WTO: Agreement on Investment Facilitation for Development (IFA)

Context- Recently (July 2023) over 110 (it does not include India) of the WTO 164 members
concluded text-based negotiations on the Agreement on Investment Facilitation for
Development (IFA)
What is the Agreement on Investment Facilitation for Development (IFA)?

  • The Agreement on Investment Facilitation for Development (IFA) is a WTO-negotiated
    agreement designed to create a more investor-friendly business environment by
    simplifying investment procedures and promoting transparency and predictability for
    foreign direct investment (FDI), particularly in developing and least-developed countries.
  • It Is meant to create legally binding provisions aimed at facilitating investment flows.
    What IFA doesn’t cover?
  • IFA does not cover areas like market access, investment protection, government
    procurement, specific subsidies, or investor-state dispute settlement (ISDS).
  • In essence, the IFA is not aimed at liberalising investment policies. Its objective is to
    simplify investment procedures.
    Investment facilitation and Investment promotion
  • The difference between investment facilitation and investment promotion is that
    promotion focuses on presenting a location as an attractive investment destination,
    while facilitation aims to simplify the process for foreign investors to establish or expand
    their businesses by addressing practical challenges they may face.
    Reasons for India’s Non-Participation in IFA Talks
    WTO’s Mandate
  • India believes that investment matters are beyond the WTO’s scope and prefers bilateral
    negotiations for investment provisions.
    Concern About Developed Nations’ Strategy
  • India views the IFA as a step by developed nations to introduce investment facilitation in
    the WTO, potentially followed by contentious investment protection rules later on.
    Opposition to Plurilateral Agreements
  • India opposes plurilateral agreements within the WTO, as they do not follow the
    consensus decision-making process.
    Concerns About ‘Most Favoured Nation’ (MFN) Provisions
  • India is wary of including MFN provisions in the IFA due to past negative experiences,
    including repercussions faced after including an MFN provision in its Australia Bilateral
    Investment Treaty (BIT).
    Legally binding dispute settlement
  • The apprehension that foreign investors could use a future IFA to bring claims under the
    existing BITs.
  • India has terminated its older bilateral investment treaties (BITs) and is in the process of
    negotiating new agreements based on its 2016 Model BIT text