Investment Governance in Cambodia: A Window of Opportunity

Investment Governance in Cambodia: A Window of Opportunity

The importance of investment governance for inclusive sustainable development is often overlooked, including stakeholders engaged in natural resource governance and social and environmental issues. However, investment governance plays an important role in shaping the results of their efforts.

As part of advancing land investment governance (align) initiative, Columbia Center for Sustainable Investmentthis International Institute for Environment and Developmentand Cambodia opens up A series of virtual workshops were convened to explore this gap in Cambodia. The online meeting brought together community representatives, civil society organizations, government officials and lawyers to review and discuss Cambodia’s new investment law, which was enacted on October 15, 2021. new investment law Recent negotiations related to investment treaties may present an opportunity for greater alignment between the country’s investment governance and the Sustainable Development Goals, as well as human rights, environmental and climate obligations.

Opportunities to promote responsible investment and strengthen investment processes

A key objective of the new law is to promote “quality” investment in Cambodia (Article 1). The term “quality” is not defined, leaving open the question of whether it can be interpreted – or better, defined in a sub-decree – to mean investment that promotes inclusive, sustainable development . Through various consensus-based processes, the international community has articulated a vision of how investment can contribute to inclusive and sustainable development, including through the concept of “responsible investment”.this Voluntary Guidelines for Responsible Governance of Tenure (in paragraph 12.4) expands on this vision and explains that responsible investing does no harm, prevents deprivation and environmental damage of legal tenure holders, and respects human rights.

To what extent Cambodia will incorporate responsible investment principles into its implementation sub-decree The effect of the new law remains to be seen, but it offers some opportunities. For example, investment projects may be cancelled due to non-compliance with legal obligations or adverse effects on the environment, public interest or people’s well-being (Article 31).

The law also indicates that Cambodian investment advice screening process To be regulated in a new sub-decree (Article 11). The new application system screens potential investors to check their reputation, expertise and experience, financing status and commitment to sustainable development and responsible business practices. It can also screen potential investments to examine feasibility, community consultation and consent programmes, climate change impacts, empowerment of local people (including youth and women), site suitability, natural resource use and management, and liaison with national and sustainable Consistency of development goals.

How to strengthen investment processes and promote responsible investment in practice

Investment-affected communities are important stakeholders in investment governance. They can use different levers to better align investment with inclusive, sustainable development. For example, at the law and policy design level in Cambodia, they can advocate for the implementation of sub-decrees that define quality investment and align screening procedures and grounds for termination with international principles for responsible investment. They can also encourage governments and the private sector to comply with existing national laws that incorporate inclusive, sustainable development standards by building capacity and knowledge around such standards and the experiences of affected communities.

Governments and investors can benefit greatly from ensuring that all investments are made responsibly.Responsible investing reduces associated risks and substantial costs Conflict with local communities, increasing the chances of project success. Successful investments that promote socio-economic development, avoid conflict, care for the local environment and thus generate profits are win-win for investors, governments and communities.

Challenges facing investment governance in Cambodia

The Cambodian community is often unaware of planned projects and related draft laws and policies, and therefore cannot provide important insights to shape them and avoid negative impacts in the first place.When it comes to indigenous peoples or other project-affected communities, they have the right to Free, Prior and Informed Consent must be respected.More generally, where legal rights holders are involved, they should be consulted and allowed to participate meaningfully in decision-making and legislative process.

Local communities and civil society organizations will benefit from support and enhanced understanding of investment governance to review draft laws and policies and evaluate and monitor the implementation of specific projects. They need greater capacity to engage in constructive and productive dialogue with governments and the private sector to avoid poor laws and irresponsible investments in the first place, and to ensure that natural resource projects that adversely affect them Take mitigation and remedial action.

Another challenge involves Cambodia’s exposure to investor-state disputes Under investment treaties and broader trade agreements with investment chapters (Collectively known as IITs or International Investment Treaties), which often includes investor-state dispute settlement clauses (ISDS).Even with strong domestic laws to protect communities and the environment, as long as such ISDS provisions remain in force, governments may huge costeven if they take legal action to protect human rights or the environment, including combat climate change. and, empirical evidence No indication that IIT stimulates new inward investment (let alone new “quality” investment), neither The benefits associated with any new investment outweigh the costs.

Have 21 known IITs with the ISDS regulations applicable to Cambodia.A foreign investor recently brought first to know Investment treaty-based claims against Cambodia (link behind paywall). In addition, the Regional Comprehensive Economic Partnership (RCEP), a mega trade agreement with investment clauses that entered into force for Cambodia on January 1, 2022. The RCEP parties agreed to begin discussions on ISDS within two years.Cambodia may consider available options align IIT with sustainable development, including withdrawing consent to existing ISDS terms and refusing to sign new treaties.

window of opportunity

These ALIGN workshops revealed opportunities to strengthen investment governance in Cambodia to better promote inclusive and sustainable development. Community representatives, civil society and lawyers in particular have much to contribute. They can participate in design, such as drafting laws and policies related to them, including sub-decrees. They can contribute to decision-making at the national level, for example, in the negotiations of the ISDS chapter of the RCEP. They can support the implementation of investment governance – especially when proposing projects that will affect them.

align Support governments, civil society, local communities and other relevant actors to strengthen the governance of land investments. The project is being implemented by a consortium led by the International Institute for Environment and Development, the Columbia Centre for Sustainable Investment and Namathi, and is funded by the UK government. This material is produced by CCSI and IIED as part of ALIGN; however, the views expressed do not necessarily reflect the official views or policies of ALIGN partners or the UK Government.

This story was originally written by Columbia Center for Sustainable Investment.