There is plenty of knowledge about possible benefits of international investments in an economy. I discussed these benefits with China Daily readers on our article of February 21st. In this story, I will point out for a country wanting to receive these investments that an institutional arrangement must be built, since these international investments may have positive and negative impacts. Considering this, some regulations are important to try to avoid negative impacts from transnational companies’ investments, and to enhance the positive effects of these foreign direct investments.

There are 8 major topics that should be studied and covered by public policies. The objective here is to facilitate local, state or even federal Governments and agencies in setting a framework where international investments can be attracted to promote development and avoid possible negative externalities.

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The first one relates to governance structure of the investments. In this arena, we may take care of the wide arrange of possibility of investments (joint-ventures, vertical integration, franchisees…), money entrance conditions, the promotion policies to receive these investments, safeguards for risk protection (invasion, expropriation, fees, etc) and others. How direct investment will take place and sorts of assets ownership (land, industry and others) must be considered and planned, and also how the stimulus package for these investments (like energy supply, logistics and other related to infrastructure) will be built and even how to remove the existing obstacles to attract investments.

The second topic relates to environmental protection, focusing on policies of water usage, agricultural practices (soil preservation, harvest, among others), policies on pollution control, sanitary measures, international standards and certifications that will be required and, finally policies regarding the preservation and rights over the biodiversity. Some companies are accused of not having the same environmental practices they have in the home base, and this should be avoided by suitable policies.

The third topic deals with regulation of human resources. These regulations may include salaries, labor and wages, benefits, working conditions, corporate social responsibility, ethics and codes of conduct and community relations. This is one of the most important topics, since most problems on international investments done in the past happened in the field of bad management of human resources.

Taxation policies (taxes) comes as a fourth topic that must be defined for transnational investments. Questions regarding the structure of taxes and tax policies, export tax policies, purchase and compensation taxes and possible Government temporary tax incentives for the investment to be done, to be stimulated are focus of the analysis here.

As fifth we have research and development policies. At this point, the most relevant would be a kind of stimulus to improve development of local knowledge and R&D. Property rights, licensing contracts and royalties must be discussed. Stimulus for linkages with local research organizations and institutions can be an important incentive to integrate and promote development.

The sixth topic is more related to agricultural or agribusiness investments, and deals with joint actions for farmers and industry. It is important to have policies stimulating linkage of the international investments to local organizations, an incentive for cooperatives and association’s formation and sustainability, previous preparation of farmers, coops or organizations for the relationships with the international investments and incentives for building sustainable supply contracts. It could be important also to establish a framework for dispute mechanisms and even private arbitration.

The seventh topic regards to financing and credit. Discuss and implement policies on how an international investor can have access to public sources of financing, state banks and public credit lines. This offer of credit, linked to the technology of the international investor gives a nice possibility of growth.

Finally, the last topic relates to policies regarding market access. In each of these policies, there are suggestions of incentives to international investments. These can consider government purchasing of products generated by the investment and facilitating local access to investors, international agreements for market access to improve export channels of this new entrant and general competition policies. In food investments, it is also important to evaluate and promote food safety policies to facilitate international market access.

The relevance of studies of international investments to produce food is of fundamental importance. It is well known that food production needs to be enhanced and in order to accomplish these needs, international investments are of fundamental importance. In a moment where countries are establishing policies towards food security, with Governmental and private funds being allocated to buy land abroad and secure food supply the role of these investments increase in importance. This article provided for Government, agencies and companies involved with international investments, a list of 8 major topics that must be considered for regulation of these investments in order to try to bring as much as possible sustainable economic development.

The author is professor of strategic planning and food chains at the School of Economics and Business, University of Sao Paulo, Brazil (www.favaneves.org) and international speaker. The opinions expressed are his own.