The ongoing economic and financial crises has led many governments to continue liberalizing and promoting foreign investment as a source of growth, UNCTAD’s World Investment Report 20121 says. At the same time, however, the study notes that foreign direct investment (FDI) in some core industries faces more restrictions and regulation. And it says there is growing discontent with some key features of international investment agreements. Suppliers in developing countries need support to address the compliance challenges posed by the complex corporate social responsibility standards of global supply chains.
The World Investment Report 2012, released today, is subtitled “Towards a New Generation of Investment Policies”.
In the light of ongoing crises, governments have readjusted their FDI policies to achieve a better balance between investment liberalization and regulation in some core industries, the report says. This trend includes a more critical approach towards outward FDI as a result of perceived fears of job exports. Government policies on International investment likewise have been seeking a more balanced approach between investment protection and sustainable development. Finally, as long as the current economic crisis continues, there is a heightened risk of more restrictions being imposed on FDI, the report says. The study calls for more international cooperation on the matter.
Investment liberalization and promotion remain principal goals, but numerous countries see a need to readjust open-door policies
The publication reports 67 policy measures affecting foreign investment in 44 countries over the course of 2011. Of these measures, 52 are related to investment liberalization, promotion and facilitation. Fifteen measures introduced new restrictions or regulations. Compared with 2010, the percentage of more restrictive investment policy measures decreased significantly, from approximately 32 per cent to 22 per cent. However, UNCTAD says it would be premature to interpret this as an indication of a reversal of the trend observed in recent years towards more stringent policy environments for investment (figure 1).
Regional investment approaches, sustainability considerations and arbitration reform efforts gain ground in international investment policies
With a total of 47 new international investment agreements concluded in 2011, the universe of such agreements reached 3,164 by the end of 2011 (figure 2)2, though the number of new international investment agreements concluded per year has been on a downward trend for more than a decade. As the negotiation of bilateral investment treaties continues to lose momentum, the balance is gradually shifting towards regional investment treaty-making, the report says. It adds that sustainable development considerations increasingly are factors in international investment agreements and in government policies on international investment.
With 46 new cases in 2011, the year saw the highest number of known treaty-based disputes ever filed within one year. With some cases challenging core domestic public policies, States increasingly have expressed discontent with current investor-State dispute settlement processes and a number of suggestions for reform are emerging, the report says.
Developing country suppliers need support to comply with transnational corporations’ multiple corporate social responsibility standards
Corporate social responsibility standards are of growing importance and are affecting global supply chains, the report notes. Such standards have complex social and environmental criteria that transnational corporations require their suppliers to meet across a broad range of industries. Compliance with such codes offers new business opportunities but also presents considerable challenges for companies, especially small suppliers in developing countries. Such international standards frequently exceed the regulations and common market practices of host countries. There also are cases of conflicting requirements and standards that constrain competitiveness. In addition, there is a need to accommodate increasing consumer and civil society concerns. The report argues that governments, as well as transnational corporations, can assist suppliers in coping with these challenges through various capacity development initiatives aimed at an upgrading of entrepreneurial and management skills by strengthening existing national institutions and by working with transnational corporations to harmonize standards and simplify compliance procedures.
The World Investment Report and its database are available online at :http://unctad.org/en/Pages/Publications/WorldInvestmentReports(1991-2009).aspx, http://unctad.org/en/Pages/DIAE/FDI%20Statistics/FDI-Statistics.aspx and http://unctad.org/en/pages/DIAE/DIAE.aspx
Full Report - http://unctad.org/en/PublicationsLibrary/wir2012_embargoed_en.pdf
Overview - http://unctad.org/en/PublicationsLibrary/wir2012overview_en.pdf
Figure 1 - National investment policy changes, 2000-2011
Source: UNCTAD, World Investment Report 2012.
Figure 2 - Number of new bilateral investment treaties and other international investment treaties, annual and cumulative, 2000-2011
Source: UNCTAD, World Investment Report 2012
Abbreviations: BIT –bilateral investment treaty, IIA –international investment agreement