International Investment – Working Together for Common Prosperity
International investment and the policies underpinning it stand at a crossroads, and as I see it policy makers face at least three major challenges. First, in a number of OECD countries concerns about international investment and in particular foreign takeovers of national enterprises are on the rise. Policy makers must find ways of addressing public concerns without yielding to protectionist pressures and throwing away the benefits of decades of work to create an open, rules-based international investment environment. Second, the increase in cross-border corporate investment is part of a larger picture of international specialisation and the emergence of major new players in the global economy, which has contributed to an extended period of exceptional growth and rising prosperity. But policy makers in OECD and emerging economies need to work together to ensure that the public continues to support the open markets that deliver these benefits by fostering greater transparency, a level playing field and effective international co-operation. Third, harnessing international investment for combating poverty remains an urgent priority. While an increasing number of developing and emerging economies have benefited from international integration, many of the poorest countries especially in Africa, have been left behind.
Trends and recent developments in foreign direct investment
The global environment for FDI continued to improve in 2006. Macroeconomic growth continued, stock prices remained firm and profitability improved. In addition, new players made their presence more strongly felt. Multinational enterprises based in developing or emerging economies became more active acquirers of enterprises in the OECD area and new categories of financial investors, such as private equity companies, allocated large amounts of money to corporate takeovers. Reflecting this, FDI flows to and from OECD countries increased significantly in 2006, outflows by 29 per cent to USD 1 120 billion and inflows by 22 per cent to USD 910 billion. These are the secondhighest levels in the history of OECD, exceeded only in the boom year 2000. The numbers were lifted by a small number of very large crossborder mergers and acquisitions. The biggest five such transactions valued at close to USD 120 billion. There may be reasons to fear the potential impact on FDI of growing public concerns about the impact of globalisation. Business allegations of cross-border investment being dissuaded by hostile attitudes in the host country have also become more frequent. On balance, however, it appears that the negative political undercurrents have not yet translated into a slowdown of direct investment flows.
Freedom of Investment, National Security and "Strategic" Industries: An Interim Report
International investment is a key driver of growth and sustainable development. An open, non-discriminatory environment for international investment brings significant demonstrated benefits, including with respect to job creation, more efficient resource allocation, and social and environmental progress. Freedom of investment is a core value of the OECD, which has fostered progress in liberalisation in this area for more than 40 years.
Economic and Other Impacts of Foreign Corporate Takeovers in OECD Countries
Cross-border mergers and acquisitions (M&A) are growing rapidly and are changing the industrial landscape in OECD countries. Merger activity is highly cyclical, and the current wave will no doubt recede in rhythm with the business cycle. But each wave reaches new heights and with each new wave, the role of foreign-owned firms in OECD countries and the international operations of domestic firms grow. The questions cross-border M&As raise and the reactions they elicit are not new, but they are clearly growing in importance with the rise in foreign takeovers. The emergence of multinational enterprises from developing countries, notably India and China, has also added a new dimension.
Essential Security Interests under International Investment Law
Under many international agreements, states have negotiated language which provides that even when states have entered into treaty commitments, such commitments do not prevent them from taking measures in order to protect their essential security interests. How often are provisions on essential security interests found in investment agreements? What is their scope? Is the state entitled to be the sole judge for invoking these provisions, i.e. are they self-judging? Is there relevant customary international law on this issue? How have arbitral tribunals interpreted essential security provisions? The present article focuses on these questions. It analyses: i) the frequency and scope of these provisions in international investment agreements and instruments to which OECD members are party; ii) the way customary international law bears on this issue; and iii) the views of arbitral tribunals who expressed themselves on these issues in specific cases.
OECD's FDI Regulatory Restrictiveness Index: Revision and Extension to More Economies and Sectors
The levels of restrictiveness of OECD countries toward foreign direct investment (FDI) have been progressively reduced over time and are low on average. Remaining variations are largely due to the limited group of countries which still maintain forms of general screening of foreign investments. Non- OECD countries adhering to the OECD Declaration on International Investment and Multinational Enterprises are in general as open as OECD countries. Other non- OECD countries such as China, India, South Africa and Russia have more extensive restrictions. Among the nine sectors covered by the index, the most restricted are electricity and transport and the most open are tourism, construction and manufacturing. The Index does not take into account a number of factors beyond statutory discrimination which have a bearing on inward direct investment flows. However, when combined with these factors, the index is a good predictor of FDI performance.
Intellectual Assets and International Investment
The ongoing shift towards a knowledge-based and technology-driven economy has brought to the fore the issue of how knowledge is created, acquired and disseminated, bearing on countries’ economic performance and also raising issues of protecting "strategic assets". This has placed increased attention on international investment, since this is one of the main channels for the acquisition and diffusion of technological and managerial know-how.
The International Investment Dimension of SMEs: a Stocktaking of the Evidence
Globalisation, it is often claimed, is changing the FDI landscape. New technology, more open and transparent investment policies and greater emphasis on markets as a resource allocation device are playing a part in advancing the globalisation of production through international investment. These new developments are a force driving the internationalisation of SMEs. Advances in telecommunication and information technologies, for instance, have made it easier for new and small businesses to establish contact with foreign partners and customers and reduced the importance of economies of scale in many industries (OECD, 2006). Moreover, as large businesses outsource parts of their supply chain in an expanding global economy, opportunities for SMEs to internationalise through direct investment or crossborder co-operation agreements, such as joint ventures, expand.
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