Major economies commit to open investment Countries which together represent 80% of the world economy and are participating in a Freedom of Investment initiative under the auspices of the Organisation for Economic Co-operation and Development (OECD) have pledged to resist discriminatory policies and new forms of protectionism towards investment in the context of the global economic crisis and to continue to monitor measures and commitments.

Investment protectionism remains a threat but so far governments have for the most part resisted temptations to impose barriers. But the need for vigilance remains constant. This agreement is an important sign of the government’s commitment to resisting protectionism, the OECD said at the release of a report on the initiative. The Freedom of Investment, National Security and Strategic Industries (FOI) process of the OECD helps member and non-member governments to preserve and expand an open environment for international investment, while also safeguarding essential security interests and taking action to recover from the current crisis. Discussions under the FOI process have been taking place since 2006 and 10 FOI roundtables have been held involving the 30 OECD members countries and 17 non-members. The following themes have emerged from these discussions: No protectionist trend, but a need for reinforced vigilance No recent examples have been observed of countries taking deliberate action to erect barriers to inward investment. Nearly all governments continue to welcome inward investment and some have recently taken measures to liberalise their investment policies. OECD investment principles promote commitment to openness and non-discrimination in recipient country investment policies and, more generally, to transparent, accountable and effective public policy. The roundtable participants completed guidance for investment policies addressing national security concerns in October last year. This guidance helps governments ensure that their security-related investment measures are effective in achieving their aims and are not disguised protectionism. It urges governments to use restrictive investment measures only as a last resort, when measures of general application are not adequate to address security concerns. If restrictive investment measures are deemed necessary for achieving security-related policy goals, governments should make such policies as non-discriminatory as possible and respect the principles of transparency, proportionality and accountability. Roundtable participants found it encouraging that several countries seem to have followed the guidance for recipient country investment policies relating to national security. Reiterating commitment to openness All FOI participants reiterated their commitment to open investment policy and noted that the current context creates new challenges for investment policy-makers. Many governments have adopted measures to channel public-sector investment and subsidies and they often have considerable discretion in their application. Under some programmes they attach conditions to investment and subsidies that may discourage outward investment. If such measures are not carefully designed there is a risk of a drift toward discriminatory policies that will ultimately be detrimental to a return to sustainable income and employment growth. OECD investment principles provide for flexibility as governments shape their responses to economic crises. While acknowledging that governments are currently facing exceptional circumstances and that they may need to take exceptional measures, roundtable participants also stress the need to ensure that such measures do not unduly impede investment flows or distort competition. Such measures should not be maintained longer than necessary and should be designed from the outset with an “exit strategy” in mind. Strengthened peer monitoring Preliminary indications suggest that governments are aware of the risks of “new investment protectionism” and are seeking to deal with the issues it raises (for example, by co-ordinating responses to the crisis). Roundtable participants have agreed to work toward enhanced peer reviews that would include more complete and readily accessible information on policy measures, supporting analysis on new forms of investment protectionism and deeper involvement of non-members as full partners in the FOI process with equal rights and responsibilities as OECD members. Enhanced peer review will bring several benefits: • it will make recent policy measures more transparent and increase pressures on participants to lead by example in protecting “freedom of investment” and respecting their international commitments; and • it will allow participating governments to learn from each other’s experiences at a time when many governments are actively seeking models for good policy practice. Roundtable participants called on governments to work hand in hand with business to rebuild trust and confidence in international investment and to ensure that international investors conduct business with integrity and transparency. The full report can be viewed at www.oecd.org If not carefully designed, there is a risk of a drift toward discriminatory policies that will ultimately be detrimental to a return to sustainable income and employment growth