8th UNCTAD-OECD Report on G20 Investment Measures Released

31 October 2012

While G20 members continued to honour their pledge not to introduce new restrictive investment measures, a closer look at current developments reveals a more nuanced picture.

The joint report, the eighth since September 2009, finds that in the first half of 2012, global foreign direct investment (FDI) flows fell by 8 per cent compared to the first half of 2011, as also reported in UNCTAD's Tenth Global Investment Trends Monitor.

The joint reports are issued periodically by UNCTAD, the OECD and the WTO. The G20 is a group of finance ministers and central bank governors representing 20 major global economies - that is, 19 countries and the European Union.

The recent investment measures by G20 States have been taken amidst increased turmoil in a global economy marked by fears of a sovereign debt crisis in Europe and of a slowdown in growth among major emerging market economies, the report says.

During the reporting period running from May to October 2012, the study says, the following measures were enacted:

  • Six countries -- Brazil, Canada, India, Mexico, the Russian Federation, and Turkey -- amended their investment-specific policies (those not designed to address national security);

  • Two G20 members -- France and Italy -- amended their investment policies for reasons of national security; and

  • Sixteen G20 members concluded -- in total -- eight new international investment agreements (IIAs), including four bilateral investment treaties (BITs) and four "other IIAs."

On the whole, G20 members have continued to honour their pledge not to introduce new restrictive measures, the report says. Almost all investment policy measures adopted during the reporting period tended to eliminate restrictions to FDI and to facilitate greater FDI.

Despite this encouraging finding, persistent high unemployment, turbulence in financial markets, and a weak economic recovery are putting intense pressure on governments to grant assistance to individual domestic companies and to preserve jobs, the report notes. As a result, governments may resort to policies or practices that discriminate against foreign investors or discourage outward investment, an issue also analyzed in UNCTAD's 2012 World Investment Report Governments also may be tempted to yield to such pressure in informal and diffuse ways that are not manifested as policy changes, thereby undermining investors' trust in predictable and transparent frameworks in host countries, the report warns.

Following a request by G20 leaders at their Los Cabos Summit, 18-19 June 2012, both the OECD and UNCTAD are committed to reinforcing and deepening their work towards enhancing investment policies through monitoring policy developments on a semi-annual basis.

In their Los Cabos Declaration, the leaders also called on the two organizations, along with the WTO, to accelerate their work on analyzing the functioning of global value chains and their relationships to trade and investment flows, development, and jobs.