings and maximum transparency.154 Other methods to receive feedback from relevant stakeholders are polls, surveys, focus groups, citizens panels, and workshops.155 Regulators in high-income countries tend to interact with stakeholders through designated unified or ministerial websites. About 76 percent of OECD high-income countries and 65 percent of ECA economies carried out in 2018 consultations through unified websites where all ministries post their draft regulations. Conversely, LAC and Sub-Saharan African countries tend to rely on less effective methods of consultative engagements, such as public 154 OECD. 2020. OECD Best Practice Principles on Stakeholder Engagement in Regulatory Policy. Paris: OECD. 155 Bteddini, Lida. 2013. Op. cit. 213 meetings or direct interactions with only a selected number of stakeholders (Figure 12). Specifically for LAC, Colombia, Costa Rica, and Mexico conduct their public consultations on a unified website for all proposed regulations (Table 6).156 Figure 12. Types of consultative practices by region (2018) OECD high Unified website income Ministry website Public meetings Stakeholder engagement No consultation Europe Asia & Unified website Pacific Ministry website Public meetings Stakeholder engagement No consultation East Asia & Unified website Pacific Ministry website Public meetings Stakeholder engagement No consultation Latin America & Unified website Caribbe Ministry website Public meetings Stakeholder engagement No consultation South Asia Unified website Ministry website Public meetings Stakeholder engagement No consultation Sub-Saharan Unified website Africa Ministry website Public meetings Stakeholder engagement No consultation Middle East & Unified website Nort Africa Ministry website Public meetings Stakeholder engagement No consultation 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of countries Source: World Bank Group. 156 GIRG database, see: https://rulemaking.worldbank.org/en/rulemaking. 214 Table 6. How are the comments received in practice across the LAC region, 2018 Through targeted On the On a unified outreach to website of Through Through Through website for stakeholders, Through the relevant public social mail/ all proposed such as business email ministry or meetings media courier regulations      associations or regulator other groups Antigua and No No Yes Yes N.a. N.a. N.a. Barbuda Argentina No Yes Yes Yes No No Yes The Bahamas No No No Yes N.a. N.a. N.a. Barbados No No No No Yes No Yes Belize No No No No No No No Bolivia No No No Yes No No No Brazil No Yes No No No No No Colombia Yes Yes No No Yes Yes No Costa Rica Yes Yes No No Yes Yes Yes Dominica No No No No Yes No No Dominican No No Yes Yes Yes No No Republic Ecuador No No No Yes No No No El Salvador No No No Yes No No No Grenada No No Yes Yes Yes No No Guatemala No No Yes Yes No No No Guyana No No No Yes No No No Haiti No No No No No No No Honduras No No No No No No No Jamaica No No Yes Yes Yes Yes Yes Mexico Yes No No Yes Yes No No Nicaragua No No No No N.a. N.a. N.a. Panama No No No No No No No Paraguay No No No No Yes Yes No Peru No Yes Yes Yes No No No Puerto Rico No No Yes Yes No No No St. Kitts and No No No Yes No No No Nevis St. Vincent and No No No No Yes N.a. N.a. the Grenadines Suriname No No No Yes No No No Trinidad and No No No No No No No Tobago Uruguay No Yes No No No No No St. Lucia No No No No N.a. N.a. N.a. Source: GIRG database. 215 Procedures should be defined to notify stakeholders about proposed regula- tions. These procedures should define: i) the particular manner by which interest- ed parties will be informed of a proposal (e.g., publication on the internet, official journal, newspaper; direct contact; holding open conferences or public hearings; etc.); ii) the content of the public notification; iii) the permitted methods and form for public comments (e.g., written comments, hearings on the record); iv) managing the official record of comments received; and v) public access to comments. Stake- holder engagement encompasses a variety of activities and includes eight key components (Box 36).157 Box 36. Key components in stakeholder engagement Eight components of stakeholder engagement: 1. Stakeholder identification analysis 2. Information disclosure 3. Stakeholder consultation 4. Negotiation and partnerships 5. Grievance management 6. Stakeholder involvement in project monitoring 7. Reporting to stakeholders 8. Management functions. Additionally, there are five basic steps for iterative consultation, which can be repeated over the life of the process: i. Plan ahead ii. Consult basic principles of good practice iii. Incorporate feedback iv. Document the process and results of consultation v. Report back Source: World Bank Group. 157 International Finance Corporation. 2007. Stakeholder Engagement: A Good Practice Handbook for Companies, Doing Business in Emerging Markets. Washington, D.C.: IFC. 216 c. Institutional Framework Public consultations should be conducted primarily by regulatory depart- ments, agencies, or ministries. Box 37 lists different types of institutions that are commonly involved in consultation processes of investment-related regulations. Implementation of public consultations would typically require staff from the ministry or regulatory agency that is responsible for invest- ment matters to: Prepare and distribute or publish the proposed law or secondary regula- tion (including any explanatory materials). Collect, review, and assess the comments received. Handle communications with the public, including meetings or hearings. Make any required adjustments to the proposal. Prepare responses to consolidated inputs including how they will be addressed. Box 37. Institutions that should be involved in public consultation processes of investment-related regulations Executive Authority (including Ministry of Trade, Economy, Investment, Finance, and any other relevant ministries) Legislative Authority (e.g., Parliaments or Congresses) Ministry of Justice Sectoral Regulators Investment Promotion Agency Regulatory Oversight Bodies (Governance/Regulatory Reform/ Better Regulation agencies or equivalent) National and subnational governments (central or federal, state or provincial, and municipal) Source: World Bank. 217 Sometimes, public consultation processes are conducted by a regulatory oversight body (ROB)158 to ensure regulatory quality and to have impartial advice on the analysis of the proposed regulation.159 Across the LAC region, in 2019 only Argentina, Costa Rica, Dominican Republic, Ecuador, El Salvador, Mexico, and Peru had an oversight body in charge of stakeholder engagement and consultation (see below, Figure 20).160 For example, Mexico publishes reg- ulatory proposals on the website of its National Commission for Regulatory Improvement (CONAMER).161 The website also serves as the platform through which comments from the general public are collected.162 d. Human Resources and Training Ministries and regulatory agencies’ public officials should be trained on stakeholder engagement techniques. These techniques should focus on how to collect inputs from stakeholders and on the way to actively engage them. At the same time, administrations should ensure that public officials adhere to open government and stakeholder engagement principles.163 Training could also involve relevant stakeholders, where civil society and business associations may benefit from training in responding to public con- sultation.164 Capacity-building efforts may need to be undertaken with major stakeholders (e.g., business associations, consumer groups) to help them play an effective role in consultation processes. For example, providing information explaining the nature of the regulatory proposal, the reasoning underlying it 158 ROBs are central regulatory coordinating bodies that lead a government’s regulatory governance policy and have different competencies, such as: i) implementation of regulatory tools (e.g., RIA, administrative procedures registries, simplification initiatives, etc.); ii) elaboration of regulatory policy guidelines for ministries/regulatory agencies at the national and subnational levels; iii) lead the coordination on regulatory policies across national ministries/regulatory agencies, as well as with subnational governments. 159 IFC. 2010. Op. cit. 160 OECD. 2020. Government at a Glance. Op. cit. 161 Articles 69 H and J of Mexico’s Federal Law on Administrative Procedures requires that comments and feedback be collected on regulatory proposals. Due to a reform and enactment of a Regulatory Improvement General Law, the Federal Regulatory Improvement Commission (COFEMER) became the National Regulatory Improvement Commission (CONAMER). 162 GIRG database, see: https://rulemaking.worldbank.org/en/rulemaking. 163 OECD. 2020. Op. cit. 164 Adelle, Camilla; Donald Macrae; Andreja Marusic; and Faisal Naru. 2015. “New development: Regulatory impact assessment in developing countries—tales from the road to good governance.” Public Money & Management, Vol. 35/3. 218 and the alternative proposals that have been considered will provide a basis for stakeholders to respond. Developing a “consultation culture,” with stakeholders being confident and willing to engage with government on policy issues may also be a medium-term task.165 LAC countries, such as Barbados, Brazil, Costa Rica, Dominican Republic, and Mexico provide guidance to participants when soliciting comments to help them provide actionable comments (i.e., to encourage them to provide evidence and clear arguments). In Barbados the International Business Division might ask stakeholders for general comments but also highlight sections that contain special or debatable issues. The Costa Rican Digital System of Pre- liminary Control website includes a frequently asked questions tab and a user manual. Similarly, CONAMER’s website in Mexico includes a user manual for the system. In the Dominican Republic, discussions in working group tables include the help of hired experts that guide the conversations.166 e. Information and Communications Technology Electronic systems support communication with citizens and businesses to participate in public consultation exercises. Some governments receive feedback utilizing emails posted on government websites, email lists, and online forums.167 Nonetheless, countries are increasingly exploring ways to improve the accessibility and timeliness of consultations through the use of ICTs. Utilizing the Internet for consultations is rising in popularity and by 2015, as many as 75% of high-income economies had unified websites for this purpose (Box 38).168 Box 38. Examples of online public consultation platforms Brazil. Participa + Brasil (https://www.gov.br/participamais- brasil/) is a central portal for public participation through public consultations, public hearings, surveys and good practices dis- semination. This portal has a public consultation section that publishes a summary of the draft regulation and allows users to make comments to a specific paragraph or to send a general 165 IFC. 2010. Op. cit. 166 GIRG database, see: https://rulemaking.worldbank.org/en/rulemaking. 167 Bteddini, Lida. 2013. Op. cit. 168 GIRG database, see: https://rulemaking.worldbank.org/en/rulemaking. 219 comment to the overall text. Users are able view the comments submitted and their status – if it was accepted, rejected or if it is under analysis. In October 2023, there were 32 active public consultations in this platform. Chile. Participación ciudadana (https://open.economia.cl/par- ticipacion-ciudadana/ is a citizen participation website that enables users to make comments to support governmental policies and regulations. Law n. 20,500, from 2011, amended the law that provides the general bases for the State Administration and incorporated in the leg- islation a statement that the State recognizes people’s right to participate in policies, plans, programs, and activities. This law has been applied and reinforced through the Presidential Instructions for Citizen Participation in Public Management (IP N°7 /2014), establishing public consultations for the public to comment draft policies and regulations. The website provides access to each ministry’s public consultation section. Some ministries (e.g., Ministry of Agriculture) provide results of closed consultations with a summary of the consultation process and a table with comments received and the ministry response to each comment. Source: World Bank Group. Digital platforms should allow public officials to track time limits for receiving comments from the general public, answer comments, and publish the results.169 These platforms should also allow citizens and businesses to monitor the status of their inputs, receive answers to their comments, and access to the public consultation’s final results. By improving the likelihood that affected stakeholders know about new rules, the online consultation of new regulations has been shown to boost trust in government and to increase 169 Arlet, Jean; Varun Eknath; and Oleksandra Popova. 2022. “Effectively Engaging the Private Sector in the Business Reform Process”, December 9, 2022, Global Indicators Briefs No. 15. Washington, D.C.: World Bank. 220 compliance by firms and individuals.170 Additionally, online feedback platforms make the review process more inclusive and allow targeted users situated anywhere to provide inputs (Box 39).171 Box 39. Examples of online platforms for dialogue in LAC and other regions Argentina: National Communications Entity (https://www. enacom.gob.ar/presentacion-opiniones/) Colombia: Sistema Único de Consulta Pública (https://www. sucop.gov.co/) Costa Rica: Consulta Pública (https://www.presidencia. go.cr/consulta-publica/) Denmark: Business Forum for Better Regulation (https://dan- ishbusinessauthority.dk/business-forum-better-regulation) Estonia: Osale e-participation portal (https://participedia. net/case/1268) Finland: otakantaa “Have your say” consultation platform (https://www.otakantaa.fi/fi/) Ghana: Business Regulatory Reform Portal (https://www. bcp.gov.gh/new/) Greece: open gov (http://www.opengov.gr/en/) 170 Fadairo, S. A.; R. Williams; and E. Maggio. 2015. “Accountability, Transparency and Citizen Engagement in Government Financial Reporting.” Journal of Government Financial Management 64 (1): 40–45; Molster, C.; A. Potts; B. McNamara; L. Youngs; S. Maxwell; H. Dawkins; and P. O’Leary. 2013. “Informing Public Health Policy through Deliberative Public Engagement: Perceived Impact on Participants and Citizen-Government Relations.” Genetic Testing and Molecular Biomarkers 17 (9): 713–18; Torriti, Jacopo. 2007. “(Regulatory) Impact Assessments in the European Union: A Tool for Better Regulation, Less Regulation or Less Bad Regulation?” Journal of Risk Research 10 (2): 239–76; Vallbé, J.; and N. Casellas. 2014. “What’s the Cost of e-Access to Legal Information? A Composite Indicator.” Presented at the Doing Business Research Conference “Past, Present, and Future of Business Regulation.” McDonough School of Business, Georgetown University, Washington, DC, February 20–21. 171 Adelle, Camilla; Donald Macrae; Andreja Marusic; and Faisal Naru. 2015. “New development: Regulatory impact assessment in developing countries—tales from the road to good governance.” Public Money & Management, Vol. 35/3. 221 Macedonia: National Electronic Register of Regulations (https://ener.gov.mk/Default.aspx) Mexico: Regulatory Improvement System—SIMIR (https:// cofemersimir.gob.mx/portales) Mexico: Federal Telecommunications Institute—IFT (https:// www.ift.org.mx/industria/consultas-publicas) Singapore: Pro-Enterprise Panel—PEP (https://www.mti.gov. sg/PEP/About-the-PEP) Slovakia: Slo-Lex platform (https://www.slov-lex.sk/web/) Uruguay: Regulatory Unit for Energy and Water Services— URSEA http://www.ursea.gub.uy/web/consultaspublicas.nsf) Vietnam: VIB online (managed by the VCCI) (www.VIBonline. com.vn) Source: World Bank. 4. Case Studies Box 40. Colombia: Platform to enable public consultation on draft regulations from national and local governments Challenge Increase transparency and civil participation in regulatory business reform projects. Measure Colombia’s National Planning Department developed and deployed in 2020 an online platform, SUCOP, that presents public consultations on draft regulations of national and ter- ritorial executive branch agencies. It provides a list of public consultations and enables to search by year, sector, agency, type of document, etc. Each public consultation has a summary and supporting documents (e.g., rationale and full draft regu- lation). Comments and suggestions are submitted through the 222 platform and users must register and login to submit comments. When the consultation is finalized, SUCOP makes available a document with the compilation of comments received and another document with a report on the results of the consulta- tion. This report presents a summary of the consultation and its results – including number of participants, number of comments, number of suggestions that were accepted and rejected, etc. – and individual response to each comment received. Furthermore, the platform publishes regulatory agendas by agency. The regulatory agenda presents a table with informa- tion on things that the agency plans to regulate (or to change existing regulation). Results SUCOP increases transparency and citizen participation in regulatory elaboration, through a centralized platform with standardized processes and information. Between 2020 and October 2023, SUCOP published 306 public consultations from 33 agencies and received 2961 comments. SUCOP has an inter- active dashboard with consultations statistics: Consultas públicas desarrolladas en el SUCOP Source: https://www.sucop.gov.co/. 223 5. Further Resources Adelle, Camilla; Donald Macrae; Andreja Marusic; and Faisal Naru. 2015. “New development: Regulatory impact assessment in developing countries—tales from the road to good governance.” Public Money & Management, Vol. 35/3. Arndt, Christiane; Sarah Hermanutzi; Céline Kauffmann; and Rebecca Schultz. 2016. “Building Regulatory Policy Systems in OECD Countries”, OECD Regula- tory Policy Working Papers, No. 5. Paris: OECD. Arlet, Jean; Varun Eknath; and Oleksandra Popova. 2022. “Effectively Engaging the Private Sector in the Business Reform Process”, December 9, 2022, Global Indicators Briefs No. 15. Washington, D.C.: World Bank. Bteddini, Lida. 2013. “MENA and Public Consultations.” MENA Knowledge and Learning: Quick Notes Series, Number 101. Washington, D.C.: World Bank. Fadairo, S. A.; R. Williams; and E. Maggio. 2015. “Accountability, Transparency and Citizen Engagement in Government Financial Reporting.” Journal of Gov- ernment Financial Management 64 (1): 40–45. International Finance Corporation (IFC); Multilateral Investment Guarantee Agency (MIGA); World Bank. 2010. Making It Work: “RIA Light” for Developing Countries. Washington, D.C.: World Bank. International Finance Corporation. 2007. Stakeholder Engagement: A Good Practice Handbook for Companies, Doing Business in Emerging Markets. Wash- ington, D.C.: IFC. Johns, Melissa; Saltane, Valentina. 2016. Citizen engagement in rulemaking: Evidence on regulatory practices in 185 countries. Washington, D.C.: World Bank. Molster, C.; A. Potts; B. McNamara; L. Youngs; S. Maxwell; H. Dawkins; and P. O’Leary. 2013. “Informing Public Health Policy through Deliberative Public Engagement: Perceived Impact on Participants and Citizen-Government Relations.” Genetic Testing and Molecular Biomarkers 17 (9): 713–18. OECD. 2012. Evaluating Laws and Regulations: The Case of the Chilean Chamber of Deputies. Paris: OECD. OECD. 2017. Best Practice Principles on Stakeholder Engagement in Regulatory Policy. Paris: OECD. OECD. 2020. Government at a Glance: Latin America and the Caribbean 2020, OECD Publishing, Paris. 224 OECD. 2021. Regulatory Policy Outlook 2021. Paris: OECD. OECD. 2022. “Better Regulation Practices across the European Union.” Regulatory Policy Committee: GOV/RPC (2021)23/REV2. Paris: OECD. Rahman, Shaela. 2010. “Using Strategic Communications to Engage Stake- holders in Tax Reform”, December 2010, Investment Climate in Practice No. 15. Washington, D.C.: World Bank. Torriti, Jacopo. 2007. “(Regulatory) Impact Assessments in the European Union: A Tool for Better Regulation, Less Regulation or Less Bad Regulation?” Journal of Risk Research 10 (2): 239–76 Vallbé, J.; and N. Casellas. 2014. “What’s the Cost of e-Access to Legal Infor- mation? A Composite Indicator.” Presented at the Doing Business Research Conference “Past, Present, and Future of Business Regulation.” McDonough School of Business, Georgetown University, Washington, DC, February 20–21. World Bank. 2016. Global Indicators of Regulatory Governance: Trends in Par- ticipatory Rulemaking. A Case Study. Washington, D.C.: World Bank. World Bank. Forthcoming. WTO Investment Facilitation Agreement - Business Environment Reform and Investment Facilitation: An Overview of Reform Measures, Good Practice and Donor. Washington, D.C.: World Bank.  Measure 13: Regulatory Impact Assessments (RIAs) 1. Introduction The process of evaluating regulations should be based on the best available information and scientific expertise. The Regulatory Impact Assessment (RIA) is a tool that helps public institutions to ensure quality of government interven- tion and it is a key element of good governance.172 RIAs evaluate, in quantitative or qualitative terms, the potential economic, social, and environmental impacts of new regulations and help policymakers to identify the costs and benefits of different policy options. They help ensure that regulations are designed in a way that achieves intended goals while minimizing negative effects (see theory of change, Figure 27). 172 OECD. 2020. Regulatory Impact Assessment, OECD Best Practice Principles for Regulatory Policy. Paris: OECD. 225 In the early 1980s only a few OECD countries employed RIA processes; by 2000, 90 percent of OECD countries had established processes for RIAs. Today, nearly all OECD countries claim to have some sort of a RIA system. Around the 2010s, about 20 developing and transition economies, including Brazil, Costa Rica, and Mexico, had established RIA processes, and over the past ten years, a signifi- cant number of developing and emerging countries have been actively implement- ing RIA policies as well. By 2018, 43 percent of countries from the LAC region conducted RIAs (Figure 13, bottom).173 Figure 13. RIA implementation across the globe (2018) Conduct regulatory impact assessment Do not conduct regulatory impact assessment 100% 80% Share of economies (%) 60% 40% 20% 0% OECD High Europe & Latin America East Asia & South Sub-Saharan Middle East income Central Asia & Caribbean Pacific Asia Africa & North Africa Source: World Bank Group. 173 World Bank. 2018. Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments. Washington, D.C.: World Bank. 226 Governments around the world face challenges when setting up RIA systems, including the adoption of RIA best practices, even in OECD countries. Based on data from the WB’s Global Indicators of Regulatory Governance (GIRG), 92 out of 185 countries conducted an impact assessment of proposed regulation in 2018. 174 Many countries still do not have RIA systems in place, especially in Sub-Saharan Africa and the Middle East and North Africa (MENA), as well as in the Caribbean countries in the LAC region (Figure 13, top).175 Between 2000 and 2016, 60 out of 136 developing countries embarked on RIA reforms.176 RIAs are an effective way to promote quality regulations, for example measures that affect how foreign investors carry out economic activities in a country. RIAs have been recognized in the WTO IFD agreement (Box 41). Box 41. RIAs in the IFD Agreement The IFD Agreement includes references to impact assess- ments (Non-binding Art. 23.1 and Binding Art. 23.2) as follows: When preparing major regulatory measures within the scope of this Agreement, each Member/Party is encouraged to carry out, in accordance with its respective rules and proce- dures, an impact assessment of such measures. When conducting such impact assessments, the regulatory authority of the Member/Party should offer reasonable op- portunities for any interested person, on a non-discrimina- tory basis, to provide comments and take into consideration the potential impact of the proposed regulation on investors, including micro, small and medium-sized enterprises. Source: World Bank Group. 174 The GIRG is a World Bank project that was discontinued. However, its findings are still relevant in a large number of countries. See https://rulemaking.worldbank.org/en/rulemaking. 175 World Bank. 2018. Op. cit. 176 Kamkhaji, Jonathan C.; Peter Ladegaard; and Petter Lundkvist. 2019. “Risks when Reforming: Challenges and Sustainability of RIA Systems: Results of the First Systematic Study on RIA Reforms in Developing Countries.” European Journal of Risk Regulation 10(1): 187-200. 227 Public consultation with affected stakeholders is not only an essential element of a functional RIA system but it provides some benefits (numeral 9 of Figure 15): i) it is a cost-effective mechanism to gather information to elaborate a high quality RIA; ii) it helps to identify regulatory options that will be rejected by major stakeholders; and iii) it increases transparency and helps to build trust and under- standing of the proposed regulation.177 2. Diagnostics Some basic steps must be followed when implementing impact assessments on draft or proposed regulations. First, evaluate existing laws to see if basic princi- ples are in place to: i) implement RIAs, or ii) conduct impact assessments infor- mally on a case-by-case basis. Secondly, understand the scope of ex ante impact assessments (e.g., whether reviews apply to all regulations, to primary laws, or only to main primary laws). These diagnostics should include public consultation processes as well as the use of digital platforms. Governments could also consider the use of in-country indicators and inter- national benchmarks to assess the implementation of ex ante impact assess- ments and related public consultation exercises. Possible indicators include: Metrics and data on draft or proposed regulations, for instance, number of proposed laws and secondary regulations that were drafted with an RIA, how many of these included a public consultation process, and the outcomes of the consultation process such as authority answers to stakeholders’ comments and whether their recommendations were considered. OECD’s Indicators of Regulatory Policy and Governance Surveys (iREG), which present up-to-date evidence of OECD member countries’ regulatory policy and governance practices.178 The iREG indicators measure three key principles: i) Stakeholder engagement; ii) RIA; and iii) Ex post evaluation. 177 International Finance Corporation (IFC); Multilateral Investment Guarantee Agency (MIGA); World Bank. 2010. Making It Work: ‘RIA Light’ for Developing Countries. Washington, D.C.: World Bank. 178 OECD member countries’ regulatory policy and governance practices advocated in the 2012 Recommendation of the Council on Regulatory Policy and Governance, see: https://www.oecd-ilibrary.org/ governance/recomendacion-del-consejo-sobre-politica-y-gobernanza-regulatoria_9789264209046-es.. 228 3. Implementation Principles The RIA usually starts by asking what problem the policy intends to solve and what its main objectives is. It also asks regulators what the available policy options are and why the proposed measure is the preferred one. The RIA also includes a cost-benefit analysis section known as impact analysis, and it asks whether public consultations with relevant stakeholders from the public and private sectors were carried out while designing the proposed regulatory measure, and whether the implementation agency has the necessary human, material, and financial resources to enforce the proposed policy. Figure 14 describes the main components of the RIA.179 Figure 14. RIA key components RIA document contains Conclusion Policy Policy Policy Impact and way Enforcement problem objetive options analysis Consultation and review forward Source: World Bank Group. To ensure regulatory coherence, impact assessments need to be integrated in the policy-making process, ensuring that the analysis is undertaken at the inception of policy proposals. At that time there is still an opportunity and interest to identify the best approach, and alternatives to the proposed reg- ulation can be considered. The OECD establishes ten elements of RIA’s best practice (Figure 15).180 Given the substantial resources, capacities, technical skills, and transparency in decision-making processes required to implement a successful RIA, it is not optimal to design and introduce a complete RIA in developing countries. Even if political support for regulatory reform exists, there is little evidence of govern- ments’ capacities to integrate the use of the RIA in a sustainable manner. These are also concerns for middle income countries, such as Mexico, where developing 179 IFC. 2010. Op. cit. 180 OECD. 1997. Regulatory Impact Analysis: Best Practice in OECD Countries. Paris: OECD. 229 skills among regulators in charge of RIAs has been a core task, but results have been uneven.181 Still, there are mechanisms and alternatives that could be used by countries without well-established RIA systems, especially among developing countries. Figure 15. RIA’s best practice elements 2. Allocate 1. Maximize political responsibilities 3. Train the 4. Use a consistent commitment to RIA for RIA program regulators but flexible elements carefully analytical method 7. Integrate RIA 5. Develop and whith the policy- 8. Communicate the implement data 6. Target RIA efforts marking process, result collection strategies beginning as early as possible 9. Involve the public 10. Apply RIA to extensively existing as well as new regulation Source: OECD. a. Legal and Policy Framework It is important that regulators formalize the requirement to use a RIA system. The RIA policy should be established in an authoritative document such as a law (e.g., Regulatory Reform or Better Regulation Law, Administra- tive Procedures Law, etc.), presidential decree, prime ministerial instruction, executive order, cabinet directive, policy handbook, government resolution, or internal ministerial memo, among others. However, there are some cases where RIA systems are implemented without an explicit mandate in a legislation. While 75 out of 108 lower-middle- and upper-middle-income countries surveyed in 2018 implemented a RIA based on a legal requirement, 29 out of 185 total countries surveyed conducted RIA without having a legal obligation to do so (Figure 16).182 This is possible in some of the most well-established RIA systems such as the United Kingdom, 181 IFC. 2010. Op. cit. 182 World Bank. 2018. Op. cit. 230 Australia, and Canada, where high institutional capacity and well-functioning regulatory governance systems are present. Without these conditions, im- plementing an RIA without a legal mandate would be challenging. Having a mandate will not only provide legal certainty but will ensure enough resources for its operation. Based on the OECD’s Indicators of Regulatory Policy and Governance (iREG),183 in 2015 in LAC only Brazil, Costa Rica, and Mexico had an obligation to conduct a RIA. By 2019 four more countries from the region had established obligations to conduct RIAs for at least some subordinate regulations (Figure 17).184 Figure 16. Percentage of countries with RIA required by law (2018, by level of income) High income Upper middle income Lower middle income Condict impact assessment Impact assessment guidelines Lower income Impact assessment required by law 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Share of economies Source: World Bank Group. 183 The iREG covers three main dimensions: “ex ante Regulatory Impact Assessment”, “Stakeholder engagement” in the design of new regulations, and regulatory “Ex post evaluation and administrative simplification”. These three dimensions are measured across four categories: Methodology, Systematic adoption, Transparency, and Oversight and Quality Control. “Methodology” gathers information on the methods used in each regulatory area, e.g. the type of impacts assessed or how frequently different forms of consultation are used; “Systematic adoption” records formal requirements and how often these requirements are conducted in practice; “Oversight and quality control” records the role of oversight bodies and publicly available evaluations; “Transparency” records information that relates to the principles of open government, e.g. whether government decisions are made publicly available. 184 OECD. 2020. Government at a Glance: Latin America and the Caribbean 2020, OECD Publishing, Paris. 231 Figure 17. Requirements to conduct RIA for subordinate regulations, 2015 and 2019 All subordinate regulations Major subordinate regulatons Some subordinate regulations Never 100 MEX 90 BRA 80 CHL 70 MEX COL 60 BRA CRI 50 CHL ECU 40 COL SVL 30 CRI ARG 20 ECU DOM 10 PER PER 0 2015 2019 Requeriment to conduct RIA Source: OECD (iReg for Latin America 2015 and 2019). Especially at initial stages of RIA adoption, endorsement by the highest political level in a country is important to establish the policy authority and encourage officials to implement it effectively.185 A simplified RIA or “RIA Light” system can be a good first step, espe- cially for developing countries. This approach aims to improve regulatory quality gradually. The World Bank has identified five minimum elements for a functional RIA Light system (Figure 18).186 A RIA Light applies only to major regulatory proposals.187 RIA Light implementation also comes with challenges and obstacles in emerging and developing countries, such as lack of compli- ance, institutional resistance, lack of credibility, and lack of influence of RIA outcomes on regulatory decisions. Additionally, consultation mechanisms and transparency are important in newly implemented RIA Light systems because data from stakeholders helps to address information gaps, particu- larly in low-capacity contexts.188 185 IFC. 2010. Op. cit. 186 Ideally, these five elements should be applied sequentially. 187 Among the reasons that justify why RIA Light should be applied to major draft regulations are: i) a more consistent application of RIA to major issues will help to establish it as an integral part of the policy process; ii) even relatively limited scrutiny can be effective in screening out some of the least well considered policy proposals; and iii) the policy will be more credible if applied to major issues in all portfolio areas. 188 IFC. 2010. Op. cit. 232 Figure 18. RIA Light system minimum requirements RIA light elenments 2. A unit 1. Political or group of commitment 3. Clear regulatory criterio: what 4. 5. Bulding to establish reformers and Transparency RIA capacities and operate on to subject to quality control RIA and what in the process withn effective and by on expert and consultion government self sustaning questions to supervisory address RIA process body Source: World Bank Group. b. Procedures Ex ante impact assessment policies should require the identification of a specific policy need, as well as the objective of the regulation that justifies the use of regulation, such as the correction of a market failure, or the need to protect citizen’s rights. The OECD suggests a list of basic steps of the RIA process (Box 42).189 An important step in the RIA process is consultation with relevant stakehold- ers. There are different types of consultation: i) Informal consultation; ii) Notifica- tion of pending regulatory reviews (or decisions); iii) Public notices; iv) Circulation of draft regulations and RIA for comment; v) Public hearings; vi) Focus groups; vii) Business test panels; viii) Business and/or community advisory bodies.190 In best-practice RIA systems, engagement of stakeholders should commence early in the decision-making process and before a decision to regulate is made. For example, where appropriate, consultation can be assisted by public release of a draft RIA document as part of the consultation process. This can be followed by release of a more detailed final RIA informing stakeholders of the government’s final decision, reasons for the decision and how the views of stakeholders were considered during the policy development process.191 189 OECD. 2020. Regulatory Impact Assessment. Op. cit. 190 IFC. 2010. Op. cit. 191 Ibidem. 233 Box 42. RIA process basic steps 1. Consultations and stakeholder engagement: Use inputs from all potentially affected stakeholders as well as other relevant experts in all stages of the RIA process. 2. Problem definition: Describe assessment of the nature and extent of the problem to be addressed by the regulatory proposal, preferably in quantitative terms.192 3. Objective: Clearly state the policy objective(s) and goal(s) of the regulatory proposal. 4. Description of the regulatory proposal: Describe the existing regulatory framework, the proposed draft, identify adminis- trative bodies and institutions responsible for drafting, imple- menting, and enforcing the proposal, outline the enforcement regime and proposed strategy for ensuring compliance. 5. Identification of alternatives: List the practical alterna- tives, including any non-regulatory approaches considered as potential solution of the identified problem. 6. Analysis of benefits and costs: Clearly outline the benefits and costs expected from alternatives identified in previous steps. 7. Identification of the preferred solution: Outline how and in what ways the identified regulatory proposal is superior to the alternatives that were considered. 8. Setting out the monitoring and evaluation framework: Describe how performance of the regulation will be evaluated and anticipate the necessary data requirements. Source: OECD. Impact assessments vary in scope. The most common legal requirement for an RIA establishes the need to identify the costs and net benefits of the regu- lation. The RIA process also includes comparing the proposed regulation to any 192 Qualitative terms might also be important (e.g., public health issues). 234 potential alternatives to identify the trade-offs of the different approaches and choose the best option. In 95 percent of countries with an RIA in 2018, analysis of the impact of the proposed regulation on the public sector (e.g., ad- ministrative costs) was included in the RIA; however, less than 60 percent of countries included assessments of the impact on SMEs (Figure 19). Figure 19. Type of impacts measured across the 92 countries with a RIA policy (2018) Public sector 95% Private sector 84% Beneficit from the regulation 89% International obligations 60% Enviroment 75% Competitiveness and maket openness 75% SMEs 59% Implementation 57% Source: World Bank Group. Note: Calculated in percent of countries among those that conduct RIA. Given limited resources, especially in emerging and developing countries, governments may decide to implement an RIA all at once or gradually (i.e., RIA Light). During the adoption of a new RIA system, implementation should include measurable goals. Once the primary preconditions are met or at least understood, the OECD suggests different possible paths to the gradual intro- duction of an RIA starting with:193 A pilot phase, then the institutionalization of the RIA for all major regulations A simplified methodology, and then expand A few institutions, and then expand the RIA to others A focus on major regulatory proposals, and then lower the threshold to cover less significant regulations 193 OECD. 2020. Regulatory Impact Assessment. Op. cit. 235 A binding regulation and then moving to soft law Single- or multi-criteria qualitative analysis, and then gradually moving to quantitative analysis (e.g., cost-benefit analysis or other) Concentrated RIA expertise, moving to more distributed responsibilities. Built-in monitoring and evaluation mechanisms should be part of a RIA system. Assessing the benefits an RIA policy in place helps maintain sustain- able commitment to the RIA.194 For example, some regulatory oversight bodies collect data on the number of initial regulatory proposals that have been improved thanks to the RIA.195 Box 43 lists some aspects to consider when strengthening capacities on M&E (see section H).196 Box 43. M&E programs in the context of RIA Monitoring, evaluation, and reporting processes, including evalu- ation of the RIA process and RIA documents, are an important part of capacity-building. Internal monitoring and reporting systems can include: The operation of the broader regulatory system, such as the number and type of existing regulation and new regulations made, regulatory “hot spots” and issues of concern to stakehold- ers and broad regulatory trends (such as a country performance according to international measures of the quality of regula- tions and regulatory systems, e.g., Transparency International). The number of RIAs prepared and considered by decision makers. Number of these RIA that met minimum requirements. How RIA documents are used, types of issues undergoing RIA analysis. 194 Governments should produce reports periodically providing numbers on RIAs produced over a certain period, summarizing their quality and also their impact on the quality of decisions being made, as well as the effectiveness and efficiency of the overall RIA framework. 195 OECD. 2020. Regulatory Impact Assessment. Op. cit. 196 IFC. 2010. Op. cit. 236 Impacts of RIA process on decision-making processes and outcomes, such as cases where the recommended option changes during the policy development process, citations of RIA documents by ministers, senior officials, in Parliament and media, etc. Views of key stakeholders about the RIA process. RIA unit performance, including responses from officials about the quality of RIA training, quality, and timeliness of advice about RIA to agencies, departments, and ministries, etc. Source: World Bank Group. c. Institutional Framework RIAs should be designed by regulatory departments, agencies, or ministries. Box 44 lists different types of institutions that are commonly involved in ex ante impact assessment and its consultation processes of investment-related regulations. Regulatory agencies usually have a risk adverse culture, which impedes new ideas or approaches to regulations. Similarly, regulators can be captured by the sectors they regulate. For these reasons, the RIA process is usually led by a ROB to ensure quality of proposed regulations and have impartial advice on the analysis included in the RIAs.197 Examples of ROBs in LAC are the Directorate of Regulatory Improvement and Technical Regulation in Costa Rica, CONAMER in Mexico, and the Multi-Sector Regulatory Quality Commission in Peru.198 As measured by the OECD, by 2018 there were seven LAC countries where specialized bodies are in charge of the RIA policy (Figure 20).199 Additionally, ROBs are in charge of defining the RIA content, providing training to regulators, establishing the way RIAs should be submitted and revision criteria, based on the applicable legal framework. 197 IFC. 2010. Op. cit. 198 GIRG database. Costa Rica (The Directorate of Regulatory Improvement and Technical Regulation has the authority by Law 8220 in the field of regulatory improvement and simplification of procedures including the review a monitoring of impact assessments); Mexico (National Regulatory Improvement Commission— CONAMER); and Peru (The Multi-Sector Regulatory Quality Commission consisting of three Ministries: Ministry of Presidency, Deputy Ministry of Economy and Deputy Ministry of Justice). 199 OECD. 2020. Government at a Glance: Latin America and the Caribbean 2020, OECD Publishing, Paris. 237 Box 44. Examples of public institutions that should be involved in the ex-ante impact assessment process of investment-related regulations Executive Authority (including Ministry of Trade, Investment, Finance and any other relevant ministries) Legislative authority (e.g., Parliaments or Congresses) Sectoral Regulators Regulatory Oversight Bodies (Governance/Regulatory Reform/ Better Regulation agencies or equivalent) National and subnational governments (central or federal, state, or provincial, and municipal) The ROB could be located in different areas of the administration. Ideally, a ROB should be at the center of the government (e.g., in the President or Prime Minister’s Office, or in the Finance Ministry). This helps to prevent conflict of interest since ROBs do not regulate specific economic activi- ties or sectors and ensure regulatory quality from a “whole of government” approach. As an alternative, some countries have located the RIA oversight body within the industry department with the aim to focus on business environment regulatory reform policies. Nevertheless, this option reduces the ROB authority. Similarly, some countries located the ROB in the law department. The downside of this model is that legal experts usually do not have strong RIA-related skills, especially related to the cost-benefit analysis.200 200 IFC. 2010. Op. cit. 238 Figure 20. Bodies in the LAC region promoting and monitoring regulatory policy and their functions, 2019 10 ERG 9 BRA 8 CHL ARG ARG ARG 7 C0L C0L C0L BRA ARG 6 CRI CRI CRI CHL C0L ARG 5 DOM DOM DOM C0L CHL CRI 4 ECU ECU ECU CRI DOM ECU 3 MEX MEX MEX MEX ECU MEX 2 PER PER PER PER MEX PER 1 SVL SVL SVL SVL SVL SVL 0 Body responsible for Administrative Stakeholder Legal quality Regulatory impact Ex post evaluation promoting regulatory simplification or burden engagement and assessment policy an reporting reduction programmes consultation on regulatory quality exists Source: OECD (iReg for Latin America 2019). When a ROB has not been created, it is important to have a central unit or authority with overseeing and reporting responsibilities for RIA policy, par- ticularly when a new RIA system is being implemented and capacities are relatively low. The unit should have adequate competencies and resources. Also, it is crucial that this central office works cooperatively with regulators. An additional role of an ROB or central unit is to propose data collection strategies, given that during the RIA adoption phase, public officials from the regulatory agencies may not have experience in obtaining and interpretating RIA related data.201 Some countries use an independent or external body to provide oversight. An external body provides specialist expertise on the RIA quality and an inde- pendent opinion. The United Kingdom used this model for its Better Regula- tion Commission, composed of external stakeholders from different parts of society (e.g., businesses, charities, and non-profit organizations).202 Similarly, the Netherlands has used an external watchdog, the Dutch Advisory Board 201 Ibidem. 202 The Better Regulation Commission has been replaced by the Risk and Regulation Advisory Council (RRAC), which is also an independent advisory body responsible for developing some work on public risk and how best to respond to it. 239 on Administrative Burdens (Actal), which provides advice on administrative burdens reduction imposed by the government. In some cases, these inde- pendent or external bodies report to Parliament. For example, in Australia, in addition to the oversight body within the administration, there are parliamen- tary committees that oversee RIA.203 d. Human Resources and Training Design and analysis of RIAs requires highly specialized skills, therefore civil servants from ministries and regulatory agencies must have adequate training. This training should cover the following aspects: i) techniques for problem definition; ii) setting policy objectives; iii) identifying alternative solutions; iv) impact assessment; v) stakeholder engagement; and vi) imple- mentation of the RIA.204 Training could also involve relevant stakeholders. For example, civil society and business associations may benefit from training to respond to public con- sultation. Also, training for parliamentarians to analyze the government’s RIA and to challenge them as part of a democratic process. Additionally, to make RIA training more targeted and relevant, pilot projects could be used, helping achieve buy-in of regulators.205 The ROB or the central unit or authority in charge of RIA oversight is the institution in the best position to provide training. The role of a ROB or RIA unit is particularly important in a context of low policy, institutional, and resource capacities. These institutions should focus on capacity-building within regulatory agencies, providing a broad understanding of the RIA, specific procedural requirements, and technical skills to prepare the RIA (Box 45). Training should also be maintained over the long-term given regulators’ staff rotation.206 203 IFC. 2010. Op. cit. 204 OECD. 2020. Regulatory Impact Assessment. Op. cit. 205 Adelle, Camilla; Donald Macrae; Andreja Marusic; and Faisal Naru. 2015. “New development: Regulatory impact assessment in developing countries—tales from the road to good governance.” Public Money & Management, Vol. 35/3. 206 IFC. 2010. Op. cit. 240 Box 45. Capacity-building in a RIA system The success of an RIA system depends substantially on regula- tory officials having effective incentives to prepare high quality RIAs in a timely manner. Officials also require capabilities to play their roles effectively. The main capacities are: 1. An understanding of the RIA system that has been adopted by the government and their responsibilities within it. A grasp of the logic of RIA as a tool to improve policy. This 2. involves understanding the limits to government regulatory action and the need to make rational choices between alter- natives based on comparative analysis. Knowledge of the specific methodological tools used in RIA, 3. such as cost-benefit analysis. Appreciation of the importance of links between govern- 4. ment and stakeholders to allow for the necessary consulta- tion and information gathering to underpin the system. Source: World Bank Group. In addition to the provision of training, governments (mainly ROBs or central units) should publish detailed guidance material on RIA processes and methodological issues. Given their technical nature, analytical tech- niques need special attention (Box 46).207 For example, in 2018, 128 out of 185 countries surveyed had specific RIA guidelines. All OECD high-income countries (except Portugal) had in 2018 RIA guidelines, compared to only four in LAC: Colombia, Costa Rica, Mexico, and Peru.208 207 OECD. 2020. Regulatory Impact Assessment. Op. cit. 208 World Bank. 2018. Op. cit. 241 Box 46. Methodologies to assess impacts209 Either a partial equilibrium analysis or a general equilibrium analysis could be performed. When performing partial equilibri- um analysis, typically the methodological alternatives available to administrations are the following: Least cost analysis: Looks only at costs, in order to select the alternative option that entails the lowest cost.210 Cost-effectiveness analysis (CEA): Entails that adminis- trations quantify (not monetize) the benefits that would be generated by one USD of costs imposed on society.211 Cost-benefit analysis (CBA): Entails the monetization of all (or the most important) costs and benefits related to all viable alternatives at hand.212 Multi-criteria analysis: Allows a comparison of alternative policy options along a set of predetermined criteria.213 209 OECD. 2015. “Regulatory Impact Assessment and regulatory policy”, in Regulatory Policy in Perspective: A Reader’s Companion to the OECD Regulatory Policy Outlook 2015. Paris: OECD. 210 This method is typically chosen whenever benefits are fixed, and the administrations only needs to choose how to achieve them. 211 The typical method used to compare options is thus the so-called benefit-cost ratio, which means dividing the benefits by costs. This method is normally used to all expenditure programs, as it leads to identifying the “value for money” of various expenditure programs. A typical question that can be answered through cost-effectiveness analysis is “how many jobs will be created for every Dollar invested in this option?”; or “how many lives are saved by every Euro spent on this option?”. 212 In its most recurrent form, it disregards distributional impacts and only focuses on the selection of the regulatory alternative that exhibits the highest societal net benefit. Accordingly, the most common methodology in cost-benefit analysis is the “net benefits” calculation, which differs from the “benefit/cost ratio” method that is typically used in cost-effectiveness analysis (being benefit minus costs, rather than benefits divided by costs). 213 For example, criteria chosen could include the impact on SMEs, the degree of protection of fundamental rights, consumer protection, etc. Multi-Criteria Analysis is particularly useful when Impact Assessment has to be reconciled with specific policy objectives, and as such is used as an instrument of policy coherence. This method is more likely to capture distributional impacts, although this crucially depends on the criteria chosen for evaluating options. 242 On the other hand, general equilibrium analysis requires modelling abilities, and as such can and should be chosen only when several specific conditions are met: 214 Indirect impacts should appear significant and spread across various sectors of the economy. Sufficient skills are present within the administration, or there is the possibility to commission a general equilibrium modelling analysis from a high quality, reliable group of re- searchers inside or outside the administration. Source: OECD. e. Information and Communications Technology Electronic systems have been developed by some countries to assist in RIA development. For example, Australia’s Office of Best Practice Regulation developed the “Regulatory Burden Measure” (RBM) tool, which helps users to calculate regulatory proposals’ compliance costs to businesses, community or- ganizations, and individuals (Figure 21).215 Some of these calculators are also accessible to stakeholders, so they can estimate the costs of current, drafted, or potential regulations or changes to regulations.216 Figure 21. Australian Commonwealth Regulatory Burden Measure Source: Office of Best Practice Regulation. 214 General equilibrium analysis is preferred by many scholars for its ability to capture very dispersed indirect impacts of regulation. For the time being, however, it is likely that the overwhelming majority of administrations will continue to use partial equilibrium analysis in RIA. However, where a regulation will materially affect one or more closely related markets or will have diverse and far-reaching effects across the economy, a general equilibrium framework is required to assess these impacts. 215 See https://rbm.obpr.gov.au/home.aspx. 216 OECD. 2020. Regulatory Impact Assessment. Op. cit. 243 In the LAC region, only Costa Rica and Mexico publish RIAs through a unified website for all proposed regulations, as per the 2018 GIRG. Bolivia and Colombia do it through a website of the relevant ministry or regulator, and Brazil, Nicaragua, and Panama through targeted outreach to business associations, other stakeholder groups or both.217 CONAMER from Mexico has implemented a RIA system that allows the general public to consult draft regulations, its RIAs, and their status with various search criteria, such as date of draft regulation publication, by type of RIA or by sector or proponent agency (Figure 22, bottom).218Additionally, this system serves as an inter-governmental platform that interconnects sectoral agencies with CONAMER for review of RIAs (Figure 22, top). Figure 22. Mexican RIA electronic system (SIMIR) 217 GIRG database, see: https://rulemaking.worldbank.org/en/rulemaking. 218 See https://cofemersimir.gob.mx/portales. 244 Source: CONAMER. In the context of an RIA, data production, collection, processing, accessing, and sharing can be supported by ad hoc data governance strategies. Addi- tionally, new technologies such as big data or Artificial Intelligence can help to better monitor and evaluate the impact of a regulation. This implies the involvement of relevant data holders.219 For example, OECD countries are bene- fiting from the deployment of shared data governance frameworks to, for example, define a public policy problem, analyze available alternative solutions, or estimate compliance and enforcement costs while elaborating an RIA.220 219 OECD. 2019. The Path to Becoming a Data-Driven Public Sector, OECD Digital Government Studies. Paris: OECD. 220 Increasingly involving statistical institutes and other relevant data holders within and outside the public sector is crucial to ensure streamlined data management and real-time data processing practices that can help in ensuring the access to trustworthy data sources informing RIA. 245 4. Case Studies Box 47. Mexico: RIA evolution between 2010 and 2019 Challenge In 2011, CONAMER estimated that administrative burdens in Mexico represented 4.8 percent of the GDP, which was similar to other countries such as Spain, Italy, and Portugal.221 By 2018, the Mexican regulatory system was complex, with an estimate of 150,000 regulations and 130,000 administrative procedures across the three levels of government (federal, state, and municipal). Measure In 2000, the 1994’s Administrative Procedure Federal Law (LFPA) was amended, creating the Federal Regulatory Improve- ment Commission (COFEMER). Among other aspects, the LFPA established the obligation for all federal ministries and agencies to elaborate RIAs for every draft regulation that generates costs to citizens or business, including the report of the administrative procedures that such regulations create, modify, or eliminate, which feeds to the Federal Registry for Procedures and Services. During the 2000’s, COFEMER worked on setting-up the baseline for regulatory governance tools, including a RIA system, as well as coordination mechanisms with the federal administration. By 2010, RIA guidelines included ex ante impact analysis of draft regulations, followed in 2012 by incorporating the RIA questionnaire competition and risks components. During the same year the ex post RIA was introduced. Later in 2016 the RIA incorporated foreign trade and consumer protection com- ponents, and in 2019, the human rights component. 221 OECD. 2014. Regulatory Policy in Mexico: Towards a Whole-of-Government Perspective to Regulatory Improvement. Paris: OECD. 246 RIA Guidelines 2010 2010 (impact analysis) Introduction of Ex-post RIA 2012 New RIA (Competition & risks components) 2016 New RIA (foreign trade & consumer protection components) Consttutional reform (reg. 2017 gov.became national matter) Regulatory Improvement COFEMER became CONAMER 2018 and the National System for General Law (LGMR) Regulatory Improvement New RIA (Human 2019 rights component) Additionally, in 2017 a constitutional reform was passed by the Congress, which mandated the enactment of the Regulatory Improvement General Law (LGMR), which goes beyond LFPA’s federal scope and now the 31 states and Mexico City, as well as the 2,469 municipalities are obliged to implement regulato- ry governance policies, including the mandate for states and Mexico City to issue regulatory improvement state laws and the implementation of state RIAs. Results The constitutional reform and the new LGMR set up a National System for Regulatory Improvement, which includes a National Council for Regulatory Improvement and a Regulatory Improve- ment National Observatory that comprises the three levels of government and involves autonomous agencies and regulators, the private sector, academia, and representatives from civil society organizations. From 2013 and 2018, important results were achieved: Reviewed regulations: 7,493 Improved regulations: 571 Yearly average of monitored administrative procedures: 4,560 Simplified administrative procedures: 1,495 Under the new regulatory governance framework, between 2018- 2019, CONAMER issued 1,690 simplification recommendations 247 to 929 administrative procedures. In June 2019 the regulatory burden represented 4.4 percent of GDP. By November 2020, after implementing the simplification recommendations, the regulatory burden was estimated to be 2.2 percent of GDP, which represented savings of MXN $20,178 million (approx. USD $1 billion). Source: CONAMER.222 5. Further Resources Adelle, Camilla; Donald Macrae; Andreja Marusic; and Faisal Naru. 2015. “New development: Regulatory impact assessment in developing countries—tales from the road to good governance.” Public Money & Management, Vol. 35/3. Asian Development Bank. 2010. “Kingdom of Cambodia: CREST Project – Reg- ulatory Impact Assessment Subproject,” Project No. 38421. Manila: ADB. Asian Development Bank. 2014. “Kingdom of Cambodia: National Rollout of the Regulatory Impact Assessment in Government,” Project No. 48298-001. Manila: ADB. International Finance Corporation (IFC); Multilateral Investment Guarantee Agency (MIGA); World Bank. 2010. Making It Work: “RIA Light” for Developing Countries. Washington, D.C.: World Bank. Kamkhaji, Jonathan C.; Peter Ladegaard; and Petter Lundkvist. 2019. “Risks when Reforming: Challenges and Sustainability of RIA Systems: Results of the First Systematic Study on RIA Reforms in Developing Countries.” European Journal of Risk Regulation 10(1): 187-200. OECD. 1997. Regulatory Impact Analysis: Best Practice in OECD Countries. Paris: OECD. OECD. 2014. Regulatory Policy in Mexico: Towards a Whole-of-Government Perspective to Regulatory Improvement. Paris: OECD. OECD. 2015. “Regulatory Impact Assessment and regulatory policy”, in Reg- ulatory Policy in Perspective: A Reader’s Companion to the OECD Regulatory Policy Outlook 2015. Paris: OECD. 222 See https://www.gob.mx/conamer. 248 OECD. 2019. The Path to Becoming a Data-Driven Public Sector, OECD Digital Government Studies. Paris: OECD. OECD. 2020. Regulatory Impact Assessment, OECD Best Practice Principles for Regulatory Policy. Paris: OECD. OECD. 2020. Government at a Glance: Latin America and the Caribbean 2020, OECD Publishing, Paris. World Bank. 2018. Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments. Washington, D.C.: World Bank. World Bank. 2019. Governing Infrastructure Regulators in Fragile Environ- ments: Principles and Implementation Manual. Washington, D.C.: World Bank. World Bank. Forthcoming. WTO Investment Facilitation Agreement - Business Environment Reform and Investment Facilitation: An Overview of Reform Measures, Good Practice and Donor. Washington, D.C.: World Bank. Measure 14: Periodic Review of Investment Facilitation Measures 1. Introduction Periodic ex post review refers to an analysis that assesses whether a regulation has achieved its original objectives and whether it can be improved or eliminated. Evaluation of existing regulations, the final stage in the regulatory process, is an important element of the regulatory policy cycle since it allows control over the quality of regulations (Figure 23).223 If conducted well, periodic reviews provide valuable information on the effectiveness and appropriateness of policies and reg- ulations (see Theory of change, Figure 27). For bilateral or multilateral investment agreements, regular review allows governments to continually simplify the admin- istrative burden on foreign investors.224 223 OECD. 2012. Evaluating Laws and Regulations: The Case of the Chilean Chamber of Deputies. Paris: OECD. 224 Mendelkern. Group 2001. Mendelkern Report on Better Regulation. Final Report, 13 November 2001. 249 Figure 23. Regulatory Policy Cycle Ex post evaluation Ex ante evaluation for preparation and desingn Implementing and monitoring Adoption Source: OECD. When laws and regulations are enacted, ex ante impact assessments help reg- ulators foresee potential social and economic effects, but it is not possible to identify all the impacts to all affected parties. Moreover, circumstances change over time and sometimes a regulation becomes outdated. In some cases, it no longer applies. In other cases, it needs to be tightened because the problem that the regulation originally intended to solve has evolved. However, review of existing regulations across the LAC region mainly focuses on identifying administrative burdens and not on whether objectives are being met.225 Periodic reviews are an effective way to check the validity of regulations throughout the investment lifecycle. The importance of periodic reviews has been recognized in the IFD Agreement (Box 48). Box 48. Periodic reviews in the IFD Agreement The IFD Agreement includes the following clauses on con- ducting periodic reviews of measures (Non-binding Art. 21): Each Member/Party is encouraged to review, at intervals it deems appropriate, its measures of general application within the scope of this Agreement to determine whether any of such 225 OECD. 2020. Government at a Glance: Latin America and the Caribbean 2020, OECD Publishing, Paris. 250 measures it has implemented should be modified, stream- lined, expanded or repealed so as to make the Member’s/ Party’s investment facilitation regime more effective in achieving its policy objectives and in addressing the specific needs of micro, small and medium-sized enterprises. Each Member/Party is encouraged to periodically review its authorization fees with a view to reducing their number and diversity. Members/Parties are encouraged to consider stakehold- er feedback and make use of relevant international perfor- mance indicators. Members/Parties are invited to share with the Committee on Investment Facilitation established under paragraph 39.1 their experiences in carrying out periodic reviews and policy recommendations resulting thereof. 2. Diagnostics When performing a diagnostic on periodic reviews, including a potential needs assessment when implementing the IFD Agreement, some basic steps should be followed. First, identify whether there is a legal framework in place that comprises basic principles and mechanisms to implement periodic reviews, or whether these are conducted informally on a case-by-case basis. Secondly, determine the scope of periodic reviews, e.g., whether reviews apply to all regulations (primary laws and subordinate regulations) or only to main primary laws. These diagnostics should include public consultation processes as well as the use of digital platforms, e.g., tools to monitor the stock of existing investment-related regulations or a Business Process Management (BPM) platform. Furthermore, governments could consider the use of in-country indicators and international benchmarks to assess the implementation of ex post reviews and related public consultation exercises. Key indicators include: Metrics on regulations that has been reviewed after certain period of time: For instance, number of proposed laws and secondary regulations, which impact was assessed. 251 OECD’s iREG: The iREG indicators present up-to-date evidence of OECD member countries’ regulatory policy and governance practices.226 The iREG in- dicators measure three key principles: i) Stakeholder engagement; ii) RIA; and iii) Ex post evaluation. 3. Implementation Principles To ensure that existing regulations meet their policy objectives, remain up-to- date, and are consistent and cost effective, ex post systematic reviews should be conducted. According to the OECD, there are three types of ex post reviews: i) Programmed reviews; ii) Ad hoc reviews; and iii) Ongoing stock management (Table 7).227 All reviews should involve consultations with affected parties and be as accessible as possible to civil society. Across the LAC region, around 10 out of 31 countries measured by the GIRG in 2018 implement at least one type of ex post review (Table 8).228 Table 7. Types of ex post reviews of regulation Programmed reviews* Ad hoc reviews** Ongoing stock management*** Sunsetting rules • Public stock-taking • Stock-flow linkage rules • Embedded in statute • Principles-based reviews • Quantitative red tape • Other post- • In-depth reviews • reduction targets implementation reviews Benchmarking • Source: OECD adapted from the Australian Productivity Commission. *For regulations or laws with potentially important impacts on society or the economy, par- ticularly those containing innovative features or where their effectiveness is uncertain, it is desirable to embed review requirements in the legislative/regulatory framework itself. Sunset requirements provide a useful “failsafe” mechanism to ensure the entire stock of subordinate regulation remains fit for purpose over time. Post-implementation reviews within a shorter timeframe (1 to 2 years) are relevant to situations in which an ex ante regulatory assessment was deemed inadequate (by an oversight body for example) or a regulation was introduced despite known deficiencies or downside risks. 226 OECD member countries’ regulatory policy and governance practices advocated in the 2012 Recommendation of the Council on Regulatory Policy and Governance, see: https://www.oecd-ilibrary.org/ governance/recomendacion-del-consejo-sobre-politica-y-gobernanza-regulatoria_9789264209046-es. 227 OECD. 2020. Reviewing the Stock of Regulation, OECD Best Practice Principles for Regulatory Policy. Paris: OECD. 228 GIRG database, see: https://rulemaking.worldbank.org/en/rulemaking. 252 **Public “stocktakes” of regulation provide a periodic opportunity to identify current problem areas in specific sectors or the economy as a whole. Stocktake-type reviews can also employ a screening criterion or principle to focus on specific performance issues or impacts of concern. “In depth” public reviews are appropriate for major regulatory regimes that involve significant complexities or interactions, or that are highly contentious, or both. “Benchmarking” of regu- lation can be a useful mechanism for identifying improvements based on comparisons with jurisdictions having similar policy frameworks and objectives. ***There need to be mechanisms in place that enable “on the ground” learnings within enforce- ment bodies about a regulation’s performance to be conveyed as a matter of course to areas of government with policy responsibility. Regulatory offset rules (such as one-in one-out) and Burden Reduction Targets or quotas need to include a requirement that regulations slated for removal, if still “active”, first undergo some form of assessment as to their worth. Review methods should themselves be reviewed periodically to ensure that they too remain fit for purpose. Table 8. Periodic review approaches across the LAC region, 2018 Legislation- Statutory Stock-taking Rolling specific Ad hoc sunset rules (i.e., one- Reviews review reviews clauses in, one-out). requirement Barbados Yes Yes No No Yes Bolivia Yes No No No No Brazil No No No No Yes Colombia Yes Yes No No No Costa Rica No No No No Yes Ecuador No Yes No No No Mexico Yes Yes No Yes Yes Panama Yes Yes No No No Peru Yes No Yes No No St. Vincent and No Yes Yes No Yes the Grenadines Source: GIRG database. a. Legal and Policy Framework Although periodic reviews could be implemented by any regulatory agency at any point in time, ideally this practice should be established in a law or sub- ordinate regulation. As of 2017, ex post evaluation of existing regulation was mandatory in 23 OECD Members and European Union (EU) countries. Even though this represents 60 percent of member countries, it is low compared to the 90 253 percent of members where ex ante assessments of regulations are mandatory.229 Conversely, only Costa Rica, Mexico, and Peru out of 31 LAC countries measured by the GIRG in 2018 required ex post review of regulations,230 and based on OECD data, by 2019 also El Salvador (13 percent in total).231 In some countries periodic reviews must be undertaken within a two- to five-year period after a law or regulation has been enacted. However, the timeframe depends on the impact of the regulation and whether a specific time for the periodic review was established when it was created. For example, 85 percent of EU Member States carried at least one ex post evaluation between 2017 and 2021.232 In LAC, Mexico requires ex post review of all sub- ordinate regulations every five years. In El Salvador this happens at least ten years after their enactment.233 Additionally, periodic review mechanisms can be part of Regulatory Impact Assessment’s (RIA) guidance materials, where it is established on a case- by-case basis whether a proposed regulation is subject to ex post evaluations, and if so when it is expected to be conducted. For more details about RIAs, see the “Regulatory Impact Assessment” section. Periodic reviews benefit from public participation. As a good practice, all reviews should involve consultations with affected parties. Consultations provide a means of obtaining more complete information about impacts, as well as the opportunity to test preliminary analysis and findings. Engaging stakeholders can also help with targeting reviews at regulations or regulatory areas that might be problematic. Consultations also build trust in the review process. For more details, see Measure 12: Providing opportunities to comment on investment measures. b. Procedures It is important to determine whether the original policy logic that justified the government’s intervention still stands, given changes that may have occurred over time in regulatory frameworks, the economy, or society. 229 OECD. 2020. Op. cit. 230 GIRG database, see: https://rulemaking.worldbank.org/en/rulemaking. 231 OECD. 2020. Government at a Glance. Op. cit. 232 OECD. 2022. “Better Regulation Practices across the European Union.” Regulatory Policy Committee: GOV/RPC(2021)23/REV2. Paris: OECD. 233 OECD. 2020. Government at a Glance. Op. cit. 254 Methodologies for conducting evaluations are usually based on a cost-benefit framework, where quantification is to be encouraged when feasible.234 These methodologies are usually publicly available on government agencies’ websites. However, regardless of what methodology and indicators are chosen, they need to refer to the original policy objectives. For example, the National De- partment for Planning in Colombia has published a methodology with seven that should be considered when implementing a periodic review (Figure 24).235 Figure 24. Factors to consider when implementing ex post reviews 1. Time 2. Scope 3. Parties * Establish when the review will be conduced (e.g.,5 * Establish if the regulation should be reviewed as a * Stakeholders mapping that were impacted by years after implemented or whole, only part of it, or the regulation after 2 years if there were in conjuction with other implementation issues) regulations 4. Theory of change 5. Sources 6. Method * Define a theory of change and indicators: Identifity * Define quantitative and/or Qualitive data * Quantitative methodologies inputs Establish activities Identifity outputs * Validation of data sources * Qualitive methodoligies Identification of results Define accumulated * Search of information in public or private sources * Mixed metododlogies long-term effects 7. Results * Review report and conclusions * Publication of the results in a clear and simple way, including the assumptions and methods that werw used Source: National Department for Planning (DNP), Colombia. 234 As part of a wider consideration of the type of ex post review, data requirements are best considered at the time a regulation is being made. Additionally, the observed impacts of a regulation should ideally be compared with counterfactuals. 235 National Department for Planning. 2021. Guía Metodológica para la implementación de la Evaluación Ex Post de la Regulación. Bogota: DNP. See Link. 255 As aforementioned, from the LAC region only Costa Rica, El Salvador, Mexico, and Peru have a legal mandate for ex post regulatory reviews. However, Barbados, Bolivia, Brazil, Colombia, Ecuador, Panama, and St. Vincent and the Grenadines conduct ad hoc periodic reviews without a legal mandate, but only some of them based on specific criteria.236 For instance, in Brazil some agencies apply periodic reviews, such as the National Petroleum Agency. In Colombia ex post review of regulations is not a widespread tool in the public administration, but some entities have already implemented it.237 In Mexico, there are three toolkits to conduct ex post reviews, through: i) Regulatory As- sessment Report Ex Post; ii) National Regulatory Framework Analysis; or iii) Program for Reform in Priority Sectors.238 A myriad of regulations exists, so governments must prioritize regulations to review to simplify the process and maximize benefits. Higher priority should be given to the review of regulations that have wide coverage across the economy or society, those that generate significant impacts on citizens or organizations, or where there is clear evidence of a problem.239 Some countries define threshold tests (e.g., costs above EUR 1 million for citizens and busi- nesses) to decide which regulations should be prioritized. For example, Austria, Germany, and Spain have comprehensive threshold tests covering both costs and benefits on social, economic, and environmental impacts.240 In Ecuador, thresholds are based on fiscal impact and the balance of trade; in Mexico there are a set of 13 criteria established in the Regulatory Manual, which include among others, national interest topics, emerging industries, and administra- tive burdens. In Panama only rules that are not adjusted to the current legal 236 GIRG database, see: https://rulemaking.worldbank.org/en/rulemaking. 237 For example, according to Article 2.2.1.7.6.7. of the Decree 1595 of 2015, there is a disposition according to which, every technical regulation must be subject to a review from the Regulatory Agency with the goal of deciding its enforcement, amendment, or repeal at least once every 5 years. Regarding the rules applicable to the Regulatory Commissions, there may be ex-post assessments every three years. The Ministry of Justice has the usual practice to analyze the enforcement of current laws and recommend the repeal of normative acts that are obsolete. 289 Regulatory Assessment Report Ex-Post: Regulations that were subject to a Regulatory Improvement Process may be undertaken by an ex-post review mechanism; National Regulatory Framework Analysis: CONAMER reviews the regulatory framework, there may be proposals to improve regulations in specific economic sectors; and Program for Reform in Priority Sectors: When regulatory barriers are identified at a state and municipal level, CONAMER may set up a program aimed to look for proposal on regulatory improvement for sectors declared as a priority. 239 OECD. 2020. Op. cit. 240 OECD. 2020. Op. cit. 256 system and need to be updated are subject to review; and in St. Vincent and the Grenadines, ex post reviews are conducted when the proposed regulation has a serious impact on the public.241 Periodic reviews should be publicly announced, and comments from the general public and responses from authorities should be publicly available. The coverage and duration of public consultations should be proportionate to the significance of the regulation and its impacts, and the degree of public interest or concern.242 Institutions should provide advance notice of forthcom- ing reviews of regulation, ideally in the form of an annual forward regulatory review plan, so stakeholders can be prepared. For more details see Measure 11: Providing opportunities to comment on investment measures. c. Institutional Framework Periodic reviews should be part of regular planning for all responsible min- istries, departments, and regulatory agencies. Usually, periodic reviews are viewed as additional activities rather than regular work. To institutionalize these reviews and create a culture of assessment for existing regulation, resources for ex post evaluations should be foreseen in annual plans. Institu- tions’ budgets should also include resources to conduct public consultation for the periodic reviews. If an ROB already exists,243 this institution would be responsible for coordi- nating periodic reviews across the government, as well as with subnational agencies. If a country does not have an ROB, usually an office or department at the national or central government level (e.g., part of the Executive’s Office) in charge of regulatory reform and simplification initiatives could take this role. Regardless, a coordinating entity is needed for periodic reviews and the related consultation processes. 241 GIRG database, see: https://rulemaking.worldbank.org/en/rulemaking. 242 Stakeholder preparation for a review can require considerable data gathering and analysis, which takes time and resources. 243 Examples of ROBs are the Better Regulation Executive (BRE, UK); National Commission for Regulatory Improvement (CONAMER, Mexico); Office of Information and Regulatory Affairs (OIRA, United States of America); Office of Impact Analysis (OIA, Australia—previously the Office of Best Practice Regulation, OBPR); Office of the Council of State (OCS, Thailand); Regulatory Scrutiny Board (RSB, EU Commission); etc. 257 Ministries and sectorial regulators are ultimately responsible for imple- menting and enforcing regulations. These authorities have advantages in monitoring ex post reviews since they have the technical knowledge of how specialized departments or dedicated staff could implement these reviews. It is also important to develop internal mechanisms to communicate in real time the performance of regulations, as this may avoid the need for larger reviews at a later stage.244 Different types of institutions that are commonly involved in periodic reviews and their consultation processes of investment-related regula- tions include: Regulatory Governance, Regulatory Reform, Better Regulation agencies (at national and subnational levels) Reform secretariats Regulators, sector-specific agencies Subnational regulatory agencies Investment Promotion Agencies For high-impact regulations, reviews should be carried out independently from the responsible departments, especially for agencies with enforcing tasks.245 For these cases, transparency is important, and materials for public consultation should be prepared in advance by the regulatory agency or ministry and shared with stakeholders (including preliminary findings and recommendations).246 Across the LAC region, in 2019 only Argentina, Costa Rica, Ecuador, EL Salvador, Mexico, and Peru had a specialized body in charge of monitoring ex post reviews of existing regulations (see above, Figure 20).247 244 OECD. 2020. Op. cit. 245 Given its nature, enforcement institutions usually should normally not conduct reviews themselves, but to play the role of a provider of relevant information and advice. 246 Banks, Gary. 2014. Making public policy in the public interest: the role of public inquiries in Royal Commissions and Public Inquiries: Practice and Potential. Prasser, S. and H. Tracey Ed. Sydney: Connor Court Publishing. 247 OECD. 2020. Government at a Glance. Op. cit. 258 Public consultations for periodic reviews can either be implemented by ROBs or relevant ministries and regulatory agencies. These institutions should establish mechanisms that allow citizens and the private sector to submit comments and receive answers from public officials. All this informa- tion should be publicly available (e.g., through a ROB’s or agency’s website). d. Human Resources and Training Public institutions should have trained staff to periodically review in- vestment-related measures. Similarly, sufficiently trained staff should be available to carry out public consultations and respond in a systematic manner to comments from the general public. ROBs could provide training to staff members from ministries and sectorial regulators. Manuals and guidelines are needed to onboard new personnel in charge of conducting periodic reviews and public consultations (Box 49). If necessary, people who are already skilled in evaluation techniques may be recruited to quickly build capacity. Guidance and training manuals should be systematically updated to ensure that staff receive up-to-date training. Spe- cialist recruitment (e.g., academics or specialist businesses) could supplement the expertise available within the government, especially to evaluate high-im- pact regulations.248 Skill sets relevant to ex post assessment of regulations are largely the same as those required for ex ante RIAs (for more details about RIAs, see Measure 13: Regulatory Impact Assessment). Box 49. Example of periodic/ex post review guidelines from different countries and regions Australia: Guidance on Assessing Impacts, https://oia.pmc. gov.au/resources/guidance-assessing-impacts Brazil: Guidance for Preparing Regulatory Impact Assessments, https://www.gov.br/mdic/pt-br/assuntos/reg/boas-prati- cas-regulatorias/guias-e-manuais/guia-de-avaliacao-de-resul- tado-regulatorio-arr Colombia: Methodological Guide on the Implementation of the Ex Post Assessment of Regulation, https://colaboracion.dnp. gov.co/CDT/ModernizacionEstado/EReI/Guia_Metodol%C3%B- 3gica_Evaluaci%C3%B3n_ExPost.pdf 248 OECD. 2020. Op. cit. 259 European Union: Better Regulation guidelines and toolbox, https://commission.europa.eu/law/law-making-process/ planning-and-proposing-law/better-regulation/better-regu- lation-guidelines-and-toolbox_en Mexico: Guide for the Evaluation of the Regulation Impact, https://www.gob.mx/conamer/documentos/guia-para-eval- uar-el-impacto-de-la-regulacion United Kingdom: The Magenta Book, https://www.gov.uk/ government/publications/the-magenta-book e. Information and Communications Technology ICT is a useful tool to monitor the stock of existing investment-related regu- lations. Online platforms allow agencies to announce in advance which regula- tions will be reviewed and present the results of those evaluations. 4. Case Studies Box 50. Chile: Ex post law evaluation Challenge Prior to 2010 Chile lacked an ex post evaluation framework for laws and regulations (from the executive and legislative branches). There was no systematic evaluation of the degree of compliance with and impacts of laws and regulations. This problem was exacerbated by the absence of an ex ante RIA system, which is a mechanism to establish baselines to assess possible impacts of draft laws and regulations. Measure To create a systematic approach to ex post evaluations of laws and regulations, the Law Evaluation Department was estab- lished by the Chilean Congress in 2010. The department’s main competences are: Assess legal norms passed by the Congress 260 Establish a methodological framework for ex post eval- uations, including different types of impacts (economic, financial, social, cultural, environmental, etc.) Involve social organizations network interested in participat- ing in the review process Recommend reforms to laws Results The creation of the Law Evaluation Department is a unique ini- tiative. Despite the existence of parliamentary law commissions, around the world there are very few institutions inside parliaments that carry out systematic ex post evaluations of primary laws. The Law Evaluation Department has focused on involving the civil society in its evaluations. It has tools and mechanisms to collect information on citizens’ perceptions, such as on-line questionnaires and chats, questionnaires for particular groups, development of focus groups, workshops, etc. Additionally, the Citizen Forum is an open space where civil organizations and citizens can participate in-person or virtually. Source: OECD.249 5. Further Resources Arlet, Jean; Varun Eknath; and Oleksandra Popova. 2022. “Effectively Engaging the Private Sector in the Business Reform Process”, December 9, 2022, Global Indicators Briefs No. 15. Washington, D.C.: World Bank. Banks, Gary. 2014. Making public policy in the public interest: the role of public inquiries in Royal Commissions and Public Inquiries: Practice and Potential. Prasser, S. and H. Tracey Ed. Sydney: Connor Court Publishing. Bteddini, Lida. 2013. “MENA and Public Consultations.” MENA Knowledge and Learning: Quick Notes Series, Number 101. Washington, D.C.: World Bank. 249 OECD. 2012, Evaluating Laws and Regulations: The Case of the Chilean Chamber of Deputies. Paris: OECD. 261 European Commission. 2022. The European Union’s efforts to simplify legisla- tion: Annual Burden Survey 2021. Brussels: European Union. International Finance Corporation. 2007. Stakeholder Engagement: A Good Practice Handbook for Companies, Doing Business in Emerging Markets. Wash- ington, D.C.: IFC. Mandelkern Group. 2001. Mandelkern Report on Better Regulation. Final Report, 13 November 2001. National Department for Planning. 2021. Guía Metodológica para la imple- mentación de la Evaluación Ex Post de la Regulación. Bogota: DNP. OECD. 2012. Evaluating Laws and Regulations: The Case of the Chilean Chamber of Deputies. Paris: OECD. OECD. 2012, Evaluating Laws and Regulations: The Case of the Chilean Chamber of Deputies. Paris: OECD. OECD. 2020. Reviewing the Stock of Regulation, OECD Best Practice Princi- ples for Regulatory Policy. Paris: OECD. OECD. 2020. Government at a Glance: Latin America and the Caribbean 2020, OECD Publishing, Paris. OECD. 2022. “Better Regulation Practices across the European Union.” Regula- tory Policy Committee: GOV/RPC(2021)23/REV2. Paris: OECD. Rahman, Shaela. 2022. “Using Strategic Communications to Engage Stake- holders in Tax Reform”, December 2010, Investment Climate in Practice No. 15. Washington, D.C.: World Bank. Smithers, Nicola. 2011. The Importance of Stakeholder Ownership for Capacity Development Results. Washington, D.C.: World Bank Institute. Treasury Board of Canada Secretariat. 2009. Handbook for Regulatory Proposals: Performance Measurement and Evaluation Plan. Ottawa: Treasury Board. Reference List 1. Adelle, Camilla; Macrae, Donald; Marusic, Andreja; and Naru, Faisal. 2015. “New development: Regulatory impact assessment in developing countries—tales from the road to good governance.” Public Money & Management, Vol. 35/3. 262 2. Arlet, Jean; Eknath, Varun; and Popova, Oleksandra. 2022. “Effectively Engaging the Private Sector in the Business Reform Process”, Global Indica- tors Briefs No. 15. Washington, D.C.: World Bank. 3. Banks, Gary. 2014. “Making public policy in the public interest: the role of public inquiries in Royal Commissions and Public Inquiries: Practice and Potential.” Prasser, S. and H. Tracey Ed. Sydney: Connor Court Publishing. 4. Bteddini, Lida. 2013. “MENA and Public Consultations.” MENA Knowledge and Learning: Quick Notes Series, Number 101. Washington, D.C.: World Bank. 5. Government of Australia. Available at: [https://rbm.obpr.gov.au/home.aspx]. 6. IFC. 2010. 7. International Finance Corporation (IFC); Multilateral Investment Guarantee Agency (MIGA); World Bank. 2010. Making It Work : ‘RIA Light’ for Developing Countries. Washington, D.C.: World Bank. 8. International Finance Corporation. 2007. Stakeholder Engagement: A Good Practice Handbook for Companies, Doing Business in Emerging Markets. Washington, D.C.: IFC. 9. Johns, Melissa; Saltane, Valentina. 2016. Citizen engagement in rulemaking: Evidence on regulatory practices in 185 countries. Washington, D.C.: World Bank. 10. Kamkhaji, Jonathan C.; Peter Ladegaard; and Petter Lundkvist. 2019. “Risks when Reforming: Challenges and Sustainability of RIA Systems: Results of the First Systematic Study on RIA Reforms in Developing Countries.” European Journal of Risk Regulation 10(1): 187-200. 11. Mendelkern Group. 2001. Mendelkern Report on Better Regulation. Final Report, 13 November 2001. 12. National Department for Planning. 2021. Guía Metodológica para la imple- mentación de la Evaluación Ex Post de la Regulación. Bogota: DNP. Available at: [https://colaboracion.dnp.gov.co/CDT/ModernizacionEstado/EReI/Guia_ Metodol%C3%B3gica_Evaluaci%C3%B3n_ExPost.pdf]. 13. OECD. 1997. Regulatory Impact Analysis: Best Practice in OECD Countries. Paris: OECD. 14. OECD. 2012, Evaluating Laws and Regulations: The Case of the Chilean Chamber of Deputies. Paris: OECD. 15. OECD. 2014. Regulatory Policy in Mexico: Towards a Whole-of-Government Perspective to Regulatory Improvement. Paris: OECD. 263 16. OECD. 2015. “Regulatory Impact Assessment and regulatory policy”, in Reg- ulatory Policy in Perspective: A Reader’s Companion to the OECD Regulatory Policy Outlook 2015. Paris: OECD. 17. OECD. 2020. OECD Best Practice Principles on Stakeholder Engagement in Regulatory Policy. Paris: OECD. 18. OECD. 2020. Reviewing the Stock of Regulation, OECD Best Practice Princi- ples for Regulatory Policy. Paris: OECD. 19. OECD. 2020. Government at a Glance: Latin America and the Caribbean 2020, OECD Publishing, Paris. 20. OECD. 2022. Better Regulation Practices across the European Union. Regula- tory Policy Committee: GOV/RPC (2021)23/REV2. Paris: OECD. 21. Rahman, Shaela. 2010. “Using Strategic Communications to Engage Stake- holders in Tax Reform”, December 2010, Investment Climate in Practice No. 15. Washington, D.C.: World Bank 22. Smithers, Nicola. 2011. The Importance of Stakeholder Ownership for Capacity Development Results. Washington, D.C.: World Bank. 23. Treasury Board of Canada Secretariat. 2009. Handbook for Regulatory Proposals: Performance Measurement and Evaluation Plan. Ottawa: Treasury Board. Available at: [https://publications.gc.ca/collections/collection_2013/ sct-tbs/BT22-134-2009-eng.pdf]. 24. World Bank. 2016. Global Indicators of Regulatory Governance: Trends in Par- ticipatory Rulemaking. A Case Study. Washington, D.C.: World Bank. 25. World Bank. 2019. Governing Infrastructure Regulators in Fragile Environ- ments: Principles and Implementation Manual. Washington, D.C.: World Bank. 26. World Bank. Forthcoming. WTO Investment Facilitation Agreement - Business Environment Reform and Investment Facilitation: An Overview of Reform Measures, Good Practice and Donor. Washington, D.C.: World Bank. 264 G. Facilitating Sustainable Investments Investment policymaking that integrates economic pros- perity with social and environmental considerations is becoming increasingly widespread. As defined by the UN Sustainable Development Goals (SDGs), sustainable devel- opment is multifaceted and includes measures related to reducing poverty, protecting the environment, strength- ening institutions, and improving human conditions.250 Sustainable investment251 calls for countries to promote a positive contribution by enterprises to economic, envi- ronmental, and social progress.252 Responsible business practices can also improve the performance of enterpris- es and have a positive impact on operations by managing risks more efficiently, while mitigating adverse effects from enterprises on the environment and society. When it comes to investment strategies, countries should foster responsible business behavior through a combination of mandatory and voluntary measures. Good practices for sustainable investment are reflected in guidelines and principles as developed by internation- al organizations, non-governmental organizations, and 250 The 2030 Agenda for Sustainable Development (2030 Agenda), adopted in 2015 by the Member States of the United Nations (UN), reflects the scale and ambition of the call for action by all developed and developing countries in a global collaborative partnership. The 17 Sustainable Development Goals (SDGs) are integrated, indivisible and balance the economic, social, and environmental dimensions of sustainable development. UN General Assembly, Transforming our world: the 2030 Agenda for Sustainable Development, 21 October 2015, A/RES/70/1. 251 ”Sustainable Investing” is one of many terms used to describe strategies that aim to maximize social good and financial returns. Others include “social”, “sustainable”, “ethical”, “mission-based” or “impact” investing. 252 OECD, Guidelines for Multinational Enterprises 2011 Edition, OECD Publishing, Paris. 265 business associations.253 For example, the OECD Guidelines for Multinational En- terprises (2011), the ILO Tripartite Declarations of Principles concerning Multi- national Enterprises and Social Policy (2017), and the UN Global Compact cover areas such as human rights, labor, environment, and anti-corruption. Further tools are being developed to helping countries to assess, implement and monitor the sustainability of investments, for instance the OECD FDI Qualities Toolkit.254 The inclusion of sustainable development provisions in IIAs has gained attention in recent years. All IIAs concluded in 2020-2021 contain reform-oriented provisions aimed at preserving regulatory space and promoting sustainable investment. These IIAs feature the commitment of states to ensure the systematic incorporation of provisions that promote sustainable development. Most of these IIAs refer to the protection of health and safety, labour rights, and the environment. Others explicitly recognize that parties should not relax health, safety, and environmental standards to attract investment. Some others include provisions for the promotion of corporate social responsibility (CSR).255 Recent examples of IIAs containing a dedicated provision on sustainable investment are the Sustainable Investment Facilitation Agreement (SIFA) between the European Union (EU) and Angola,256 the EU-China Comprehensive Agreement on Investment (not yet signed),257 and at the regional level, the Protocol on Investment of the African Continental Free Trade Area (AfCFTA) Agreement.258 253 Most used and cited are the following non-binding international responsible business conduct standards of good practice: OECD (2011): OECD Guidelines for Multinational Enterprises. Adopted in 1976 and updated in 2011, the guidelines cover all area of business responsibility, including labor and human rights issues, environment, disclosure, bribery, consumer protection, science and technology, competition, and taxation. ILO (2017): ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy. The principles include recommendations on employment, training, working conditions, forced labor, child labor, non-discrimination, freedom of association and collective bargaining. UN: UN Global Compact. A widely regarded corporate sustainability initiative of the UN with over 12,500 participants including 9,500 companies and 3,000 non-business participants. The ten principles of the UN Global Compact on corporate sustainability entail principles of human rights, labor, environment, and anti-corruption. 254 OECD, FDI Qualities Policy Toolkit, OECD Publishing, Paris, 2023. https://www.oecd-ilibrary.org/ sites/7f251bac-en/index.html?itemId=/content/publication/7f251bac-en. 255 UNCTAD, Recent developments in the IIA regime: Accelerating IIA reform, IIA Issues Note, August 2021. 256 It is part of the EU’s investment and development strategy in Africa to conclude more SIFA’s with countries in the region. 257 The Agreement includes a specific section on sustainable development which includes commitments on labor and environmental protection, as well as provisions on a separate and dedicated mechanism to address differences. 258 The Protocol on Investment of the AfCFTA Agreement includes investors’ obligations related to CSR, socio-political and anti-corruption obligations, business ethics, human rights, and labor standards, environmental protection, indigenous people and local communities and parties’ commitments in relation to the right to regulate, minimum standards on the environment, labor and consumer protection, human resources development, and pursuit of development goals. 266 The text currently being negotiated in the IFD Agreement includes promotion of sustainable investment with two measures covered in this section: responsi- ble business conduct (Measure 15) and Anti-corruption (Measure 16). Measure 15: Promoting responsible business conduct (RBC) 1. Introduction Promoting RBC is of central interest to policy makers wishing to attract and retain investment and ensure that business activity contributes to broader value creation and sustainable development. RBC refers to the expectation that all businesses, regardless of their legal status, size, ownership, or sector, avoid or address any negative impacts of their operations, while contributing to sustain- able development in the countries where they operate.259 The term corporate social responsibility has historically been used to describe business interactions with society. CSR is increasingly being used alongside RBC and business and human rights (BHR). These concepts reflect the expectation that businesses should consider the impact of their operations and supply chains on people, the planet and society as part of their core business considerations and not as an add-on (see theory of change, Figure 27). RBC is an entry point for any company that wishes to contribute to the SDGs and to achieve specific economic and sustainability outcomes. RBC expectations are prevalent throughout global value chains and are affirmed in the main international instruments on RBC – notably the OECD Guidelines for Multinational Enterprises (OECD Guidelines,260 the United Nations Guiding Principles on Business and Human Rights (UN Guiding Principles),261 and the ILO 259 OECD Guidelines for Multinational Enterprises (2011). 260 OECD (2015), OECD Guidelines on Corporate Governance of State- Owned Enterprises, 2015 Edition, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264244160-en, OECD (2017b) Responsible Business Conduct for Institutional Investors, http://mneguidelines.oecd.org/RBC-for-Institutional- Investors.pdf, OECD (2019c), Responsible Business Conduct and the Sustainable Development Goals, https://mneguidelines.oecd.org/RBC-and-the-sustainable-development-goals.pdf. 261 UN (2011), Guiding Principles on Business and Human Rights, HR/PUB/11/04. http://www.ohchr.org/ Documents/Publications/GuidingPrinciplesBusinessHR_ EN.pdf. 267 Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy262 – and increasingly in IIAs263 and national development strate- gies, laws, and regulations. Increasingly, RBC standards are enforced through supply chain laws originating in developed countries. For example, the German Supply Chain Act, which entered into force on January 1, 2023, places German enterprises of a specific size under the obligation to respect human rights by implementing defined due diligence obligations. Firms are mandated to identify and prevent or minimize the risks of human rights violations and damage to the environment along their entire supply chain (see Box 51). Similarly, the French 2017 Duty of Vigilance Act (Loi de Vigilance) requires large French companies to develop a vigilance plan that covers the company’s own activities with regard to possible violations of human rights and environmental standards and those of its controlled subsidiaries, contrac- tors and suppliers.264 On February 23, 2022, the European Commission adopted a proposal for a Directive on corporate sustainability due diligence. The aim of this Directive, which is currently under review by the European Parliament and the European Council, is to foster sustainable and responsible corporate behavior and to anchor human rights and environmental considerations in companies’ opera- tions and corporate governance.265 Box 51. German Supply Chain Act The Act on Corporate Due Diligence Obligations in Supply Chains (Gesetz über die unternehmerischen Sorgfaltspflicht- en in Lieferketten) took effect on January 1, 2023. It places enterprises that have their central administration, principal place of business, administrative headquarters, statutory seat or branch office in Germany under the obligation to respect human rights by implementing defined due diligence obliga- 262 OECD/OHCHR/ILO (2019), Responsible Business: Key Messages From International Instruments, https://mneguidelines.oecd.org/Brochure-responsible-business-key-messages-from-international- instruments.pdf. 263 More than 25 in force IIAs include a specific provision on RBC. UNCTAD Investment Policy Hub, Mapping of IIA content. 264 Business and Human Rights Resource Centre. 2023. France’s Duty of Vigilance Law. Link: https://www. business-humanrights.org/en/big-issues/corporate-legal-accountability/frances-duty-of-vigilance-law/. 265 European Commission. 2023. Corporate sustainability due diligence. Link: https://commission. europa.eu/business-economy-euro/doing-business-eu/corporate-sustainability-due-diligence_en. 268 tions. The Act initially applies to enterprises with at least 3,000 employees. Beginning in 2024, it will apply to enterprises with at least 1,000 employees in Germany. The core elements of the due diligence obligations include the establishment of a risk management system to identify, prevent or minimize the risks of human rights violations and damage to the environment. The Act sets out the necessary preventive and remedial measures, makes complaint proce- dures mandatory and requires regular reports. The due diligence obligations apply to an enterprise’s own business area, to the actions of a contractual partner and to the actions of other direct or indirect suppliers. This means that an enterprise’s re- sponsibility no longer ends at its own factory gate but applies along the entire supply chain. The Supply Chain Act contains an exhaustive list of eleven internationally recognized human rights conventions. The legal interests protected in those conventions are used to derive behav- ioral requirements or prohibitions for corporate action to prevent a violation of protected legal positions. These include the prohibi- tion of child labor, slavery and forced labor, the disregard of occu- pational safety and health obligations, withholding an adequate wage, the disregard of the right to form trade unions or employee representation bodies, the denial of access to food and water, and the unlawful taking of land and livelihoods. If enterprises fail to comply with their legal obligations, ad- ministrative fines may be imposed. These can amount to up to 8 million euros or up to 2 percent of annual global turnover. The fines system based on turnover applies only to enterprises with an annual turnover of more than 400 million euros. Moreover, if an administrative fine is imposed above a certain minimum level, enterprises may be excluded from the award of public contracts. An authority is equipped with effective enforcement instru- ments to monitor an enterprise’s supply chain management. The competent authority, the Federal Office for Economic Affairs and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle), has far-reaching supervisory powers. It can, for example, enter business premises, demand information, and 269 inspect documents as well as demand that enterprises take concrete action to fulfil their obligations and enforce this by imposing financial penalties. Source: Adapted from German Federal Ministry of Labour and Social Affairs. 2023. Supply Chain Act. Link: https://www.csr-in-deutschland.de/ EN/Business-Human-Rights/Supply-Chain-Act/supply-chain-act.html. In several LAC countries, there are legislative initiatives that were launched in 2022 containing due diligence obligations related to RBC. The Colombian Human Rights Due Diligence Bill (Proyecto de Ley sobre Debida Diligencia Obligatoria en Derechos Humanos) is a legislative initiative led by the Ombudsman’s Office (Defen- soría del Pueblo), together with the Office of the United Nations High Commissioner for Human Rights (OHCHR) in Colombia and a local university.266 In Brazil, there is a Draft Framework Law on Business and Human Rights, a legislative initiative submitted to Congress by a group of parliamentarians, which seeks to establish guidelines for the promotion of public policies aligning with RBC.267 Peru’s Due Diligence Bill (Proyecto de Ley sobre Debida Diligencia del Perú)268 was launched within the framework of its National Business and Human Rights Action Plan, supported by various civil society institutions, including some human rights organizations. Two more initiatives are worth highlighting in the RBC due diligence spectrum in LAC. Mexico’s Draft General Law on Corporate Responsibility and Corporate Due Diligence is an initiative filed in 2020 aimed at establishing a mandate for re- sponsible conduct by companies, so that they avoid and/or mitigate the negative impacts associated with their activities, supply chains and commercial relation- ships, in relation to the conditions of workers, respect for human rights, care for the environment, the fight against corruption, the protection of consumer rights , among others.269 In Chile, a Technical Working Committee was formed in June 2023, in the session of the Inter-ministerial Committee for the National Action Plan for Human Rights and Business, to prepare the Draft Law on Due Diligence in Human Rights and Companies, which is expected to be presented to Congress in 2024. The proposal seeks to establish a regulation requiring companies to implement 266 The draft legislation is yet to be developed. Colombia’s Ombudsman Office. “Defensoría terminó con éxito los 5 diálogos regionales de noviembre sobre derechos humanos y empresas”. 29 November 2022. 267 Brazilian parliament’s Chamber of Deputies. https://www.camara.leg.br/proposicoesWeb/ fichadetramitacao?idProposicao=2317904 268 Peru’s Due Diligence Bill. 269 En Mexico’s Senate’s website, the initiative still appears as pending, as of the 16th of October 2023. 270 diagnostic mechanisms on the direct and indirect impact on communities and monitor them for mitigation. The pre-legislative process foresees a first stage of dialogue with public companies, followed by conversations with national and foreign chambers of commerce in Chile, and with various interest groups.270 These laws and draft laws provide an opportunity to improve RBC, but also create the risk of adversely affecting suppliers in developing countries. For example, there is a risk that German companies affected by the Supply Chain Act will choose to move supply chains away from countries where inspections are difficult, or standards are generally low. Survey results show that 18 percent of German companies are planning to source their upstream products from countries that pay sufficient attention to compliance with human rights and environmental protection standards and 12 percent said they would withdraw from suppliers in developing and emerging countries.271 Similarly, in France, a decline in imports from low-income countries has taken place following the adoption of the Duty of Vigilance Act in 2017.272 In particular, small companies may be pushed out of supply chains as a result of such initiatives, since companies may find it too difficult to conduct proper inspections, or they may not have the resources or knowledge to implement these standards. Implementing RBC principles and standards can help companies operationalize the SDGs related to responsible production patterns, inclusive and sustainable economic growth, employment, and decent work for all. The Paris Agreement on climate change also underlines the critical role of business in tackling climate change, including through reducing greenhouse gas emissions and improving envi- ronmental performance. For businesses, RBC should not be seen as an additional burden in lieu of focusing on business continuity, but rather a strategic orientation that can encourage a more systemic and dynamic response that will bring short and long-term benefits to the company. Government support for RBC is essential to ensure coherence between their own policies and their expectations of businesses, and it supports domestic firms as they adapt to participate in GVCs. Governments should consider that many companies may not commit to RBC of their own accord because of a lack 270 Chilean Ministry of Foreign Affairs. https://www.subrei.gob.cl/sala-de-prensa/noticias/detalle- noticias/2023/08/01/qué-formas-han-tomado-las-regulaciones-de-debida-diligencia 271 German Institute of the German Economy (upcoming), in DW. 2023. New supply chain laws shake suppliers in developing world. Link: https://www.dw.com/en/germany-new-supply-chain-law-shakes- suppliers-in-developing-world/a-65454276. 272 Ibid. 271 of incentives, capacity, resources, or knowledge. This is especially true in contexts where awareness of RBC is low. Governments should, therefore, ensure that RBC measures do not exacerbate negative impacts for businesses, but rather incentivize companies to mitigate any potential harms and maximize benefits, such as gen- erating an improvement in corporate reputation. In addition, facilitative measures to mitigate potential adverse effects for domestic suppliers will be key. The impor- tance of RBC promotion has also been recognized in the IFD Agreement (Box 52). Box 52. Responsible business conduct in the IFD Agreement The IFD Agreement includes the following requirements related to RBC (Binding Art. 37): With a view of promoting sustainable development, each Member/Party shall encourage investors and enterprises operating within its territory or subject to its jurisdiction to vol- untarily incorporate into their business practices and internal policies internationally recognized principles, standards and guidelines of responsible business conduct that have been endorsed or are supported by that Member/Party. In accordance with its legal system, each Member/Party should encourage investors and enterprises operating within its territory to undertake and maintain meaningful engagement and dialogue, in accordance with international responsible business conduct principles, standards and guidelines that have been endorsed or are supported by that Member/Party, with Indigenous peoples, traditional communities and local communities. Each Member/Party recognizes the importance of investors and enterprises implementing due diligence for responsible business conduct in order to identify and address adverse impacts in their operations, their supply chains and other business relationships. Members/Parties agree to exchange any information and best practices available on issues covered by paragraphs 37.1 and 37.2, including on possible ways to facilitate the uptake by enterprises and investors of responsible business practices and reporting, in the Committee on Investment Facilitation. 272 2. Diagnostics Conducting a diagnostic on RBC involves the following steps: 1. Define the scope and objectives of the diagnostic: Determine the scope of the diagnostic by identifying the areas of RBC on which the government will focus. Set clear objectives that the diagnostic aims to achieve. Focus is key as RBC may include different areas such as environment, labor, human rights, indige- nous populations, etc. 2. Review relevant instruments and guidelines: Stocktaking of international instruments and guidelines that the country has adhered to or endorsed as well as domestic laws and regulations requiring companies to adhere to RBC practices. This will help identify any gaps or inconsistencies. 3. Conduct interviews and surveys: Conduct an in-country review of government policies and their effectiveness that encourage companies to comply with RBC while also engaging with their stakeholders, including employees, customers, suppliers, and local communities, to better understand their concerns and to ensure that their operations are aligned with local needs and priorities. 4. Identify areas for improvement: Based on the findings of the assessment, identify areas where the government needs to improve its RBC policies. Develop recommendations to address the identified gaps. When conducting a diagnostic on RBC, it is important to consult a variety of sources to ensure that the assessment is comprehensive and evidence-based: International standards and guidelines: International standards and guide- lines provide benchmarks on RBC, such as the UN Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises, and the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy. Government policies and regulations: Government policies and regulations can provide guidance on RBC, such as labor laws, environmental regulations, and anti-corruption measures. Industry codes of conduct: Industry codes of conduct provide guidance on re- sponsible business conduct specific to a particular sector, such as the Extractive Industries Transparency Initiative or the Forest Stewardship Council. Corporate social responsibility reports: CSR reports provide information on a company’s responsible business conduct practices and can provide insight into areas for improvement. 273 Stakeholder engagement: Engagement with stakeholders, including employees, customers, suppliers, and local communities can provide valuable insights into the impact of a company’s operations and areas for improvement. 3. Implementation Principles a. Legal and Policy Framework The scope of RBC is broad and cross-cutting as business-related impacts on society, both positive and negative, cover a range of substantive areas. The legal and policy framework on RBC encompasses the (i) international instruments the country has adhered to or endorsed related to RBC; (ii) any other instrument laying out principles, standards, or guidelines in areas of relevance for RBC; (iii) government measures that incentivize and facilitate the voluntary uptake by businesses of RBC; and (iv) government measures that could impede business to incorporate into their business practice and internal policies international practices, standards, and guidelines on RBC. As part of the legal and policy framework on RBC, Table 9 below highlights key policy areas. Table 9. RBC Policy Areas Policy area Description Maintain gains Governments have a primary duty to ensure human rights and protect in human rights against abuses by business. Businesses have the responsibility to respect protection human rights independently of the state’s ability or willingness to fulfil its obligations. Companies are required to avoid causing or contributing to ad- verse human rights impacts in their own activities and to seek to prevent or mitigate impacts to which they are directly linked through their business relationships. Support civil society Human rights defenders play a critical role in enabling companies to under- and human rights stand the concerns of affected stakeholders. When conducting due diligence, defenders relevant stakeholders to be consulted include civil society organizations, trade unions, community-based organizations, and human rights. While states have a duty to protect freedom of expression, association and assembly, business- es have a responsibility to respect human rights defenders. Conduct risk-based Enterprises should carry out risk-based due diligence, for example by incor- due diligence porating it into their enterprise risk management systems, to identify, pre- vent and mitigate actual and potential adverse impacts and account for how these impacts are addressed. 274 Prioritize Due account of the need to protect the environment and to conduct their ac- environmental tivities in a manner that contributes to wider sustainable development. This governance entails, among other responsibilities, establishing and maintaining appropri- ate environmental management systems; assessing and addressing the en- vironmental impacts associated with the processes, goods, and services of the enterprise over their full life cycle with a view to avoiding or, when un- avoidable, mitigating them; improving environmental performance; and being transparent about environmental impacts and risks. Governments should set clear expectations to business enterprises in this regard. Protect labor rights The promotion of observance among enterprises of international labor stan- dards, notably the fundamental principles and rights at work as recognized in the ILO Declaration on Fundamental Principles and Rights at Work. These include prohibition of discrimination on any grounds, prohibition of child and forced labor, protection of adequate working conditions and the recognition of freedom of association and collective bargaining. Ensure adequate Adequate conditions of work include fair remuneration, reasonable working working conditions hours, paid leave, and occupational safety and health. and occupational safety and health Promote non- Non-discrimination in employment is a fundamental element of a labor sys- discrimination tem calling upon states to promote equality of opportunity and treatment in respect of employment. Provide for freedom Freedom of association and collective bargaining are another fundamental of association and element of a responsible and integrative labor system. collective bargaining Prevent forced Immediate and effective measures to secure the prohibition and elimination labor and human of the worst forms of child labor and take adequate steps to ensure that trafficking forced or compulsory labor does not exist in their operations. b. Procedures Countries can promote and enable RBC practices by implementing the following actions: Regulating. Establishing and enforcing an adequate legal framework that protects the public interest and underpins RBC and monitoring business per- formance and compliance. This also includes the requirement for companies to disclose information about their operations and related social and envi- ronmental impact. Facilitating. Clearly communicating expectations on what constitutes RBC, providing guidance with respect to specific practices and enabling enter- prises to meet those expectations (e.g., developing information material, capacity-building, establishing help desks that directly support companies). 275 Cooperating. Working with stakeholders in the business community, workers’ organizations, civil society, other governments, and the public, across internal government structures, to create synergies and establish a common understanding of RBC. Public procurement policies and processes offer an important avenue for governments to incentivize RBC. Public procurement accounts for approximately 12 percent of GDP in OECD countries and governments are some of the largest buyers of goods and services. Public procurement is critical to the delivery of public services such as infrastructure, health, and education and it can be managed in a way that also promotes the principles of RBC including environmental protections, human rights, labor rights and anti-corruption. Promoting. Demonstrating support for best practices in RBC. An IPA that has an explicit mandate to promote RBC can target or exclude investors based on their RBC record or take an action when an investor is found to be in breach of internationally recognized RBC principles. Two thirds of OECD IPAs take action when investors are found in breach with legisla- tion and over half when investors do not comply with RBC principles.273 For example, Business Sweden follows the government Action Plan for Business and Human Rights and may decide not to assist certain investors in breach of the UN Guiding Principles on Business and Human Rights, the principles of the UN Global Compact or the OECD Guidelines for Multina- tional in its activities. Yet, there is a high divergence on this aspect across IPAs in different regions and countries are still learning how to promote RBC, and sustainable development more generally, through IPA activities. Leading by example: Governments are increasingly seeking to promote the implementation of RBC standards by using their leverage as economic actors and leading by example. This includes ensuring that state-owned enterprises (SOEs) act in accordance with RBC standards, integrating RBC criteria in public spending, including RBC in corporate governance regulations as well as in investment promotion policies. c. Institutional Framework The institutions involved in supporting RBC can vary depending on the country and legal system. Common institutions that may be involved in either developing, monitoring compliance, and enforcing RBC include: 273 OECD. Mapping of investment promotion agencies in OECD countries. 2018. 276 Legislative authority (e.g., Parliaments passing laws related to RBC). Executive authority (relevant ministries) (e.g., in charge of developing and implementing industrial or cross-sector policies, including broader sustainable development policies, and/or policies in areas of relevance for RBC). Investment promotion agency when implementing investment promotion strategies aligned with RBC practices. Special Economic Zone authorities monitoring the compliance of RBC practices. Any other authorities responsible for developing and implementing measures to promote RBC (e.g., authorities in charge of developing and im- plementing national action plans on business and human rights). National Contact Points set up by countries adhering to the OECD Guidelines for Mul- tinational Enterprises are an example of this type of mechanism. National Contact Points have two main functions: (i) to promote the Guidelines and handle enquiries, which means that National Contact Points ensure that the Guidelines and the role of the contact points are known among relevant stakeholders and across government agencies; and (ii) provide a grievance mechanism to resolve cases relating to non-observance of the Guidelines by companies (OECD 2021b).274 In LAC, Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru, and Uruguay have established their respective National Contact Points.275 Authorities (judicial and non-judicial) responsible for dealing with cases of adverse impacts linked to business operations, supply chains and other business relationships. d. Human Resources and Training Capacity-building needs may vary depending on the roles and responsi- bilities of officials involved in the development, implementation, and en- forcement of RBC practices. To effectively address capacity-building needs, it may be necessary to conduct a needs assessment and develop tailored training programs and resources. Nevertheless, some common capacity-build- ing needs may include: 274 OECD (2021), Annual Report on the OECD Guidelines for Multinational Enterprises 2020: Update on National Contact Point Activity. 275 OECD Responsible Business Conduct: OECD Guidelines for Multinational Enterprises. Promoting Responsible Business Conduct in Latin America and the Caribbean. https://mneguidelines.oecd.org/ncps/ 277 Knowledge of the international instruments the country has adhered to or endorsed related to RBC or any other instrument laying out principles, standards, or guidelines in areas of relevance for RBC. Design and implementation of measures to incentivize and facilitate the voluntary uptake by businesses of RBC as laid out in international princi- ples, standards, and guidelines. Implementation capacity of any legal and regulatory framework in the areas covered by the international principles, standards, and guidelines on RBC. Identification of measures that could make it more difficult for business- es to address international practices, standards, and guidelines on RBC, and incorporate them into their business practice and internal policies. e. Information and Communication Technology ICT tools may be used to publish laws, regulations, and measures in place related to RBC, as well as international instruments the country has adhered to or endorsed related to RBC so that businesses can anticipate expected behavior in a country. 4. Case Studies Box 53. RBC policies in Peru and Chile Challenge Fostering sustainable investment through the implementation of domestic measures. Approach Peru Sostenible, a conglomerate of companies that promote sustainable development in Peru, also known as ‘Peru 2021’, launched a database called “Marcas que Marcan”, together with Kunan, a platform that bolsters a social and environmental en- trepreneurship ecosystem. They have come across with Peru’s first domestic supplier database with sustainability dimensions, promoted by the private sector. This tool allows foreign firms to work with local firms that operate sustainably and helps match environment, society, and governance (ESG) capital to ESG in- 278 vestments. At the same time, the database incentivizes other domestic firms to shift to sustainable operations to qualify for access to this database. In Chile, within the framework of COP26, held in November 2021, the Financial Market Commission (CMF) issued a general rule that requires reports on ESG matters to be included in the annual reports of publicly traded companies, in accordance with the current needs of the markets and in line with local and inter- national trends in order to promote a more responsible business ecosystem. Chile has committed to carbon neutrality, through a roadmap that includes the Decarbonization Plan and zero net greenhouse gas emissions by 2050, among other initiatives, which go hand in hand with sustainable growth. In Chile, some practices are being promoted through initiatives that come mainly from the financial and state spheres. It recently became Latin America’s largest issuer of ESG debt, which will encourage investors to meet emissions and renewable energy generation targets. Last February, Chile sold $2 billion in sus- tainability-linked bonds, maturing in 20 years, becoming the first nation to do so. Results Both reforms are expected to impact in the number of sus- tainable investments. Given that the reforms are recent, impact cannot be measured so far. Source: Peru’s National Confederation of Private Enterprises (CONFIEP). https://www.confiep.org.pe/confiep-tv/primer-directorio-de-proveedores-de-im- pacto-en-peru-marcas-que-marcan/; AMCHAM Chile (2022). ‘El Impulso de la inversión sostenible en Chile). Available at https://amchamchile.cl/noticia/el- impulso-de-la-inversion-sostenible-en-chile/ Box 54. National Action Plans on RBC Challenge Given the broad scope of RBC, it can be difficult for countries to identify areas for reforms and monitor progress in implement- ing measures to foster RBC practices. 279 Approach An effective tool to demonstrate a government’s commitment to RBC, highlight relevant policies, and signal the need for future action, is through a national action plan (NAP). NAPs are also a useful tool to ensure policy coherence on a number of topics related to RBC. As governments often have many different laws, policies and practices that are relevant to RBC, NAPs can help ensure that all government actors are working in a coherent manner to include RBC in their policies. The UN has recommend- ed that all states develop NAPs on RBC as part of their respon- sibility to disseminate and implement the UN Guiding Principles. Results As of October 2020, 24 countries (21 of which are adherents to the OECD Guidelines) have adopted a self-standing NAP. An increasing number of governments, like the Czech Republic, France, and the United States, have taken a broad view of RBC, and have included issues ranging from the environment, public procurement, to information disclosure, whistle-blower pro- tection and trade. Given that the reforms are recent, impact cannot yet be measured. Source: National Action Plans on Business and Human Rights, available at https://globalnaps.org; www.ohchr.org/EN/Issues/Business/Pages/Nationa- lActionPlans.aspx. Box 55. EU Regional Programs to promote Responsible Business Conduct Challenge Global Value Chains (GVCs) have been a strong catalyst for so- cio-economic development over the past 30 years. However, the increased adverse social and environmental impacts of GVCs have fueled debate on the benefits of international trade and globalization. These concerns have been heightened by the COVID-19 crisis and Russia’s invasion of Ukraine, where the ability of GVCs to ensure the secure supply of essential products 280 and generate benefits for all has come under the spotlight. These considerations have led to growing calls to embed RBC, including risk-based due diligence, at the core of business oper- ations. RBC requires businesses to avoid and address negative impacts of their activities, including in their value chains, while contributing to sustainable development in the countries where they operate. Promoting RBC principles and standards through trade and investment policies can prove useful in supporting more resilient, sustainable, and responsible GVCs. Approach The EU, in partnership with the ILO, the UN OHCHR and the OECD, has implemented programs in two key regions (Asia and Latin America and the Caribbean) to help create enabling policy environments for RBC, boost businesses’ capacity to observe RBC principles and standards, and raise awareness of the importance of RBC among stakeholders. The EU benefits from the partner organizations’ extensive expertise on risk-based due diligence and economic policies, to carry out the following activities: Delivering policy analysis and advice for governments on RBC and policy areas through which RBC can be leveraged (e.g., trade and investment policies, public procurement, and state- owned enterprises). Building businesses’ capacity to conduct risk-based due diligence through guidance and training in priority sectors. Strengthening National Contact Points for RBC to facilitate access to remedy. Results Key outcomes of the regional programs include: Enhanced coherence of government policies that promote RBC in 6 Asian countries and 9 LAC countries. Raised awareness on the importance of conducting risk-based due diligence for businesses engaged in international trade, in both importing and exporting. For example, 179 companies and trade organizations in Latin America, 80 SMEs in Viet 281 Nam and 510 participants of the OECD e-learning Academy on RBC, received training and capacity-building on RBC principles and standards, as well as due diligence. Increased leverage of National Contact Points for RBC to facilitate access to remedy. Lessons learned include: Leveraging the expertise and experience of different stake- holders is key for advancing RBC (including local policy makers, industry associations, businesses, trade unions, civil society organizations) Engaging governments both at national and regional levels is essential to enable a level-playing field and to enhance RBC effectivity. Adoption of due diligence by businesses is growing but is not yet standard practice. Source: Adapted from OECD. 2022. In Practice: The European Union promotes Responsible Business Conduct (RBC) for more resilient and responsible supply chains. Link: https://www.oecd.org/development-cooperation-learn- ing/practices/the-european-union-promotes-responsible-business-con- duct-rbc-for-more-resilient-and-responsible-supply-chains-fe4ca291/. 5. Further Resources ILO (1919-2019), Conventions and Recommendations, www.ilo.org/dyn/ normlex/en/. “OECD Guidelines for Multinational Enterprises” (2011). “Guidelines on Corporate Governance of State-Owned Enterprises”, OECD (2015b). “Responsible Business: Key Messages from International Instruments”. OECD (2019a). . “SME Policy Index: Eastern Partner Countries 2020: Assessing the Implemen- tation of the Small Business Act for Europe, SME Policy Index, OECD et al. (2020). OECD, “FDI Qualities Policy Toolkit”, OECD Publishing (2023). “The State, State-owned Enterprises and Human Rights”, Report of the UN Working Group on Business and Human Rights (2016). 282 “Small and Medium Enterprises and the implementation of the Guiding Prin- ciples on Business and Human Rights”, Report of the UN Working Group on Business and Human Rights (2017). . “United Nations Guiding Principles on Business and Human Rights: Imple- menting the United Nations Protect, Respect, and Remedy Framework” (2011). HR/PUB/11/04, www.ohchr.org/documents/publications/guidingprin- ciplesbusinesshr_en.pdf. “Recent developments in the IIA regime: Accelerating IIA reform”, IIA Issues Note, UNCTAD (2021). “Regulatory Governance for Development and Growth: Malaysia’s Experience with Good Regulatory Practices” (2019). . Non-exhaustive list of International Agreements and Conventions relevant to RBC Human rights Universal Declaration on Human Rights Convention against Torture and other Cruel Inhuman or Degrading Treatment and Punishment International Covenant on Economic, Social and Cultural Rights International Covenant on Civil and Political Rights Convention on the Rights of the Child International Convention on the Elimination of all Forms of Racial Discrimination Convention on Political Rights of Women Convention on the Elimination of All Forms of Discrimination against Women Convention on the Rights of Persons with Disabilities Convention on the Prevention and Punishment of the Crime of Genocide International Convention on the Suppression and Punishment of the Crime of Apartheid Labor ILO Forced Labor Convention, 1930 (No. 29) ILO Freedom of Association and Protection of the Right to Organize Convention, 1948 (No. 87) ILO Employment Service Convention, 1948 (No. 88) 283 ILO Right to Organize and Collective Bargaining Convention, 1949 (No. 98) ILO Equal Remuneration Convention, 1951 (No. 100) ILO Abolition of Forced Labor Convention, 1957 (No. 105) ILO Discrimination (Employment and Occupation) Convention, 1958 (No. 111) ILO Social Policy (Basic Aims and Standards) Convention, 1962 (No. 117) ILO Employment Policy Convention, 1964 (No. 122) ILO Minimum Age Convention, 1973 (No. 138) ILO Human Resources Development Convention, 1975 (No. 142) ILO Labor Relations (Public Service) Convention, 1978 (No. 151) ILO Seafarers’ Welfare Convention, 1987 (No. 163) ILO Private Employment Agencies Convention, 1997 (No. 181) ILO Worst Forms of Child Labor Convention, 1999 (No. 182) ILO Declaration on Social Justice for a Fair Globalization 2008 Adopted unan- imously by the International Labor Conference, Ninety Seventh Session, in Geneva on 10 June 2008 ILO Seafarers’ Identity Documents, 2003 (No.185) Environment Rio Convention on Biological Diversity (Biodiversity Convention), 1992 United Nations Framework Convention on Climate Change (UNFCCC), 1992 Montreal Protocol Vienna Convention for the Protection of the Ozone Layer, 1985 Convention on the Long-Range Transboundary Air Pollution, 1979 Aarhus Convention on Access to Environmental Information, 1998 United Nations Convention to Combat Desertification (UNCCD), 1994 Convention on Wetlands of International Importance (Ramsar Convention), 1971 Stockholm Convention on Persistent Organic Pollutants (POPs), 2001 Rotterdam Convention on Prior Informed Consent (on the Prior Informed 284 Consent Procedure for Certain Hazardous Chemicals and Pesticides in Inter- national Trade), 1998 Basel Convention on the Control of Transboundary Movement of Hazardous Wastes and Their Disposal, 1989 Bonn Convention on Conservation of Migratory Species of Wild Animals, 1979 Convention on International Trade in Endangered Species (CITES), 1973 Energy Charter Treaty, 1994 Convention Concerning the Protection of the World Cultural Heritage and Natural Heritage, 1972 Protocol of 1978 relating to the International Convention for the Prevention of Pollution from Ships, 1973 (MARPOL PROT 1978) International Convention on Civil Liability for Oil Pollution Damage, 1969 UN Framework Convention on Climate Change, 1997 Protocol on Civil Liability and Compensation for Damage Caused by the Trans- boundary Effects of Industrial Accidents on Transboundary Waters, 2003 Convention on the Protection of the Back Sea Against Pollution Ratification on 1 September 1993 Convention on the Conservation of European Wildlife and Natural Habitats (Berne Convention), 1979 Joint Convention of the Spent Fuel Management and on the Safety of Radio- active Waste Management, 1997 UNECE Amendments to the Convention on Access the Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters regarding Genetically Modified Organisms Corruption United Nations Convention against Corruption United Nations Convention against Transnational Organized Crime Other OECD Global Forum on Transparency and Exchange of Information for Tax Purposes 285 Convention against Discrimination in Education UN Millennium Declaration Measure 16: Combatting Corruption 1. Introduction Corruption remains one of the most important constraints to private sector growth in a country. There is broad consensus that corruption has a direct negative impact on economic growth and development.276 An empirical study based on Transparency International’s Corruption Perception Index (CPI) data for 175 countries over the period from 2012 to 2018 shows that corruption is neg- atively associated with economic growth.277 Real per capita GDP decreased by around 17 percent in the long run when CPI of the country increased by just one standard deviation. The study highlights that this effect is especially pronounced in countries with low government effectiveness and rule of law. The importance of measures against corruption has also been recognized in the IFD Agreement (Box 56). Box 56. Measures against corruption in the IFD Agreement The IFD Agreement includes an obligation on measures against corruption (Binding Art. 38). It includes the following requirements: In accordance with its legal system and internationally agreed standards and commitments that it has adhered to or that it supports, each Member/Party shall ensure that measures are taken to prevent and fight corruption and money laun- dering with respect to matters falling within the scope of this Agreement. 276 G. D’Agostino, J.P. Dunne, L. Pieroni, “Government Spending, Corruption and Economic Growth”, vol. 84, World Development (2016), pp. 190-205. A. Cieślik, L. Goczek, “Control of Corruption, International Investment, and Economic Growth – Evidence from Panel Data”, vol. 103, World Development (2018), pp. 323-335. M. Swaleheen, “Economic growth with endogenous corruption: an empirical study Public Choice”, 146 (2011), pp. 23-41. 277 Klaus Gründler, Niklas Potrafke, “Corruption and economic growth: New empirical evidence”, 2019, https://doi.org/10.1016/j.ejpoleco.2019.08.001. 286 Each Member/Party recognizes the importance of princi- ples such as accountability, transparency and integrity with regard to the development of its anti-corruption policies, and of taking measures affecting investment in a transpar- ent manner and avoiding conflicts of interest and corrupt practices. In accordance with its legal system and internationally agreed standards and commitments that it has adhered to or that it supports, each Member/Party agrees to exchange infor- mation and best practices on issues covered by paragraphs 38.1 and 38.2, including with a view to identifying measures or areas of cooperation to prevent and fight corruption and money laundering in matters affecting investment, in the Committee on Investment Facilitation. LAC countries participate since 2007 in the OECD-Latin America and Caribbean Anti-Corruption Initiative, with the support of the Inter-American Development Bank (IDB) and the Organization of American States (OAS). This initiative aims to promote the OECD Anti-Bribery Convention in the region and strengthen the Convention’s implementation, as well as provides a platform for countries from the region to compare experiences, share best practices, and discuss challenges in the fight against corruption. This initiative also supports the implementation and enforcement of the 1996 Inter-American Convention Against Corruption (IACAC or OAS Convention), and the United Nations Convention against Corruption (UNCAC). 2. Diagnostics To understand and evaluate the anti-corruption framework in a country, gov- ernments can undertake several diagnostic measures. These diagnostics help identify the extent and nature of corruption, assess the effectiveness of existing anti-corruption measures, and guide the development of appropriate strategies to combat corruption. 1. Assessment of the existing legal and institutional framework to address corruption: As a first step countries may undertake a comprehensive assess- ment and mapping of the legal framework, including laws related to bribery, embezzlement, money laundering, and illicit enrichment. This exercise can also evaluate the effectiveness of key institutions, including the judiciary, law 287 enforcement agencies, anti-corruption bodies, and civil society organizations. This assessment will identify gaps, weaknesses, and areas for improvement in the overall framework to address corruption. 2. Corruption Risk Assessments: Undertake corruption risk assessments to identify high-risk areas and sectors prone to corruption. Preliminary informa- tion on corruption-prone sectors or activities can be found using stakeholder consultations and surveys. But countries may need to undertake a compre- hensive review to analyze key processes, such as public procurement, licensing, and regulatory functions, to identify vulnerabilities and develop targeted an- ti-corruption measures. 3. Enforcement Effectiveness: While having a legal framework to address cor- ruption would be an important step, it is key to evaluate how effectively they are enforced. Evaluating the enforcement record and capacity of law enforce- ment agencies can help identify weaknesses and areas for improvement. 4. E-Government and Transparency: Diagnostic measures can assess the avail- ability and accessibility of public information, online services, and digital platforms for citizens to engage with the government. Strengthening trans- parency and digitizing administrative processes can reduce corruption risks and enhance public trust. 5. Public Awareness and Education: Diagnostic measures can assess the level of public awareness, perception of corruption and understanding of its conse- quences. These assessments can guide the development of targeted awareness programs and educational initiatives to foster a culture of integrity and intol- erance towards corruption. 6. International Cooperation: Diagnostic measures can assess the country’s compliance with international standards and identify areas where cooperation and technical assistance from international partners can be beneficial. In LAC countries, as mentioned above, sound cooperation efforts are being deployed under the OECD framework with the support of the IADB and the OAS. In addition, several indexes and databases can be consulted to aid with the diagnostic and complement in-country information. a. Worldwide Governance Indicators (Control of Corruption) - The Worldwide Governance Indicators report on six broad dimensions of governance for over 200 countries and territories over the period 1996-2021. Among the six key indicators, is the Control of Corruption indicator which captures perceptions 288 of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests. It lists the individual variables from each data source used to construct this measure in the Worldwide Governance Indicators b. Corruption Perception Index (CPI) – The Transparency International Corrup- tion Perception Index (CPI) is an index which ranks countries “by their perceived levels of public sector corruption, as determined by expert assessments and opinion surveys. The CPI generally defines corruption as an “abuse of entrusted power for private gain”. The index is published annually by the non-governmen- tal organization Transparency International since 1995. The most recent data available is the 2022 CPI, published in January 2023, currently ranks 180 countries “on a scale from 100 (very clean) to 0 (highly corrupt)”. c. Global Corruption Index (GCI) - The Global Corruption Index (GCI) covers 196 countries and territories and measures the state of corruption and white-col- lar crimes around the world. Based on as many as 42 internationally recog- nized variables, it encompasses two sub-indexes for both a global risk overview and a more nuanced risk assessment. GCI can be used to conduct initial risk mappings as part of your compliance effort to efficiently assess third-party risk exposure. d. The Harvard Dataverse International Country Risk Guide (ICRG), which identifies corruption as a risk that affects political stability of countries. 3. Implementation Principles a. Legal and Policy Framework Adherence to international agreements and standards on corruption is an ongoing process, and countries have to continually work to strengthen their anti-corruption frameworks in line with evolving global norms and best practices. Many countries around the world have already committed to international agreements and standards for preventing and fighting corrup- tion and money laundering. For instance, the United States has been actively engaged in global anti-corruption and anti-money laundering efforts. Here are some examples of international agreements and standards that the United States has adhered to: United Nations Convention against Corruption (UNCAC): The UNCAC is a comprehensive international treaty that aims to promote and strengthen measures to prevent and combat corruption at the national and internation- 289 al levels. The UNCAC covers various aspects, including prevention, criminal- ization, international cooperation, asset recovery, and technical assistance. https://www.unodc.org/unodc/en/corruption/ratification-status.html. Financial Action Task Force (FATF): FATF is an intergovernmental organi- zation that sets global standards for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system. Many countries already adhere to the FATF’s recommen- dations and participate in mutual evaluations to assess its compliance with these standards. https://www.fatf-gafi.org/en/the-fatf/what-we-do.html. Organization for Economic Co-operation and Development (OECD) An- ti-Bribery Convention: OECD member countries are a party to the OECD Anti-Bribery Convention, which requires member countries to criminalize bribery of foreign public officials in international business transactions. The convention aims to combat bribery and promote a level playing field for international trade and investment. “https://www.oecd.org/corruption/oecdantibriberyconvention.htm#:~:tex- t=The%20OECD%20Anti%2DBribery%20Convention,measures%20that%20 make%20this%20effective” . Bilateral and Multilateral Agreements: Several countries enter into bilateral and multilateral agreements with other countries to strengthen cooperation in preventing and fighting corruption and money laundering. These agreements cover areas such as mutual legal assistance, extradi- tion, asset recovery, and information sharing. To be consistent with international agreements, countries have to align and update their domestic legal framework to address corruption. To strength- en anti-corruption measures and enhance transparency and accountability in public and private sectors, a strong domestic legal framework and a strong institutional framework are required. For instance, the United States has enacted various laws at the federal and state levels and has established insti- tutions that are mandated to ensure the effective implementation of those laws and regulations (Figure 25). 290 Figure 25. Anti-Corruption and Anti-Money Laundering Framework in the USA Anti corruption framework Federal Legal Domestic Legal Law Enforcement and Regulatory and Framework Framework (by state) Oversight Agencies Oversight Bodies Foreign Corrupt Public Corruption, Departament of Justice (DOJ), Financial Crimes Practice Act (FCPA) Ethics and Federal Bureau of Investi- Enforcement Network Campaign gation (FBI), Securities and (FinCEN), Office of Special Finance Laws Exchange Commission (SEC), Counsel (OSC), Government The USA PATRIOT Act Office of Government Ethics Accountability Office (GAO). (AML) (OGE), Inspector General. Source: World Bank based on US laws and regulations. Corruption in a country may occur in both the public and the private sector. Therefore, when countries design legal and regulatory frameworks, they should address both public and private sector corruption. The issues and scope in designing these laws differ for each sector. The following considerations can help in this regard. For public sector: Criminalizing corruption: Enact laws that clearly define and criminalize acts of corruption in the public sector, such as bribery, embezzlement, abuse of power, and nepotism. Creating a code of conduct for public officials: Establish a code of conduct that outlines ethical standards, responsibilities, and restrictions for public officials, including rules on conflicts of interest, gifts, and post-employ- ment activities. Setting up whistleblower protections: Provide legal protection and in- centives for whistleblowers who report corruption in the public sector, ensuring confidentiality, non-retaliation, and possible rewards. Requiring asset declaration: Mandate public officials to disclose their assets, income, and liabilities to prevent illicit enrichment and detect conflicts of interest. 291 For the private sector: Anti-bribery laws: Enact laws that criminalize bribery in the private sector, including both active and passive bribery, and establish penalties for individuals and organizations involved. Corporate governance and compliance: Promote strong corporate gov- ernance practices by requiring companies to establish internal controls, ethics policies, and compliance programs to prevent corruption. Transparency in business transactions: Promote transparency in business transactions, including disclosure of beneficial ownership, relat- ed-party transactions, and financial statements of companies. Anti-money laundering measures: Implement robust anti-money laun- dering regulations to prevent the private sector from being used as a channel for illicit funds, including customer due diligence, reporting obli- gations, and compliance requirements. b. Procedures When adopting measures to address corruption and money laundering or measures that may have an impact on investments in general, governments should ensure transparency, accountability, and integrity. The process of adopting such measures should also be carried out in a non-discriminato- ry manner. Procedures involved in the adoption and implementation of such measures should be free from any conflict of interest. c. Institutional Framework Institutional governance plays a crucial role in addressing corruption ef- fectively. Establishing robust institutions with strong governance structures helps prevent, detect, and combat corruption. The institutional framework to address corruption and anti-money-laundering (AML) issues depends on a country’s legal tradition. Some of the following structures can be considered when designing an institutional framework. Independent anti-corruption agencies: An agency or commission tasked with preventing, investigating, and prosecuting corruption in both the public and private sectors. It may have powers to conduct investigations, gather evidence, and recommend legal action. 292 Law enforcement (anti-corruption department): Specialized law en- forcement agencies responsible for investigating and prosecuting corrup- tion and money laundering offenses. Usually, they work closely with other anti-corruption agencies. Some countries also include an economic and financial crimes unit within law enforcement to work on corruption and money laundering. Auditing agencies: Agencies responsible for conducting financial audits of public sector entities to ensure transparency and accountability. Financial regulators: Agencies responsible for supervising and regulating the financial sector, including banks, insurance companies, and securities firms. They set and enforce AML regulations and conduct inspections to ensure compliance. Judicial bodies: Some countries also create specialized courts to ex- clusively handle corruption cases. Having specialized courts can help with efficient processing of such cases and shall enable government to expediate trials. For AML policies to be effective, all relevant institutions need to act in a coordinated manner. For instance, these will typically include the financial in- telligence unit, law enforcement, enforcement directorates and any other spe- cialized agency created for this purpose. Coordination and cooperation mech- anisms between the key agencies can either be established through the legal framework or through the administrative powers vested on these institutions. But an effective and integrated mechanism may be required to ensure that there is sufficient coordination and information exchange. According to the Corruption Perceptions Index, Chile is the second LAC country with the best performance in corruption perception after Uruguay (only separated by Qatar). It has taken many measures to reinforce transpar- ency and the rule of law in the public administration in Chile, for example the Lobby Law.278 Even reforms to its Constitution have recognized transparency as one of the principles of Chile’s legal system. d. Human Resources and Training Capacity-building needs for officials involved in the development, im- plementation and enforcement of anti-corruption practices may vary depending on their specific role and responsibility. To effectively address 278 Platform for Chilean Lobby Law available at https://www.leylobby.gob.cl/. 293 capacity-building needs, it may be necessary to conduct a needs assessment and develop tailored training programs and resources to address the specific needs of officials. Some common capacity-building needs may include training to conduct public awareness campaigns and educational programs to promote ethics, integrity, and anti-corruption values as well as training to enforce an- ti-corruption laws and regulations. e. Communication and Information Technology E-government initiatives and the use of ICT tools can enhance transparency, accountability and reduce opportunities for corruption. The following are some examples of the government initiatives and solutions driven by technology that may be helpful in combatting corruption: 1. Online digital platforms for service delivery: These are government developed online portals and platforms for investors/individuals to access services, such as applying for permits, licenses, or approvals. These platforms can help reduce direct contact with officials, minimizing op- portunities for bribery and extortion. 2. Electronic tax returns and payment systems: Electronic tax return filing and payment systems enable businesses and individuals to file tax returns and make associated payments electronically, reducing the risk of corruption and facilitating efficient tax administration. 3. E-procurement systems: Electronic procurement platforms can provide a transparent and efficient way to conduct the public procurement process. They automate and randomize the bidding processes, provide access to tender information, and enable real-time monitoring which are key to reduce corruption risks in procurement. 4. Open Data and Financial Transparency Portals: Governments may establish open data portals where they can publish a wide range of gov- ernment information, including budgets, expenditures, contracts, and public sector performance data. This may help promote transparency and enable the general public to scrutinize the relevant information. It also helps identify irregularities or corruption risks. 5. Information sharing: Sharing information about specific instances of cor- ruption and the relevant agencies involved may help create awareness among investors and the general public. This initiative can be carried out by both the government and the non-government institutions. For instance, 294 platforms such as “I Paid a Bribe” in India provide crowdsourced informa- tion on demand bribery in different contexts. Anecdotal evidence suggests that those demanding bribes in areas where these platforms are used become more reluctant for fear of being identified on these platforms.279 6. Digital Whistleblower Platforms: Governments can implement secure online platforms for investors and individuals to report instances of cor- ruption anonymously. These platforms provide a secure channel to report corruption-related information, ensuring protection for whistleblowers and facilitating efficient investigations. 7. Anti-Corruption Hotlines: Technology-driven hotlines can enable investors and individuals to report incidents of corruption via phone calls, SMS, or through phone apps. These hotlines ensure confidentiality, and the reported cases can be tracked, investigated, and addressed promptly. 8. Use of Artificial Intelligence: Although preliminary, governments can use AI to identify patterns, anomalies, and potential corruption risks in large datasets. These technologies can help detect fraudulent activities, such as embezzlement, money laundering, or contract irregularities. Also, AI’s predictive capabilities can help governments anticipate corruption risks, prioritize resources, and focus preventive measures on areas with a higher likelihood of corruption. Though there are many ICT and digital solutions available for governments to address the issue of corruption, it is important to recognize that not all countries are able to dedicate resources to improve their digital and informa- tion communication platforms and capabilities. Any government effort to digi- talize service delivery must be backed by a strong policy rationale and the relevant legal and regulatory framework (See Measure 5: Digitalization). 4. Further Resources “How to Bribe: A Typology of Bribe Paying and How to Stop it” Transparency International (2014) “Government Spending, Corruption and Economic Growth”, vol. 84, World Development (2016), pp. 190-205. 279 Kannaiah, Venkatesh (2016) I paid a bribe: using technology to fight corruption in India. South Asia @ LSE (16 May 2016). 295 “Control of Corruption, International Investment, and Economic Growth – Evidence from Panel Data”, vol. 103, World Development (2018), pp. 323-335. “Economic growth with endogenous corruption: an empirical study Public Choice”, 146 (2011), pp. 23-41. “Convention on Combating Bribery of Foreign Public Officials in International Business Transactions”. OECD (1997) UN Convention Against Corruption (2004). ‘Anticorruption Initiatives: Reaffirming Commitment to a Development Priority’ (2019). Financial Action Task Force Reference List 1. “Control of Corruption, International Investment, and Economic Growth – Evidence from Panel Data”, vol. 103, World Development (2018), pp. 323-335. 2. “France’s Duty of Vigilance Law”. Business and Human Rights Resource Centre (2023). ]. 3. “Corporate sustainability due diligence”. European Commission (2023). “New supply chain laws shake suppliers in developing world” (2023). “ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy”. ILO (2011). 4. “I paid a bribe: using technology to fight corruption in India” (2016). 5. “Corruption and economic growth: New empirical evidence” (2019). 6. “Economic growth with endogenous corruption: an empirical study.” Public Choice, 146 (2011), pp. 23-41. 7. “Responsible Business Conduct for Institutional Investors” []. 8. “Guidelines for Multinational Enterprises”. OECD (2011). “OECD Guidelines on Corporate Governance of State-Owned Enterprises” (2015).[]. 9. “Mapping of investment promotion agencies in OECD countries” OECD (2018) 10. “Annual Report on the OECD Guidelines for Multinational Enterprises 2020: Update on National Contact Point Activity”. OECD (2019). 296 11. “Responsible Business Conduct and the Sustainable Development Goals” (2019). 12. “FDI Qualities Policy Toolkit” OECD (2023) 13. “Responsible Business: Key Messages from International Instruments”(2019). []. 14. “Transforming our world: the 2030 Agenda for Sustainable Development”, UN General Assembly (2015). 15. “UN Guiding Principles on Business and Human Rights”(2011). 16. “Recent developments in the IIA regime: Accelerating IIA reform.” (2021). 17. UN Global Compact. 297 H. Building an M&E framework for investment facilitation reforms Effective implementation of investment facilitation reforms requires the creation of a tailored monitoring and evaluation (M&E) framework. A comprehensive M&E framework is made up of three pillars: i) monitoring reforms through a results framework or scorecard, ii) collecting feedback from other stakeholders in the public sector, and iii) externally validating reforms with the private sector. See Figure 26 for an overview of the conceptual framework of a comprehensive M&E system. Figure 26. A conceptual structure of a comprehensive M&E system M&E system: conceptual framework Internal Key Performance Data collection, Indicators (Monitoring) (Scorecard) analysis, reporting M&E SYSTEM Feedback from implementing PeriodicSurveys, Queries agencies in the public sector External (Evaluation) PeriodicSurveys, Public Private Dialogue Feedback from the platforms, Reform private sector on servise specific feedback loops Source: WBG. 298 First, a results framework identifies the KPIs that need to be tracked to monitor progress over time. KPIs can be developed for the activities, outputs, and outcomes to be achieved through the reforms and investments. Second, an external evaluation can help validate the information captured through the KPIs. For example, collecting and analyzing feedback from the private sector can help identify pain points and gaps between the legal framework and implementation, that may fall through the cracks. Collecting feedback from the private sector is typically achieved by embedding feedback collection in service delivery, and through business surveys. Embedding feedback collection in service delivery is relatively inexpensive, and it can help collect specific feedback on service quality in a systematic way. Business surveys are typically more expensive and complicated to implement, and they require more effort. However, if business surveys are conducted by the government, non-government organizations, in- ternational organizations, or business associations on periodic basis, it may be helpful to include specific questions on authorization procedures to monitor the perception of the private sector (e.g., by asking investors to provide feedback on specific authorizations). Depending on the context of the reform, it may also be helpful to collect and analyze feedback from implementing partners in the public sector. This is par- ticularly useful to identify gaps and pain points in implementation when the reform affects several stakeholders, for example, a horizontal law on authorizations, or in the case of service integration between different agencies. If for example there is an oversight body coordinating reforms, it can collect feedback from the stake- holders systematically, and follow up with the implementing agencies to address the identified gaps. Developing a sound M&E framework includes articulating the theory of change. A theory of change identifies the causal pathways of the desired outcomes of the reforms and investments, then seeks to understand how to achieve those results in a particular context. This forms the basis for developing a results framework that will track KPIs of activities, outputs, and outcomes to monitor progress over time. In practical terms, the following steps must be followed: 1. Start with the desired outcomes depicted in the theory of change. Work backwards through the theory of change diagram to define the outputs and activities needed to achieve the ultimate goal(s). 299 2. Prioritize a selected number of reforms from the theory of change based on availability of resources and political economy considerations. 3. Identify the specific activities, input, outputs and outcomes and the results expected from a reform or intervention. 4. Determine how the results achieved at the level of activities, outputs, outcomes will be measured, i.e., set the results indicators. 5. Create a scorecard of indicators with baseline and target values for each indicator. The scorecard should identify data sources and data collection methods. 6. Track the selected indicators and design a mechanism to collect feedback from the private sector (ideally by embedding feedback collection into the authorization process). 7. Assess progress based on the various KPIs and feedback from the private sector, identify gaps and propose improvements. Figure 27 shows a theory of change in the context of adopting investment facilitation reforms. It provides outputs, outcomes and impacts that can be measured to monitor and evaluate the adoption of specific investment facilitation reforms (Measures 1-16) or a comprehensive reform package comprising a variety of measures. The specific M&E framework to be used in a country will need to be tailored to the breadth and depth of reforms to be undertaken, either in the course of implementing the IFD Agreement or investment facilitation provisions in IIAs. As an example, further information on outputs, outcomes, as well as contributions to potential impacts that can be measured for Measure 3 are included in Figure 28 and Table 10. 300 Figure 27. Theory of change for implementing investment facilitation reforms Inclusive growth-promoting relationships Improved business/investor Reduced business Investment generated Investment retained confidence transaction cost Impacts Business environment improves the ability of firms to compete, grow and prosper in domestic and international markets Improved Enhanced efficiency and Strong and Improved accessibility and Strengthened effective Increased Higher reach effectiveness governance of MNC-supplier investment sustainability of government transparency of investment- relationships relationships policy-and of investment authorization with of business services (# related processes fostered law-marking operations beneficiaries) policy measures administrative stakeholders processes procedures built Outcomes Government policies, regulation and institutions better a ligened with good practice(improving business environment, integration with global economy and fostering sustainable grow) Workshops, Database/ Policy Laws/regs/ Electronic/ training events, suiveys/ reports(e.g., other legal digital Business- Sustainable seminars diagnistics for assesments, New strategies/ instruments platforms enabling investment conferences, policy created manuals, polices drafted enacted, or systems standards standards etc.(ind. or conducted policy notes) amended or created or improved implemented participants) completed abolished improved Outputs 16 key investment facilitation measure ( organized by 7 topics) A B C D E F G 1. Publication and 3. Streaming investment 8. Focal points provinding 12. Public consultation 15. Promoting advance publication of 6. Independence of information, assistance, 10. Domestic supplier on investment responsible business investment measures authorization procedures institutons databases measures conduct (RBC) and advocacy services 2. Availability and 4. Streaming investment 7. Appeal and review 9. Retention 11. Supplier 13. Regulatory impact 16. Combatting accessibility of screening and approval mechanisms mechanisms development programs assessments (RIAs) corruption information mechanisms 5. Digitalizing investment 14. Periodic review of facilitation investment facilitation measures Source: World Bank Group 301 Appendix: M&E’s outputs, outcomes, impacts, and KPIs for Measure 3. Streamlining investment authorization procedures Figure 28. An example of a theory of change for reforms on streamlining investment authorizations Key Challenges Activities Outputs (reforms an investments) Outcomes and impact Challenges in the legal framework: Legal framework Legal framework Short-Term Medium-Term Long-Term Some authorizations lack a legal basis Comprehensive legal mapping of A horizontal law on authorizations (e.g., umbrella law on Legal certainty in the authorizations and authorizatión business registration, umbrella law on business licensing and autorization framework Some authorizations do not have a procedures permits, law on administrative produres) provides a common for investor clear policy objective process framework that adheres to the Agreement Some authorizations lack objective Gap analysis and reform Fewer opportunities for All authorizations have a clear legal basis in primary arbitrary and unequal and transparent criteria to evaluate Recommendations to fully align wlth the lesislation, serve a public policy objective, and are not applications treatment of applications agreement overlapping with or duplicating other authorizations A cost-effective The requirements to aplly for Drafting amendments to the legal The criteria to evaluate applicatons are clearly defined, authorizations framework authorizations are not clear, framework, coordinating consultations and the grouds for rejection are exhaustive, clear, which is free ef overlap exhaustive amd publicly available with relevant stakeholders etc. coincise, specific, and consistent with the purpose of the and duplication The legal framework discriminates Consultations and other preparatory work authorization against foreign investors carried out address implementation gaps by introducing futher amendments to the Administrative decisions are appealed and reviewed by a There is no appeearls framework or legal framework body that has some degree of indeoendence from the bidy ondependence in appeals procedures issuing the initial decision Challenges in the institutional Institutional framework Institutional framework framework: Capacity building for the oversight body An oversight body monitors implementation of the legal More consistent Higher investment There is no performance monitoring and/or competent authorities framework on authorizations, and coordinates reforms with implementation of the andd increaed the relevant completet authorities. Competent authories legal framework number of new Development of M&E framework, & can implement the new framework firms The competente authorities lack the performance management framework Ability to systematically capacities to implement streamlined An M&E and performance management framework are monitor performance, Lower compliance procedures Capacity building for the single point of entry identify gaps/bottlenecks, developed and implemented burden for and analyze feedback investors One or more competent authorities are designate as a from investors single point of entry for authorizations, and they lead service integration efforts Challenges in service delivery: Service delivery Service delivery Mapping all information on autorization Standard Operating Procedures have been developed and Streamlined authorization Lack of Standard Operating procedures Procedures for authorizations they incorporate all the good practices promoted by the procedures Conducting business process analysis, Agreement (e.g.,completeness reviewa) Enhanced transparency Lack of Standard input and output developing Standard Operating Procedures on requirements, forms Standardized input and output documents have been processes and fees & detailed process diagrams developed and implemented for all authorizations Lack of single-entry point for Mapping the input data requirements all Ability to systematically applications relevant competent authorities to develop Integrated forms and procedures have ben implemented for collect feedback integrated application forms some authorizations whichcan be processed through a single poin of entry More predictable and Lack of integrated application forms streamlined autorization Lack of completeness reviews, The completent autorities have developed procedires to procedures tracking of applications and collect feedback from yhe end users notifications to applicants Detailed information on all autorizations is publicly available Authorization fees are not publicly and up-to-date (e.g., fees, procedures, documents, issuing available and consistent and/or they authorities) restrict investment Source: World Bank Group 302 KPIs to be Used Table 10 below presents output and outcome indicators that can be used to measure progress on the implementation of reforms under this measure. This list is indic- ative – it is not meant to be exhaustive. The KPIs that will ultimately be used will depend on the specific gaps identified by the diagnostic and the specific activities prioritized. Lastly, as noted earlier in this chapter, if service delivery workflows are automated it is easier to track performance at the case file level, or even at the individual process task level. Accordingly, the level of detail of the indicator may depend on what is feasible in terms of data collection. Ideally, KPIs should include information on both efficiency and quality through feedback from end users. Table 10. List of indicators that can be considered Output Indicators Definition This indicator measures the total number of authorizations and authorization procedures mapped and included in the database 1. Number of authorizations that will set the foundations for any future work on this measure. mapped The database should include all the key information about each authorization. This indicator measures the total number of business activities 2. Number of business activities mapped. The term “business activity” refers to the fourth level of mapped ISIC code (also known as “Class” or “4th-digit level). This indicator measures the number of authorizations analyzed as 3. Number or percentage out part of the gap analysis that will be conducted to identify weak- of the total of authorizations ness in the framework. It can be expressed as an absolute number, analyzed as part of the gap or as a percentage of the total number of authorizations mapped analysis by the detailed mapping. This indicator measures the number of business activities reviewed 4. Number or percentage out of as part of the gap analysis that will be conducted to identify weak- the total of business activities ness in the framework. It can be expressed as an absolute num- analyzed as part of the gap ber or as a percentage of the total number of business activities analysis mapped by the detailed mapping. 5. Number of workshops and This indicator measures the number of consultations and work- consultations with stakeholders shops conducted with the relevant stakeholders (e.g., relevant Min- (e.g., competent authorities) to istries, Municipalities etc.) to coordinate reforms efforts. coordinate efforts on reform This indicator measures procedures or the number of authoriza- 6. Number of authorizations tions for which SOPs have been developed. Preparation can include for which Standard Operating coordinating efforts with vendors, preparing and/or reviewing “AS- Procedures are developed and IS” and “TO-BE” high level processes and working with the compe- aligned with the Agreement tent authorities to align their processes with the Agreement. 303 This indicator captures the efforts in terms of redesigning the de- 7. Number of authorizations for tailed process workflows in the competent authorities, to align them which detailed process diagrams with the Standard Operating Procedures, and optimize them (e.g., are developed or redesigned in the case where some authorization procedures are integrated). This indicator captures efforts to develop standardized forms (e.g., application forms and output documents). This is particularly rel- 10. Number of new standardized evant when the reform efforts include the design of integrated forms developed or redesigned forms (e.g., forms that integrate the data requirements from two or more competent authorities, related to an authorization). This indicator measures the number of authorizations which have been aligned with the Agreement. This refers to an alignment both 9. Number or percentage of in terms of the legal framework, as well as in terms of service de- authorizations which are aligned livery requirements (e.g., SOPs have been implemented). This indi- with the Agreement cator can be measured as an absolute number, or as a percentage of the total number of the authorizations mapped. This indicator can be used in the case where a horizontal law is enacted, for example a horizontal law on business licensing, law on administrative procedures or similar, and a Ministry or other body is tasked with monitoring the law’s implementation by the com- petent authorities. In this context, an indicator could be used that would measure the percentage of queries reviewed by the over- sight body. The denominator would be the total number of queries 10. Percentage of queries reviewed received. The term “queries” in this context refers to the feedback regarding the implementation of and questions provided by stakeholders in public administration the new legal framework (e.g., Municipalities, line Ministries and other regulators or imple- menting agencies) who are relevant in terms of implementing the reform. The rationale behind this indicator is that typically there are challenges when rolling out a new legal framework, especially so in the case where this is horizontal. This indicator can be used as a proxy to measure the oversight body’s efforts to address the feedback received by other stakeholders in public administration. This indicator can also be used as a proxy to measure the oversight 11. Number or percentage of body’s efforts by measuring the number of queries resolved by the queries resolved oversight body compared to the total number of issues identified by analyzing the received feedback. Outcome indicators Definition This indicator measures the number of documents that are no lon- ger required for the application. These can include documents is- sued by the public sector (e.g., pre-approvals, permits, no-objection 12. Number of documentation letters) or the private sector (e.g., studies, certificates) or even the requirements eliminated applicant (e.g., solemn declaration). This indicator can be used as a proxy to show improved efficiency by removing superfluous docu- mentation requirements. 304 This indicator measures the number of documentation require- ments that have been streamlined. In this context the term 13. Number of documentation “streamlined” means that these documents may still be required, requirements streamlined but they are not required to be submitted and reviewed along with the application. Instead, the business must simply declare that it has obtained all the necessary documents. This indicator measures the number of authorizations which were eliminated. It can also be expressed as a percentage of the total 14. Number or percentage of number of authorizations mapped. This indicator could be consid- authorizations eliminated ered if the diagnostic identifies a high degree of overlap and dupli- cation between authorizations and/or authorizations that lack a legal basis or that do not serve a clear policy objective. 15. Number or percentage of authorizations for which the This indicator could be considered if the diagnostic identifies gaps authorization criteria and the in the legal framework for a high number of authorizations. grounds for rejection have been stipulated in the legal framework 16. Percentage of competent This indicator could be considered if the diagnostic shows that a authorities that permit high number of competent authorities restrict the periods during submission of an application at which an application can be submitted. any time throughout the year 17. Number or percentage of competent authorities that This indicator could be considered if the diagnostic identifies gaps provide an indicative timeframe in service delivery, especially gaps relating to the processing of ap- for processing applications, and plications for a high number of authorizations. that allow the applicant to track the status of their application This indicator measures the time it takes to process an application for an authorization where an approval is required from the time the investor submits a complete application to the moment the authorization is issued. This indicator can be used as a proxy to measure compliance burden reduction, increased market access 18. Processing time (in calendar and more predictable procedures thanks to the simplified entry days) for the competent framework. In the absence of automatically recorded processing authorities (e.g., waiting time for times, this indicator can be measured through internal surveys businesses) (e.g., asking the issuing authorities for data based on their internal processes). Alternatively, this data can also be collected from the private sector, but this approach is more labor intensive, costly, and prone to methodological challenges (e.g., accuracy of feedback is difficult to verify). This indicator can be used as a proxy to measure the degree of pre- 19. Variation in the processing dictability in authorization procedures. A high variation (e.g., a high time for selected business standard deviation) in processing times indicates lack of standard- activities ization and predictability in obtaining a specific license. This indica- tor requires good data on the processing times (see indicator above). 305 This indicator can be used as a proxy for transparency and clari- ty of the regulatory framework. When information on the process 20. Percentage of applications and documentation requirements is clear and accurate, resubmis- for which investors are asked to sions should remain low since investors should be able to submit a resubmit their application complete application without the need to resubmit the application following the completeness review. 21. Percentage of applications This indicator measures integration efforts in the case where the di- that have been integrated into a agnostic identifies opportunities to eliminate overlap and duplication consolidated application form in the input data requirements included in the application forms. This indicator measures integration efforts in the case where the diagnostic identifies opportunities to fully integrate authorization procedures. In this case the integration efforts are not limited to 22. Percentage of authorizations consolidating the input data requirements in the application form that have been integrated into a – they include redesigning the process to optimize workflows, en- single point of entry able full process orchestration through a leading authority (single point of entry), possibly concurrent reviews of applications and in- tegrated output forms. 23. Reasons for successful This indicator can be used as input to develop training and other appeals for each category/type capacity-building measures. These would be targeted to officials of administrative procedure of the administrative authorities, based on the specific challenges (e.g., procedural errors, errors in indicated by the analysis of the data on the results of appeals and applying the material law) judicial review. 24. Percentage of competent This indicator can be used in the case where a new horizontal legal authorities that have fully aligned framework on authorizations has been enacted that requires sec- their legal framework with the toral regulators (e.g., Ministries and other regulatory authorities) to horizontal law on authorizations amend and align their legal framework with the umbrella law. 25. Percentage of competent This indicator can be used in the case where a new horizontal le- authorities that have fully aligned gal framework on authorizations has been enacted that requires their operational framework sectoral regulators to redesign their operational framework (e.g., with the horizontal law on policies, processes, procedures, input and output forms) to align authorizations with the new legal framework. Impact indicators Definition Direct costs are calculated by multiplying the following: 26. Direct costs: the direct • Number of times the given procedure (such as licensing) is un- impact on economic cost (such dertaken by a representative firm on a yearly basis (data pub- as administrative costs, including licly available); official and unofficial payments and labor costs) of an enterprise • Individual cost of each procedure, including official payments resulting from the reform of a (data available through official sources) and unofficial pay- regulatory procedure, calculated ments (data collected through SME surveys); and at the firm level, the sector level, or the economy level • Cost of employees directly dedicated to administrative proce- dures and the daily average employee salary (data collected through SME surveys). 306 This indicator measures perceptions in the private sector. It can be collected directly at the point of service, by integrating the request for feedback as part of the authorization procedure. 27. Improved business perceptions It could also be collected through a business survey. In this case, it of authorization procedures will require collecting a baseline and repeating the survey with the exact same question(s) and for the same “demographic” (sector, activity type, firm size, locality) of businesses after the reform (e.g., 3-4 years later). Source: World Bank Group 307