Measures to promote foreign direct investment increased in 2014, UNCTAD Report says
An increase in measures taken by Governments to liberalize foreign direct investment, combined with a fall in restrictions, led to enhanced conditions for foreign direct investment promotion in 2014 according to the UNCTAD World Investment Report 20151.
Thirty-seven countries and economies adopted at least 63 policy measures – of these, 47 were related to liberalization, promotion and facilitation of investment while just 9 introduced new restrictions or regulations on investment (mostly related to national security concerns and strategic industries). The share of liberalization and promotion increased from 73 per cent in 2013 to 84 per cent in 2014 (figure 1).2
“In 2014, more than 80 per cent of investment policy measures were aimed at improving entry conditions and reducing restrictions, with the focus on investment facilitation and sector-specific liberalization,” UNCTAD Secretary-General Mukhisa Kituyi said. “However, UNCTAD notes that relatively few measures – 8 per cent since 2010 – were specifically targeted at increasing private sector participation in key sustainable development sectors such as infrastructure, health, education and climate change mitigation.”
Developing countries were particularly active as regards investment liberalization. For example, Ethiopia opened the electricity generation and distribution sector to private investment, India liberalized foreign investment in railway infrastructure and raised the foreign direct investment cap in the defence sector, and Indonesia increased the foreign investment cap in several industries including for pharmaceuticals, venture capital operations and power plant projects. As regards new investment restrictions or regulations, for example, France, Italy and the Russian Federation amended their security-related review mechanisms.
With the addition of 31 international investment agreements in 2014, the international investment agreement regime comprised a total of 3,267 treaties of which 2,923 were bilateral investment treaties and 345 were other types of international investment agreements (figure 2).
The number of new international investment agreements continued to slow down in 2014, following a steady trend since the end of the 1990s. The report also reviews international investment agreements concluded in 2014 and finds that they include provisions geared towards safeguarding the right to regulate for the public interest, including for sustainable development objectives. For example, the new agreements tend to incorporate general exceptions, clarifications to key protection standards, clauses that explicitly recognize that the parties should not relax health, safety or environmental standards in order to attract investment, limits on the scope of treaties and carefully crafted investor–State dispute settlement provisions. All these provisions are important elements in the current debate over international investment agreement reform.
Also, the report reveals that in 2014, investors initiated 42 known investor–State dispute settlement cases pursuant to international investment agreements (figure 3), representing an important drop from the level initiated in the three previous years and more on a par with the average number of disputes in the years 2003–2009. In 2014, investors challenged, among other things, government measures in utilities, energy and renewables such as the revocation of licences for the supply of electricity and gas, the regulation of energy and water tariffs, and the cancellation of investment incentives schemes in solar energy.