Foreign direct investment policies of G20 nations generally positive, says UN report

A review conducted by the United Nations trade and development arm shows that the Group of 20 (G20) countries have for the most part refrained from taking policy measures that restrict foreign direct investment (FDI), but warns that some economic stimulus packages could give rise to “smart” protectionism.

A substantial number of the policies surveyed among the G20 – an informal forum comprising 19 nations and the European Union – by the UN Conference on Trade and Development (UNCTAD) were in fact conducive to facilitating investment, the agency says in a news release.

The review, which looked at policy developments between October 2008 and June 2009, points to positive investment specific measures such as those that smooth the way for the entry of foreign investors or facilitate foreign investment projects in host countries.

Some countries have also enacted measures to encourage outward investment by domestic companies, including those for streamlining the approval process, and providing financing and insurance.

UNCTAD also notes that investment-related measures were positive, including the various State aid or economic stimulus packages enacted by a majority of countries in response to the economic and financial crisis.

At the same time, the report cautions against the emergence of what can be described as “smart” protectionism from economic stimulus packages. It adds that protectionist pressures could still arise as the crisis spreads to less-affected economic sectors and countries, and a “new wave of economic nationalism” could occur in the aftermath of the crisis.

The report on policy trends is part of the agency’s contribution to its flagship World Investment Report series, and seeks to help officials get the most out of FDI, which UNCTAD says is crucial to assisting both developed and developing countries recover from the ongoing crisis.