Investment promotion and facilitation have remained the dominant element in recent national investment policies, UNCTAD's World Investment Report 2011 (WIR11) says. But the report warns that the risk of investment protectionism has increased as restrictive investment measures and administrative procedures have accumulated over the past few years.
The WIR11, released today, is subtitled "Non-Equity Modes of International Production and Development".
Investment policies increasingly interact with industrial policy strategies, and are more and more shaped by voluntary corporate social responsibility standards, the report says. At the same time, the network of international investment agreements is growing but questions remain about the network’s coverage of the universe of investment relationships and its effectiveness in attracting development-enhancing foreign investment. All of this makes the investment landscape complex and difficult to navigate.
The accumulation of national investment restrictions and review procedures increases risk of protectionism
The WIR identifies 149 investment policy measures adopted by 74 economies in 2010. Investment promotion and facilitation continued to be dominant in many countries, but the trend in recent years towards an increase of investment restrictions and administrative procedures has persisted. Almost one third of these 149 policy measures introduced new restrictions or regulations relevant to foreign direct investment (FDI), showing a slight increase as compared with 2009 (figure 1). Although still a minority, such restrictive measures have accumulated over the past few years and their continued upward trend, as well as stricter review procedures for FDI entry, has increased the risk of investment protectionism, says UNCTAD.
The regime of international investment agreements (IIAs) is at a crossroads
With a total of 178 new IIAs in 2010 (3 new treaties per week on average), the IIA universe had reached 6,092 agreements at the end of the year (figure 2). With thousands of treaties, many on-going negotiations, and multiple dispute-settlement mechanisms, today's IIA regime has come close to a point where it is too big and too complex to handle for Governments and investors alike, yet remains inadequate to cover all possible bilateral investment relationships and all global FDI stock (which would require another 14,100 bilateral treaties and additional coverage of the currently unprotected one-third of FDI stock). This raises questions about the impact of the IIA regime and its effectiveness for promoting and protecting investment, and about how to ensure that IIAs deliver on their development potential. Accordingly, the policy discourse about the future orientation of the IIA regime and its development impact is intensifying at national and international levels, the report says.
Investment policies increasingly interact with industrial policies
Many countries have opted for more pro-active industrial policies in recent years. As a result, investment policies increasingly interact with industrial development strategies, nationally and internationally. The challenge is to manage this interaction so that the two policies work together for development, the report says.
The investment policy landscape is influenced more and more by a myriad of voluntary corporate social responsibility (CSR) standards
In addition to standards developed by international organizations, there are currently dozens of international multi-stakeholder initiatives, hundreds of industry association initiatives, and thousands of individual company codes, This proliferation of non-binding CSR standards in recent years has made them ever more important for FDI, the report notes.
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