project progress report

IFD Project , Third Quarterly Progress Report, (March-May 2002)

Introduction

Progress of the third project

Plan for the forth quarter

Problems & Solutions

1.        Introduction

1.1. This is the third Quarterly Progress Report (March - May 2002) of the project titled “Investment for Development: Awareness and Capacity-Building on Investment Regimes and International Investment Issues in Selected Developing Countries and Transition Economies.”  The project, which is popularly known as Investment for Development (IFD), is being implemented by Consumer Unity and Trust Society (CUTS), Jaipur. The Department for International Development (DFID), UK is supporting the two year project. UNCTAD is providing support for the project in terms of information resources and advice and is also guiding the project through their representation on the PAC. Seven countries, Bangladesh, Brazil, Hungary, India, South Africa, Tanzania and Zambia have been selected for the purpose of the study.

1.2.The main objectives of the project are:

·     Assist project countries to design and implement effective investment policies that will contribute to equitable growth, development and poverty reduction;

·     To delineate measures that will help developing countries, in general, and selected countries, in particular, to construct an environment that stimulates domestic and foreign direct investment;

·     Contribute to the assessment of needs and formulation of negotiating strategies for developing countries for discussions on investment issues at the regional and multilateral levels;

·     Raise awareness and stimulate national debate on investment issues;

·     Build capacity in civil society on investment issues;

·     Encourage a participative policy-making process for investment issues;

·     Raise awareness of the impact of competition policy and sectoral regulatory policies on attracting beneficial investment;

·     Encourage “good regulation” or “re-regulation” rather than just deregulation;

·     Dampen competition for investment between countries;

·     Arrest reductions in labour, environment and other standards – the ’race to the bottom’ – phenomenon, by examining and disseminating information on the relationship between standards and investment, and

·     Encourage cooperation, information sharing and joint initiatives across countries on investment issues.

1.3  During the first (September–November 2001) quarter of the project following developments took place.

·     Institutions in the project partner countries were identified as partners in the project.

·     Operational Strategy Note (OSN) was prepared and sent to all concerned.

·     A Project Advisory Committee (PAC) was set up to guide the design and implementation of the project.

·     Two core researchers both from the Indian Institute of Management, Ahmedabad were appointed.

·     Terms of Reference (TOR) Report A was prepared and sent to all concerned for their reference.

·     Two consultants were engaged on the basis of their interest and ability and their commitment to the fulfillment of the project goals.

·     Draft project reports (Report A) from four of the seven country partners were received.

1.4. During the second (December 2001–February 2002) quarter of the project following developments took place:

·     Draft Report A was received from all partner countries.

·     Final Report A was received from India.

·     The launch meeting of the project was held at Jaipur, India on 13-14 December 2001.

·     A meeting of project partners was held on 12 December 2001 at Jaipur.

·     First PAC meeting was held in Jaipur, India on 15 December 2001 and the second PAC was held on 22 January 2002 at Geneva, Switzerland.

·     The first round of National Reference Group (NRG) meetings were held in India, Hungary, South Africa and Tanzania during the quarter.

·     Terms of Reference (TOR) for Report B was prepared along with the questionnaires for civil society, investor and local businesses and sent to all concerned.

·     Centre Policy Dialogue, the Bangladesh partner, opted out of the project for their own reasons. Negotiations were under progress with Bangladesh Enterprise Institute in Dhaka.

·     The Zambian researcher Stephen Muyakwa withdrew from the project. No reasons for the withdrawal were cited.

II.      Progress in the Third Quarter

2.1.     Contracts

2.1.1.      In Bangladesh, Bangladesh Enterprise Institute (BEI), Dhaka has been finalised as our project partner after consulting the PAC. CUTS has signed a new contract with BEI.

2.1.2.      In Zambia, Gideon Mudenda has replaced Stephen Muyakwa as the independent IFD researcher. CUTS has signed a contract with him. He is to work on final report A and preparation of report B.    

2.2     Report A

2.2.1. Report A is to be finalised by each country partner after incorporating the comments received from CUTS and the first NRG meeting participants of the respective country. Except Bangladesh and Tanzania all countries have sent their final versions of Report A.

2.2.2. Final report A has been received from the following partner countries: Brazil, Hungary, India, South Africa and Zambia. They are available on our website www.cuts-international.org/ifd-cr-lm-htm

2.2.3. Final report A is expected very soon from Bangladesh and Tanzania.

2.3.     Synthesis Report

2.3.1.  According to the OSN, on the basis of the Report A of each country, a synthesised report, the ‘Investment Policy Comparison’ will be written by the Core Researchers. This report would be distributed to the PAC for their comments.

2.3.2. The Terms of Reference  (TOR) of Synthesis Report A was prepared and sent to the Core Researchers and the PAC members for their comments. The TOR is available on our website (www.cuts-international.org/ifd-indx.htm).

2.3.3. The Core Researchers of the project have prepared the draft Synthesis Report, which was sent to the PAC for their comments. The report identifies areas of similarity and contrast in investment policies of partner countries. The draft Synthesis Report A is available on our website (www.cuts-international.org/ifd-indx.htm).

2.4         Report B

2.4.1        The researchers in all partner countries are preparing a second report entitled Performance and Perceptions Report (Report B), which would be a reader friendly, non-technical document. It will cover perceptions of foreign and domestic investment among investors and the civil society. The relationship between policy, perceptions and performance will be examined through selected case studies. The report will draw on secondary sources and the data from three surveys that will be conducted by partners. The surveys are conducted on civil society, local businesses and domestic subsidiaries of multinational corporations (MNCs). CUTS will also carry out interviews on companies based outside the selected countries.

2.4.2        The Terms of Reference (TOR) of Report B has been prepared and has been sent to all the partner countries for their reference while preparing Report B. The TOR of Report B are also available on our website www.cuts-international.org/ifd-indx.htm .

2.4.3        Sanjib Pohit of NCAER, New Delhi, has prepared the draft India Report B. This report is available on our website www.cuts-international.org/ifd-indx.htm .

2.5.     National Reference Group (NRG) Meetings

2.5.1.      A major component of the project is to constitute a NRG in each project country for conducting periodic consultative meetings. It includes representatives of the civil society, government and media. The purpose of constituting NRG is to provide a sounding board and quality check on the research outputs.

2.5.2.      The first round of NRG meetings were held in Bangladesh, Brazil and Zambia in this quarter. The minutes of the meetings held in Bangladesh and Zambia are available on our website www.cuts-international.org/ifd-indx.htm

2.5.3.      The first Bangladesh NRG meeting was held at Dhaka on 18^th April 2002. The primary issues debated were whether democratic norms, human rights and market access are necessary to attract FDI. Constraints in Bangladesh were also discussed and various recommendations were made. There were mixed reactions on whether a well-organised  civil society existed in the country. Views also varied on whether FDI should be attracted in specific sectors alone.

2.5.4.       The Brazil NRG meeting was held on 26^th April 2002. (The NRG meeting report is yet to be received)

2.5.5.      The first NRG meeting in Zambia was held on 25^th April 2002. Professor Oliver Saasa of the University of Zambia made a presentation on ‘Economic Liberalisation and the role of Foreign Direct Investment: Lessons of Zambia’. A discussion took place on various aspects of economic liberalisation and the role of FDI. It was argued that further opening up of the economy and competitive environment would make the country attractive for FDI. Inadequate infrastructural facilities and skilled personnel are major roadblocks in attracting FDI to Zambia.

2.6.     Outreach

2.6.1.      The second quarterly electronic newsletter for the period January-March 2002 was circulated. It is available on our website www.cuts-international.org/ifd-indx.htm

2.6.2.      Newspapers in Zambia covered the CUTS Zambia NRG meeting held on 25^th April 2002

2.6.3.      Mr. Pradeep S Mehta, Secretary General CUTS attended a conference on ‘Transparency, Responsibility and Progress: the Role of the OECD Guidelines for Multinational Enterprises’ on 13-15^th May in Paris, which was organised by OECD. Mr. Mehta spoke on Corporate Responsibility.

2.6.4.      Mwamba Makasa of CUTS – Africa Resource Centre participated in ‘Multilateral and Regional Trade Negotiations’ on 03^rd and 04^th April 2002 at Lusaka. The workshop background arose from realisation of the private sector of the need to become a quality partner of government and regional bodies like COMESA and SADC in multilateral, regional and bilateral trade negotiations.

2.6.5.      Mwamba also attended a workshop on US Market Opportunities and Africa Growth and Opportunity Act (AGOA) at Lusaka on 08^th April 2002 organised by Zambia Trade and Investment Enhancement (ZAMTIE). A provincial awareness campaign, the workshop aimed at sensitising on the market opportunities provided by AGOA.

2.6.6.  IFD E-Forum

As a part of the ‘Investment for Development’ project, CUTS has launched IFD E-Forum, an online discussion forum on investment issues. The forum would involve exchange of information and views on important national and international investment issues. It would also involve in debates on investment policy, perception, performance and implementation issues which are discussed in the project research.

For more information please visit http://groups.yahoo.com/group/ifd_eforum or write to IFD_eforum@yahoogroups.com.

2.6.5.      The third IFD Newsletter (the May issue) is being printed.

2.6.6.      A briefing paper entitled “Foreign Direct Investment in India and South Africa: A Comparison of Performance and Policy” has been published by CUTS.

2.6.7.      A section of CUTS website has been dedicated to the project and is regularly updated with progress reports and other news items. All reports will be available to download from the site

2.7       Report C

2.7.1   Report C is to be prepared as a separate document covering the discussions at all three NRG meetings including minutes of the meeting, background and analysis of key areas of debate, prioritised policy recommendations emerging from the meeting reflecting priorities. Reports A (FDI policy report) and B (FDI performance and perceptions report) would act as a base for Report C. Report C would also contain list of actions/recommendations for government, civil society and IGO’s. The report will be a reader friendly document with clear policy recommendations and action points for other stakeholder groups reflecting consultation with but not necessarily endorsed by all stakeholders.

2.7.2.  Terms of Reference (TOR) for Report C has been prepared and is available on our website www.cuts-international.org/ifd-cr-lm-htm

III.     Plans for the fourth quarter (June-August 2002)

3.1.    Report B will be discussed in the second round of NRG meetings to be held in all partner countries. All partner countries will finalise report B based on the comments received in second NRG meetings, and from CUTS and the Core Researchers.

            The second NRG meetings are scheduled to be held on the following dates in the following countries.

Brazil: 28^th June 2002, Sao Paulo

Hungary: 28^th June 2002, Budapest

India: 9^th June 2002, Chennai.

3.2.     The Synthesis Report A will be finalised on the basis of comments received by CUTS

and PAC members. The final report will be available at our website

3.3           As part of the IFD project, CUTS will hold three regional seminars in Asia, Africa and       Latin America in collaboration with the UNCTAD. The Africa Regional Seminar is being planned on 24-25 August in Mombasa, Kenya. The purpose of the seminar is to reach out to the civil society of Africa on investment issues.

IV.      Problems and Solutions

4.1.     Questionnaires

During this phase of the project some problems in the questionnaires relating to its size and sensitivity for Report B cropped up.

4.1.1.   Brazil devised a foreign subsidiary survey questionnaire in the format of an objective test paper.  They also excluded some of the questions from the questionnaire, which eliminated “discursive and redundant questions”.

    CUTS informed them that the questionnaires were prepared after lot of discussions and it would not be prudent to change the questionnaires.

4.1.2.  Our researcher in Hungary raised some questions on the surveys. He wished to use data from an old investor survey on the grounds that there is not enough time to conduct surveys and the response to the surveys might be inadequate.

               CUTS explained to him that it was necessary to conduct fresh surveys to get the latest data and also to know the perceptions of investors and the civil society about FDI.  Subsequently, shorter versions of the questionnaires were sent to CUTS for the surveys in Hungary.  CUTS suggested some changes on these revised questionnaires.

4.1.3.      South Africa reported that while the civil society and local business questionnaires were being positively received but response was low with the corporate questionnaire as companies found a few questions too “sensitive”. The country partner prepared a corporate questionnaire, in which the sensitive questions were removed. CUTS gave them a go-ahead after reviewing the questionnaire.

4.2              Third Quarter Payments

4.2.1        CUTS had sent the third quarter (March – May 2002) invoice to DFID on 04 March 2002 with the statement of account for December 2001-February 2002. The third quarter invoice was for GBP33480.  The amount has not yet been received by CUTS.

4.2.2        CUTS has been following up the matter with DFID for over two months. CUTS has now been informed that DFID remitted the funds on 19 April 2002 but Bank of England instead of routing the remittance to Jaipur, India through Canara Bank, London, routed the transaction through State Bank of India, London. The State Bank of India at Jaipur is unable to trace the payment. It is not clear where exactly the error occurred – at the Accounts Department at DFID or at Bank of England. We await the remittance.