A guide to include gender in investment agreements

Dawar, Kamala (2021) A guide to include gender in investment agreements. Technical Report. UK Aid, London.

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Abstract

1. This Guide explains how the regulation of foreign direct investment (FDI) has evolved, why Gender Equality and Social Inclusion (GESI) needs to be addressed in international investment treaties and the ways in which this can be implemented, along with the associated challenges. It is a basic ‘crossover’ guide for audiences based in two very different domains of policymaking: investment law and policymakers and negotiators on the one hand and gender equality ministries and civil society stakeholders, on the other.
2. Most FDI is regulated by international investment treaties signed between the government hosting an investment and the home government of the investor. The traditional objective of an International Investment Agreement (IIA) is to protect the investment in the territory of the host country, through for example: fair treatment, compensation for expropriations and the right to submit an investment dispute with the host government directly to international arbitration. Host countries are motivated to sign these agreements in order to attract FDI into their countries to further economic and human development.
3. The interconnection between gender and FDI is becoming an increasingly important area for policy makers because understanding FDI’s role in enhancing gender equality will bring multiple gains. FDI is positively related to women’s employment, particularly in developing countries, as a result of large-scale activities in female-dominated and labour-intensive garment and food industries. FDI inflows are positively associated with female life expectancy (including reduction in maternal mortality), as well as female-to-male gross enrolment rate in secondary schools. Investment liberalisation through IIAs interacts with women’s access to critical physical, financial and human resources and access to basic services, with significant implications for their empowerment, livelihoods, health, socioeconomic status and well-being.
4. Conversely, women’s disempowerment causes staggeringly deep losses in productivity, economic activity, and human capital. Working women are facing a persistent gender wage gap and discrimination within the work place. At home, 75 per cent of the world’s total unpaid care is undertaken by women, including the vital tasks that keep households functioning such as childcare, caring for the elderly, cooking, and cleaning. (McKinsey, 2019)
5. Such gender inequalities are the consequence of discriminatory forces that permeate all social activities. In the economic sphere, gender inequalities are evident in three main dimensions: the allocation of unpaid work, treatment in paid work, and rights to property. In relation to international investment, the main points of impact are the constraints on the level and terms of women’s engagement in the labour market.
6. This Guide argues that FDI and IIAs have the potential to be important mechanisms for delivering global public goods, including improving gender equality. FDI is widely understood to introduce technical know-how, enhance work force skills, increase productivity, generate business for local firms, and create better-paying jobs, generating more government revenue. Moreover, FDI is often the largest source of external finance for many developing countries.
7. Harnessing the beneficial effects of FDI in a particular state requires strategic consideration of domestic conditions and the global economy. This Guide identifies the different types of FDI, the different provisions and protections included in IIAs, and how the conduct and responsibilities of these investments and investors need to be clearly set out. This will allow for the conduct of multinational enterprises (MNEs), as the main providers of investment, to be better regulated to promote gender equality.
8. As the attraction of FDI is evolving from bringing in purely financial capital to building up all forms of capital, notably human capital, foreign investors are in turn, becoming increasingly attracted to investing in countries with higher levels of human capital, in both men and women. So, if harnessed correctly, FDI can work to benefit both the investor and the host country, in developed and developing economies. There is much potential for governments to reform their investment policies and agreements to address gender equality more effectively, but also to attract more FDI by reducing gender inequality domestically.
9. However, while FDI in female-intensive industries may boost women’s wages and employment, it has made women extremely vulnerable to the instabilities of the global economic system. This is due to the highly competitive nature of labour-intensive export industries, the high capital mobility characterised by this type of cost sensitive FDI, and the fact that manufacturing industries, which women are most employed in, are also the most exposed to the liberalising effects of current trade agreements.
10. Another GESI and FDI concern is that IIAs have the potential to unduly restrict policy space for host countries and create a risk that investors challenge core domestic policy decisions, for instance in the area of GESI. There is an increasing need to rebalance the rights and obligations between investors and states and ensure greater coherence between investment policies and other public policies. Investment policies do not exist in isolation, but interact with other policy areas, including gender, the environment and health.
11. This Guide identifies a range of different avenues for promoting GESI in investment treaties, beginning with non-binding obligations endorsing, implementing and monitoring the enforcement of relevant international agreements such as the Convention on the Elimination of all Forms of Discrimination Against Women (CEDAW). More significant provisions include non-regression clauses, with specific reference to gender equality, to prevent potential slippages in gender policies, particularly in times of crisis, such as the COVID-19 pandemic. The Guide also sets out approaches for defending policies promoting GESI in IIAs, such as broadening public policy exceptions, carve-outs or derogations, narrowing or eliminating stabilisation clauses that shield investors from changes to the law, and including performance requirements to positively discriminate in favour of female labour employment.
12. None of these methods of promoting GESI come without challenges. Indeed, if the root causes of women’s labour market inequality are not addressed by domestic governments, there will always be constraints on the ability of countries to draw substantial development benefits from foreign investment in female-intensive industries, and on the potential for this type of investment to contribute to women’s well-being. This Guide sets out how countries adopting laws, international conventions and guidelines that guarantee the right to equality use investment policies and treaties to mainstream GESI into domestic and international laws.
13. If host country governments did more to give greater domestic legislative push through IIAs, foreign firms could help to enhance gender equality in host countries. By increasing the demand for female labour, foreign firms may put upward pressure on women’s wages and contribute to reducing the gender employment and wage gaps. Foreign firms can support gender balancing in senior management through, for instance, corporate policies that help reconcile work-life balance, or activities aimed at developing leadership and managerial skills of women. Foreign firms can also develop women’s entrepreneurship in host countries, by creating new business opportunities for women-owned businesses, or by helping improve their performance.
14. The study concludes by discussing how the investment policy making process within countries can be harnessed to promote gender equality, consistent with national development goals (such as the Sustainable Development Goals (SDGs)). Consultations, impact assessments and mechanisms for monitoring FDI effects are all important in this connection. A gender sensitive investment policy making process is an essential prelude for parties to negotiations to be able to push for appropriate measures in future international investment treaties.
15. GESI provisions will become the more rational approach for FDI and multinational enterprises (MNEs) to follow when more governments embed GESI within a domestic gender equality policy that is broader than GESI policy, and implement relevant international conventions and guidelines. With this objective in mind, this Guide puts forward a range of best practices and policy guidelines, that have been developed to help maximize the potential benefits of FDI for gender equality, in both society and the economy.

Item Type: Reports and working papers (Technical Report)
Keywords: Gender, Foreign Direct Investment, Social Inclusion, BITs
Schools and Departments: School of Law, Politics and Sociology > Law
Subjects: H Social Sciences > HG Finance > HG4501 Investment, capital formation, speculation > HG4538 Foreign investments
H Social Sciences > HN Social history and conditions. Social problems. Social reform > HN0050 By region or country > HN0980 Developing countries
H Social Sciences > HQ The Family. Marriage. Women > HQ1101 Women. Feminism
K Law
Related URLs:
Depositing User: Kamala Dawar
Date Deposited: 04 Jun 2021 08:07
Last Modified: 04 Jun 2021 08:07
URI: http://sro.sussex.ac.uk/id/eprint/99596

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