Investment facilitation for development or trouble?

Turkiye pulled out of the Investment Facilitation for Development (IFD) discussion at the WTO on Feb 1, 2023. More members will follow suit not just because of IFD's defective birth investment's negative mandate in line with the July 2004 General Council Decision, but for the implications of the Investor-State Dispute Settlement (ISDS) mechanism from International Investment Agreements (IIA).

Germany, Spain, France, Netherlands, and Italy pulled out of the Energy Charter Treaty last year to stave off the ISDS mechanism. So far, 30 of the 53 members of the Energy Charter have faced 150 ISDS disputes.

The provision of the ISDS in IIAs has been controversial across countries as governments faced unpleasant experiences. The ISDS disputes are also costly, incurring an estimated average of $6 million for each party. Several efforts are underway to find alternative dispute-resolution methods in newer IIAs, including in IFD, which has opted for WTO's dispute mechanism.

However, in reality, the signatories of IFD cannot escape ISDS's clutches if they have already signed some IIAs. This linkage and the interplay of IIAs and the IFD are unambiguous.

Risks and rewards of joining IFD

Facilitations help investors in the application process, but investment decisions are market-driven and based on destination countries' political, policy and regulatory stability.

There is no evidence to show any correlation between investment facilitation and development or investment inflows. The current discourse of IFD is just an assumption.

The current literature on the impact of signing IIAs on investment flows is not encouraging either. Some studies have shown no correlation, and others have indicated limited influence. Despite states giving protection and legal assurances in IIAs, there is no conclusive evidence that IIAs have directly helped investment flows