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Globally countries remain interested in foreign investment as a source of capital for domestic growth and development needs. The host countries facilitate foreign investment through national investment policies. In addition to investment promotion the host countries also ensure investment protection through treaties to provide them with a rule-based predictable and non-discriminatory environment (UNCTAD 2017). The partner countries – host and home countries – engage with each other by signing a Bilateral Investment Treaty (BIT). The BIT negotiations are designed to address investor concerns while also striking a balance according to regulatory space with the host country.

Nearly nine of every ten International Investment Agreements (IIAs) signed across the world are BITs while the remaining ones are Treaties with Investment Provisions (TIPs) which form part of a larger Free Trade Agreement (FTA) covering many other issues such as trade and non-tariff barriers. India’s engagement concerning BITs dates back to 1994 while TIPs were initiated after ten years in 2004. Following the global trend with a prevalence of BITs in the IIAs India too has a counted few TIPs with Singapore South Korea Malaysia Japan and the ASEAN.

India’s experience with BITs

In comparison to the TIPs BITs have the advantage of being independent of other issues. Since BITs entail investment specific rules and regulations they can be amended or terminated relatively easily. This is in contrast to the need to re-negotiate an entire FTA while addressing investment-related issues only. Thus countries including India tend to prefer the BIT route for providing and procuring protection for foreign investments. However the increasing initiation of disputes by a large number of developed countries vis-a-vis the developing partners has raised alarms on the skewed nature of the existing framework of BITs. The number of disputes as well as settlements has increased dramatically in the recent past; from 50 cases in 2000 to as many as 608 in 2014 mostly initiated by investors (UNCTAD).

India alone has faced 22 legal disputes filed by its investment partners. Most cases have been initiated by its developed partners. Even more disturbing is the nature of arbitration which has turned more commercial with most of the earlier disputes being settled through non-pecuniary reliefs; in contrast to the more recent settlements through awarded compensation. Simultaneously Indian investors abroad have also experienced disputes in relation to the existing BITs. However the disputes and the order of claims is far more when raised by the foreign investing partners against India in comparison to when the Indian investor has sued its partner abroad.

Aiming for the driver’s seat

In an attempt to cap the increasing number of bilateral disputes and to preserve domestic regulatory policy space India very recently revised its BIT policy. The effective BIT through a narrower protection for the investor certainly makes it clear that India wishes to be the rule-maker rather than rule-taker in rewriting the rules of the global trading architecture. Likewise many other countries including South Africa Indonesia Ecuador Brazil and the Netherlands have also revisited their investment regimes. This only goes to show that concerns on BIT related arbitration are not unique to India.

However can bilateralism be exclusively considered as the best approach by a developing country like India which is trying to learn the rules of the game fast? Perhaps maintaining a distinctly bilateral approach along with participation in the international debate would entail a balanced approach. Engagement with the international community will be preferable.

Skirting multilateral discussion: A good idea?

However India has taken the exclusive approach. For instance India made a no-show on the list of 70 proponent countries which recognised the links between investment trade and development at the 11 Ministerial Conference of the WTO which culminated on 13 December 2017. The advocates of investment issues at the forum seek future structured discussions for identifying and developing elements of a framework.  Maintaining an arm’s length from engagement in multilateral investment issues India has cited pre-mature nature of discussions inconclusive settlement of the commitments at the past ministerial meetings and lack of preparedness as the reasons. However while keeping its foot down for agricultural negotiations at the WTO India could have made rallied for a deal through its engagement on investment-related issues. India not only has an enormous market on offer but has also demonstrated a strong will to capitalise on committed domestic reforms. India’s jumping ahead by 30 spots within a year on the Ease of Doing business ranking is already being acknowledged as among the top 10 improvements of 2017 (World Bank 2017).

Engagement at a multilateral level can offer an opportunity to understand the trends and minds on investment thinking across the world. This can be availed to understand and address the concerns of bilateral partners on the polarised position taken by India in the new BIT. The discomfort of the investment partners cannot be ignored entirely if India is to maintain cordial relations. More so given the increasing investment outflows from India which become eligible for a reciprocating action.

Published in: Qrius December 31 2017

The consequences can be far more than physiological through the ripples that will affect many future multilateral negotiations. It has not been too long back in the past when Kyoto Protocol of the United Nations Framework Convention on Climate Change was extended half-heartedly and then replaced.

Earlier this month India along with other developing countries looked forward to the 11th Ministerial Conference (MC11) of the World Trade Organisation (WTO) in anticipation. Hoping for a conclusion on the promises made in 2015 at the 10th Ministerial Conference in the form of ‘Nairobi Package’ it was strongly expected that a permanent solution to the issue of public food stocking for food security would be reached this time. This would have allowed some breathing space for the seeking countries to continue or introduce new and related programmes while being exempt from penalties for a breach of subsidy limits. The group demanded that domestic policy support to the farmer in distress should not be treated as trade-distorting and at the very least the measurement of subsidies should be pegged against the prevailing prices as opposed to their currently being computed based on prices that prevailed 30 years ago during 1986-88. However at the end of MC11 the phrase ‘tomorrow never comes’ seems to making sense like never before. The WTO supports and promotes the spirit of multilateralism. It has 164 members till date with Afghanistan as the latest country joining in 2015 after more than a decade of negotiations. The continued expansion of membership only demonstrates the faith and interest of developing and least-developed countries in the philosophy of trade integration at the world level. Multilateralism is all about protecting self-interests while promoting the interests of partner countries. Countries join the global discipline expecting multilateral development and progress from an international trade regime. The functional strategy being that of ‘give and take.’

However this time at MC11 the strategy recourse has perhaps been ‘no take no give.’ Two major powers one each from developed and developing world the US and India respectively made their individual stands clear to the global community. The US followed a diverse and scattered approach by renouncing earlier commitments and resisted even a mention of the Doha development mandate in the ministerial declaration this year. Instead the US played new cards on e-commerce and investment issues. On the other extreme were countries like India maintaining that earlier commitments be fulfilled as priority before plating newer issues on the international menu. Polarisation of positions hints that consensual decisions will be hard to reach in the future. India’s demanding position on the Nairobi Package is justified in view of its continued faith in the WTO since inception. However if developed countries suddenly show signs of withdrawal disinterest unresponsiveness ignorance disorientation or non-commitment then other countries are likely feel a breach on them. The sea change in attitudes of developed countries can be viewed from two angles analogous to two separate cliffs leading in the same depression ultimately. One way to look at this break from the past of the US and developed countries is their collusive behaviour to dictate rules of the game. Another way to look at is their changing the goalpost itself placing developing countries in a rear position while commanding the wheel and driving the wagon in different directions of choice. In either case this transformation can surely damage the stability of the institution of trade (WTO) in the future.

The consequences can be far more than physiological through the ripples that will affect many future multilateral negotiations. It has not been too long back in the past when Kyoto Protocol of the United Nations Framework Convention on Climate Change was extended half-heartedly and then replaced. Incidentally Kyoto Protocol celebrated its 20th anniversary this month since it was adopted in 1997. Hailed as the most significant international treaty to address global warming Kyoto Protocol called emission reduction commitments to 5.2% below the 1992 levels during the period 2008-12. However the US refused to ratify and Canada pulled back in 2011 realising that it would not be able to meet its targeted reduction; also suggesting to sign a new pact. In 2015 Kyoto Protocol was replaced with Paris Agreement. The case only underscores the unpredictability and backtracking of the US on issues of global interest. If past promises are not kept chances are high that guarantees on future assurances on newer issues which are being floated will never be trusted. Turning a blind eye to previous commitments has the danger of turning the time clock back into the past where trade regimes were autarkic. This will surely hammer the links—bilateral regional plurilateral and multilateral—which have been carved out through the years. For instance an immediate hit would be sensed through shackling of global supply chain arrangements. If countries have to reverse their current specialisations and focus on the all-production stages the transition costs will be severe and so will be the impact on individual economies and the people. At the end of MC11 although the battle is not lost it is hard to state if the same battlefield exists. The US guarded a forward-looking approach on newer issues of its interest. However developing countries are still on other side of the bridge counting on previous commitments which are yet to see the light of day. Under such circumstances there are two disjoint spheres of interest and unanimous democratic outcomes are unlikely to be achieved in the immediate future. With no breakthrough achieved at MC11 it is best in international interests that the members think more rationally to meet the needs of others rather than just imposing their disregard on developing countries. This would instil faith and bring the negotiations back on track so that the show goes on. Until then the finishing line has been moved forward to some undeclared time in the future.

Anjali Tandon Associate Fellow NCAER New Delhi.

Views are personal

The future of global trade is being negotiated at the 11th Ministerial Conference (MC11) in Buenos Aires Argentina this week from December 10-13.The Indian representation on the multilateral forum is taking up issues of public stock-holding for food security special safeguard mechanism and domestic support and subsidies to fisheries to promote the interests of its .5 trillion economy.

The future of global trade is being negotiated at the 11th Ministerial Conference (MC11) in Buenos Aires Argentina this week from December 10-13. The Indian representation on the multilateral forum is taking up issues of public stock-holding for food security special safeguard mechanism and domestic support and subsidies to fisheries to promote the interests of its $2.5 trillion economy. However the government is likely to stay at arm’s length from any discussion on newer issues such as investment due to the premature framework of the investment policies in a multilateral framework. The key question is: Can India afford to miss boarding the investment cart?

For long India has raised concerns about the inclusion of investment and investment facilitation at the multilateral level and MC11 of the World Trade Organisation (WTO) is no exception. According to India investment facilitation is outside the mandate of the WTO and only trade-related aspects of investment could be discussed at the multilateral forum. If investment facilitation gets included into WTO’s agenda then it would restrict space for formulation of domestic policies/rules to attract foreign investment which is the prerogative of every country.

India believes that investment is a bilateral issue to be decided by the country’s government and that new issues such as investment are outside the purview of the WTO and MC11. India also believes that the focus should remain on solving the crucial issues of finding a permanent settlement to public stock-holding for food security purposes and continued focus on agricultural reforms.

But in recent weeks India has managed to garner support of nearly 100 countries on this issue whereas China and Argentina which have been pushing for investment facilitation to be included in the agenda of MC11 have the support of 45 countries. Even the US is opposed to the idea of inclusion of investment regulations at the multilateral forum. Although South Africa is supporting India on this front India is in direct conflict with its major BRICS partner countries namely Brazil Russia and China on this issue. This is also a reflection of the shallow cooperation that exists in the groupwhose main objective was to stand as a united front on all issues at the multilateral forum.

An ideal multilateral negotiation is about ‘give and take’. It becomes easy to protect our own interests by promoting the interest of the partners even though sometimes in disjoint areas. Therefore to achieve a new outcome one should have an offer to make. This involves strategic position over a long time which can of course change with time as the regime evolves further. The investment regime is currently among the most hotly-debated policy areas in multilateral regional and bilateral partnerships.

Recently India demonstrated its muscle by announcing a new investment treaty for its bilateral investment negotiations. This is particularly impressive given the fact that India’s bilateral investment engagement dates not too back beyond two-and-half decades only. The new Bilateral Investment Treaty (BIT) introduced some significant changes effective through expansions amendments or clarifications; inclusions and omissions. It is a major departure from earlier models as it incorporates substantial changes in its attempt to safeguard the host state’s interests. Subsequently bilateral investment partners have been served notices for treaty termination or renegotiation. Interestingly some treaty partners have agreed for a renegotiation underscoring India’s potential to attract foreign investment.

The revised model BIT certainly makes it clear that India wishes to be the rulemaker rather than rule-taker in rewriting the rules of the investment architecture. It remains to be seen which of the new features of India’s revised BIT actually find a place in the BITs that India seeks to negotiate though it is apparent that several countries are likely to resist many of the proposed changes. To the extent that the model BIT text is adopted between India and certain states investors are to be expected to negotiate a specific investment agreement suited to their interests rather than rely on the limited protections contained in the model BIT.

While committing highly dedicated efforts to regulate the bilateral investment regime it is hard to accept India’s directionally opposite position in multilateral negotiations. Maintaining the government approach to negotiate investment bilaterally a completely alienated position in the multilateral forum is uncalled for. Instead of staying away in isolation to engage would be a better strategy. This is more important in the case of investment issues where even definitional clarities are yet to be reached and expected to evolve continuously in a dynamic manner. Staying involved rather than a complete disengagement will not only help India to understand the regime but also have a say in the issues from the initial stage.

Apart from early-mover advantage from engagement on the multilateral platform this will provide India the implicit opportunity to understand the nuances of bilateral issues. Multilateral discussions can be a stage setting for casting amicable solutions to regional and bilateral issues. Time has taught these lessons—negotiations on trade-related issues have witnessed an experience where multilateralism as the starting point paved the way for deeper regionalism and bilateralism. Adopting the ‘learning while doing’ approach on investment issues will furthermore be helpful for the organic evolution of India’s BIT through successive revisions.

Developed countries will continue to push for investment facilitation rules to be a part of the WTO agenda at Buenos Aires and have called for plurilateral negotiations to discuss investment facilitation and regulation which goes against what India has been propagating. But it is becoming increasingly clear that India cannot afford absenteeism on international investment issues. This is a polarised position when viewed against the enthusiastic and authoritative approach on a bilateral front. In complete acknowledgement of the preliminary and unclear nature of the current international investment discipline any commitments from India are far from being justified. However engagement would be an offer to make. An early involvement without an obligation will pay in the long run in terms of wisdom and experience which will help a strong footing in negotiating at the bilateral levels and later at the multilateral level. India must therefore act in time and ride the cart before it gets crowded.

By Rajesh Chadha and Laxmi Joshi

Rising consumer incomes in India are creating bigger markets for processed foods. This has generated the need for new and modern post-harvest and agro-processing technologies for meeting this demand.

Boost for the sector

The Ministry of Food Processing has undertaken many programmes to give a boost to this sector by enabling domestic policies. In an open economy it is equally important to establish global linkages and encourage foreign direct investment in this sector. This facilitates better returns to the farmers producing food crops boosts manufacturing creates new jobs and promotes research and entrepreneurship.

A three-day World Food India 2017 event organised by the Ministry of Food Processing Industries was held in New Delhi in the first week of November 2017. About 20000 participants from 20 countries and 26 Indian states had gathered to participate and hold discussions. The event comprised of nine seminars and a mega exhibition. This is a precursor for putting India’s food processing sector on the global map.

The NCAER report

The Medium-term Agricultural Outlook Reports of the National Council of Applied Economic Research (NCAER) was prepared for the Ministry of Agriculture and Farmers Welfare. It has highlighted the changing food habits and demand dynamics for agricultural commodities including horticulture and livestock (NCAER 2015; 2016). The NCAER reports revealed the prevalence of inadequate infrastructure in the agriculture sector such as in the areas of storage processing cold chains and supply logistics. This necessitates substantially greater private (both domestic and international) and PPP participation in these areas. The government is seeking to encourage private investment in agri-infrastructure with announcements of policy decisions and projects. However FDI in food retailing and supply chains continues to remain a politically contentious issue.

Fast-paced growth

A recent study on the challenges and growth enablers of India’s food processing sector highlights the role of this sector in creating vital linkages and synergies between agriculture and manufacturing (Grant Thornton-ASSOCHAM 2017). The sector can play a major role in minimising the post-harvest losses of various crops. The Indian packaged processed foods industry is estimated at about US $12 billion. It includes biscuits chocolates ice-cream confectionery snacks cheese and butter. The industry has been growing at a fast pace during the recent years. By 2024 the food processing sector is expected to employ nine million workers.

Government support

The food processing sector has received the government’s support through various other measures as well. As per the statement of the Cabinet Committee on Economic Affairs (May 3 2017) the government has provided an impetus to investment in the food processing and retail sector. It has allowed 100 per cent FDI in trading including through e-commerce for food products manufactured or produced in India. This is expected to benefit farmers immensely while also creating a back-end infrastructure and significant employment opportunities.

A special fund of Rs 2000 crore has been set up in NABARD to make affordable credit available at concessional rates of interest for designated food parks and agro-processing units in these food parks. Food and agro-based processing units and cold chain infrastructure have been brought under the ambit of Priority Sector Lending (PSL) to provide additional credit for food processing activities and infrastructure. This would help in boosting food processing reducing wastage creating employment and increasing farmers’ income.

New schemes

The government had approved a new Central Sector Scheme the Pradhan Mantri Kisan SAMPADA Yojana in May 2017. SAMPADA refers to the Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters. An allocation of Rs 6000 crore was made for the period 2016-20 coterminous with the 14th Finance Commission cycle. The scheme is being implemented by the Ministry of Food Processing Industries.

This scheme would also act as a catalyst for the government’s ongoing efforts towards doubling farmers’ income by 2022. It is a comprehensive package. It aims at creating modern infrastructure for food processing units with efficient supply chains from the farm gate to the retail outlets. Seven major schemes are being implemented under this package. These include mega food parks; integrated cold chain and value addition infrastructure; creation and expansion of food processing and preservation capacities; infrastructure and agro-processing clusters; creation of backward and forward linkages; food safety and quality assurance infrastructure; and human resources and institutions.

Food processing is a sunrise sector for India which contributes to the income of farmers and processors. It would create many new jobs at different levels of skills. Integration with the global economy would add glitter to the success of this sector.

Note: Views expressed in this article are those of the authors and do not necessarily represent the views of NCAER.

Can any country achieve progress without taking its women on board? Studies have shown more women in the workforce equals better economic performance

“If you want something said ask a man; if you want something done ask a woman”. — Margaret Thatcher British Prime Minister 1979-1990.

The former British Prime Minister’s words may arguably reflect the perception that women are usually more dedicated workers than their male counterparts but does this perception find any takers in the world of work in India? Apparently not as indicated by the progressive decline in the labour force participation rate (LFPR) of women in our country evident from the India Human Development Survey (IHDS) panel data among others.The IHDS conducted jointly by the National Council of Applied Economic Research (NCAER) and the University of Marylandin two waves (2004-05 and 2011-12) covers a nationally representative sample of 41554 households spread across 384 districts 1503 villages and 971 urban blocks in India.Using comprehensive measures of women’s workforce participation and accounting for all types of work the IHDSshows a slide in women’s LFPR from 31.12per cent in 2005 to 24.77 per cent in 2012.

The IHDS figures are supported by data consistently emanating from various sources including the Census of India and the annual Global Gender Gap Reportof the World Economic Forum(WEF). The Census reports an all-Indiadecline of 0.11 percentage points in the female Work Participation Rate (WPR) in the decade 2001-2011 with most states in the country except a few in the Southern zone showing a decline in the number of working women.

Data from the Global Gender Gap Report 2017 also reveals that a mere 28 per cent of the working age women in India were engaged in paid jobs in 2017 down from 34 per cent in 2006 when the report was first published. Even more alarmingly the WEF Report ranks India at 139th among 144countries on its Economic Participation and Opportunities Indexwhich is designed to measure gender-based gaps in access to resources and opportunities in the countriesit analyses. The Report also indicates that barring some parts of the Arab world more women are working everywhere as compared to India with the comparative female employment rate being as high as 70 per cent in China and 66 per cent in the US. In the Indian sub-continent too India is lagging behind Sri Lanka Nepal and Bangladesh and is ahead of only Pakistan.

Impact of Female Employment

Can any country achieve progress without taking its women on board? Several studies have shown that having more women in the workforce contributes to economic performance through several pathways. According to a special report in The Wall Street Journal produced by Joanna Barsh and Lareina Yee of McKinsey and Company in 2011 one-fourth of the current GDP of the US can be attributed to the consistent rise in female participation in the country’s economy since 1970.

Another 2016 study by the International Monetary Fund titled “Unlocking Female Employment Potential in Europe: Drivers and Benefits” indicates that the reduction in the male-female employment gap has been an important driver of European economic growth in the last decade. Closing this gap has boosted GDP in the US and the Eurozone by as much as 9 per cent and 13 per cent respectively.

Factors Keeping Indian Women out of the Workforce

Why then is India missing out on the gender dividend and what is driving Indian women out of the workforce? If one goes by the 2011 Census data it is certainly not the lack of ambition or aspirations on their part: The Censusstates that as many as 56 million women in the working age group were seeking work as of 2011 but the fact that a large number of them were denied this opportunity does not augur well for the Indian economy in the long run.Ironically the culprit is often believed to be higher education which is ostensibly meant to enhance employment instead of curtailing it. The possible explanation for this is that as women acquire higher education and become more professionally accomplished they prefer to stay at home rather than compromise and accept low-paid low-esteem and physically strenuous jobs in the informal economy.

The following accompanying graphs based on the IHDS (2004-05)plot the levels of women’s work participation by their own education levels and quintiles of other family income in both rural and urban areas. The figures show that family income notwithstanding education does not always lead to greater levels of employment for women. Another reason for the decline in Indian women’s work could be their dwindling share in services and industry currently believed to be at less than 10 per cent. Besides increasing urbanisation and mechanisation of farm jobs have hit female employment in the rural agriculture sector. The patriarchal nature of Indian society is also said to be a factor confining our women to the home and hearth. Interestingly however Chinese society is as patriarchal as India’s yet China has managed to boost women’s work to remarkably high levels because its economy is creating job opportunities.

A key issue that keeps women away from work is lack of securityexacerbated by long commuting distances and the dearth of safe transportation facilities especially in the cities. In this context the oft-cited example is that of the gruesome gangrape and murder of 23-year old Nirbhaya in Delhi in 2012 that shook the collective conscience of the country. Her only crime was that she boarded anunsafe bus to return home!In her article titled “Reclaiming public spaces: Eve-teasing leads to restrictions on women’s mobility” DrSonalde Desai project leader for the IHDS reveals that 39 per cent of the female residents in metro cities and 30 per cent in villages and small towns reported harassment in their neighbourhoods which obviously affects their freedom to venture outside the home.”This exclusion of women from public spaces is an integral part of Indian life” argues Dr Desai.

For married women and young mothers another hurdle to the retention of employment is the absence of an enabling environment comprising creches and work from home or flexi-time opportunities in lucrative jobs. Thus women finding it difficult to get jobs then finding it equally difficult to travel to work for those jobs and finding it even more difficult to balance work and domestic duties often prefer to stay at home rather than battle the odds with the grim consequence that female workers seem to be rapidly vanishing from the workforce in the country. Margaret Thatcher’s advice certainly seems to be falling on deaf ears in India.