UNCTAD has just released its latest Investment Policy Monitor (No. 27). It discusses trends in outward foreign direct investment (OFDI) policies. Overall, the Monitor shows that policies to facilitate outward FDI are becoming more widespread, but so are policies that restrict outward FDI. The number of countries that facilitate outward investment to promote sustainable development is still limited. Highlights include:
OFDI promotion initiatives are common among developed countries, present in 79 per cent of them, reflecting their role as traditional sources of FDI. Support for companies that invest abroad typically serves two main objectives. First, the growth and internationalization of domestic businesses, particularly SMEs. Second, the promotion of international cooperation and development efforts.
An increasing number of developing countries are also supporting their firms in investing overseas (14 per cent), in line with their expanding role as sources of FDI. Supporting the internationalization of domestic firms and securing access to new markets, resources and technologies are the main objectives of these policies.
Sustainability considerations and the potential benefits to the host country’s development increasingly feature among the qualifying criteria for OFDI policy support, particularly among developed countries. However, despite international commitments in the context of the SDGs, only 18 developed and 5 developing economies have adopted OFDI promotion schemes targeted at promoting investment specifically in developing countries.
Nearly half of the world's economies impose restrictions on OFDI, including most developing countries and least developed countries (LDCs). In these countries, restrictions traditionally aim at preventing balance of payment difficulties and to ensure that investments abroad do not adversely affect the home country's economic priorities.
OFDI restrictions have surged across economies at all levels of development in the last decade. Efforts to comply with anti-money laundering standards and concerns over the potential national and economic security risks posed by OFDI contributed to the rise.
As OFDI restrictions become more widespread, the complexity of applicable rules and regulatory discretion may reduce predictability and increase the administrative burden for home country authorities and investors. VIEW ARTICLE
