This is a critical time for FDI and for IPAs, as countries seek creative ways to expand and retain investment. As firms and governments seek to build resilience, adapting to changing economic and political conditions, IPAs will look to attract investment in areas such as health, the green economy, new technologies, or driven by a reconfiguration of global or regional value chains. Targeted promotion and facilitation efforts can also help increase FDI flows that grow innovation, skills, and gender equality.

The most recent joint WAIPA-World Bank Global Survey on the State of Investment Promotion Agencies shows that the sustainable development goals (SDGs) and the promotion of the SDGs has become increasingly important for IPAs. As the sustainability imperative as well as green goals offer new investment opportunities, IPAs can play an important role in facilitating such opportunities, including through policy advocacy. [8]

Such advocacy can help create a whole-of-government approach to ensure the right enablers for investments. IPAs also have an important role to play in helping and supporting investors’ decision-making, which can lead to new and innovative forms of investment. Regional initiatives to promote greater integration, such as the African Continental Free Trade Area Agreement and the planned Investment Protocol, will also be important to help grow investment flows. [9]

Additionally, the linkages of investment promotion and facilitation initiatives and measures with the broader economy and especially between lead firms and other domestic players, such as micro, small and medium-sized enterprises (MSMEs), have potential to generate SDG gains and need better assessment.

Going beyond the secular decline in the quantity of FDI, the quality of FDI is also fundamental. Home and host governments are increasingly concerned with the impact of FDI on sustainable development. Investment that is sustainable from an environmental, social and governance perspective is crucial for FDI to generate actual benefits for people and planet, providing not only capital but also helping to alleviate poverty, create jobs, accelerate the energy transition, and develop much-needed inclusive infrastructure to provide goods and services for all.

The evidence shows that the investment activities of foreign firms generate greater increases in domestic productivity relative to investment activities of local firms, while also paying higher wages [10] and offering women greater opportunities. [11] Yet, as the OECD FDI Qualities Indicators reveal, the sustainable development benefits of FDI are not uniform, with some countries benefiting more than others, and within countries, some segments of the population again benefiting more than others. [12] Impacts can also differ across different SDGs as some sustainability objectives are mutually reinforcing while others may necessitate trade-offs.

Understanding these trade-offs and the role of policies in bringing about sustainable outcomes is thus essential. This will help leverage investment to contribute to addressing the multiple sustainability challenges that the world is currently facing, such as climate change, conflict, pollution, hunger, and poverty, while contributing to the protection of the environment and the promotion of fair and inclusive development.

Reform of the international investment regime can help shift investment towards inclusive and sustainable development. Despite its potential, much of the legal framework governing foreign investments was designed in another era and does not necessarily reflect today’s priorities.

Certain challenges posed by existing legal tools, including investment treaties, laws and contracts —as well as the process for resolving investment disputes — have become more apparent over time. The need for international investment agreement reform is now recognized and being advanced across various platforms.

The growing importance of the digital economy opens up new opportunities for investment-led sustainable development through digital FDI: cross-border investment in the digital economy. Digital FDI can help boost competitiveness, increase entrepreneurial activity, and grow participation in global value chains. Digital firms have shown tremendous growth in the last decade, further accelerated by the pandemic. Building on firm-specific advantages in intangibles, network effects and digital assets, such firms can reach scale in a short time and expand abroad rapidly. They are transforming not only traditional industries but also forms of international production through a reconfiguration of value chains. As such, the global expansion of digital firms and their related investments is highly relevant for the development strategies of host economies. [13]

At the same time, certain types of digital FDI can be asset-light and therefore may have limited direct infrastructure and job creation effects in host economies, even while the dynamic growth it generates can create second-order employment effects. In addition, as the digital economy is a relatively new area, there are information gaps and coordination challenges to connecting capital to digital investment opportunities, particularly in developing economies. Regulatory frameworks may also be outdated and not foster “digital friendly” investment climates. For all these reasons, there is a need to work on identifying and adopting policies, regulations and measures that can help attract and facilitate FDI in the digital economy. [14] At the same time, the implications for the innovation ecosystem, including start-ups, certainly exist and need to be assessed together with the related regulatory challenges.

There should be coherence and consistency across different processes and institutions related to investment. Many investment reform processes are disconnected from each other, as well as from related processes taking place in other policy forums, such as those regulating the environment, public health, or human rights. Similarly, negotiations taking place at the international level are not always aligned with relevant domestic initiatives and laws. At present, we are at risk of introducing reforms in one area or policy sphere that jeopardize or are orthogonal to reforms undertaken in others. The challenge is thus to develop a shared, coherent vision for international investment governance, under which different investment reform processes and initiatives can be aligned and mutually supportive.

Successful reform requires an ambitious, collaborative approach. For reform efforts to have a tangible impact, there is a need to find innovative ways to spur investment into priority areas and initiatives. Success will therefore require a wide range of stakeholders to come together to join forces to support and advance this important goal.

For all these reasons, WIDA can play an important role in fostering deeper cooperation and delivering joint activities based on shared ideas and priorities. Future activities can take various forms, including information sharing, dialogue, outreach, and projects.