04 Nov 10 - UNCTAD-OECD Report on G20 Investment Measures

UNCTAD-OECD ReportA Joint UNCTAD and OECD report on G20 investment measures finds that G20 countries have honoured their commitment to resist protectionism, but calls upon them to remain vigilant in light of intensifying protectionist pressures.

The joint UNCTAD-OECD report is being issued for the forthcoming G20 Summit in Seoul, Republic of Korea, to be held on 11-12 November. It will be submitted together with the WTO's report on trade related developments through a joint letter and summary by the heads of the three organizations, Supachai Panitchpakdi, Pascal Lamy and Angel Gurría.

Today's report comes at a time when foreign direct investment (FDI) flows to G 20 countries declined sharply by 36 % in the second quarter of 2010 (or by 14% when compared to the second quarter in 2009), and when new risk factors, such as competitive devaluations, are emerging. As a result, G20 and global FDI flows for 2010 as a whole could remain stagnant, rendering a new global FDI boom a distant prospect. This is a matter of serious concern, since public investment is running out of steam, while private investment in the form of FDI does not appear to be ready to step up to the plate to sustain global economic growth.

The UNCTAD-OECD report shows that during the reporting period G20 countries have largely continued resisting protectionist pressures. The majority of new investment measures has aimed at facilitating and encouraging investment flows. The new report confirms the findings of earlier joint reports on G20 trade and investment policies, issued in 2010 (March and June) and 2009 (September).

This compares with the global picture, where the incidence of liberalization measures is less pronounced and where restrictive measures have accumulated over time - as reported in the 2010 (October and April) and 2009 (December) editions of UNCTAD's quarterly Investment Policy Monitor - which provides the most recent country-specific data on global investment policies - and 2010 World Investment Report.

UNCTAD's most recent Monitor found an ongoing trend towards more investment liberalisation, facilitation and promotion, while also strengthening the role of the State. Finding the right balance between more regulation and investment promotion remains a challenge.

The joint UNCTAD-OECD report looks at the relevant investment policy developments between 21 May and 15 October 2010 and finds that:

  • Seventeen G20 countries took some sort of investment policy action.

  • Eight G20 countries - Australia, Brazil, Canada, China, India, Indonesia, the Republic of Korea, Saudi Arabia - took investment-specific measures. Three among these - Brazil, Indonesia, the Republic of Korea - took measures designed to reduce the volatility of short term capital flows.

  • Eleven G20 countries made changes to their emergency measures.

  • Canada, China, France, Germany, Italy, the Republic of Korea, the Russian Federation, Turkey, the United Kingdom and the European Union - concluded nine international investment agreements (IIAs).

Some of the investment-specific measures undertaken during the crisis were steps toward eliminating restrictions and improving clarity for investors, but some caused restrictions to increase. Emergency measures continue to be the most frequent ones but, more than two years after the financial crisis struck, G20 countries have almost stopped introducing new emergency schemes, and no case of overt discrimination against foreign investors was recorded. At the same time, the report highlights grounds for concern that support policies are becoming an entrenched feature of some countries' policy landscapes. With the conclusion of nine international investment agreements (IIAs), G20 countries further enhanced the openness and predictability of their policy frameworks governing investment. The agreements concluded during the reporting period included six bilateral investment treaties and three other agreements with investment provisions. The EU clarified the role of the Lisbon treaty in the future of European investment agreements.

The findings of the report reflect G20 Leaders' commitment to forego protectionism, as issued at the London, Pittsburgh and Toronto Summits and reiterated by several G20 countries at UNCTAD's World investment Forum, held from 6-9 September 2010 in Xiamen, China. The report also calls upon G20 Leaders to be mindful of the risk for open investment posed by macro-economic imbalances, and welcomes G20 Leaders' decision to renew for a further three years their commitment to refrain from raising or imposing new barriers to trade and investment.

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