Local ownership key in investment policy – UNCTAD

ENTRY restrictions for foreign investors which prevents dominant market positions of large companies remains essential for  investment policies globally as it prevents crowding out of small domestic firms, says the United Nations Conference on Trade and Development (UNCTAD) world report.

According to the UNCTAD World Investment Report 2016 – Investor Nationality: Policy Challenges, countries worldwide needed to protect the domestic companies from being overshadowed by foreign investors especially the global multinational enterprises (MNEs).

The report shows that ownership and control mattered in investment policymaking because they were an instrument for the assessment of investor nationality and protected domestic investors.

It said drivers of rules and regulations on foreign ownership were relevant for both national and international policies.

“Ownership-based rules and regulations, as well as promotion and facilitation measures, are generally in the domain of national investment policies.

“They translate into international investment agreements (IIAs) mostly as carve-outs or reservations through which treaty partners aim to retain the option to keep in place sector-specific measures in their national policy frameworks,” reads the report.

The report said the role of ownership and control in investment policy national and international investment policy measures that differenti      ated between domestic and foreign companies included operating restrictions or performance requirements, investment facilitation and incentives, and investment protection.

It explained that these measures were most often driven by national security concerns; protection of national and strategic assets; industrial development and competition policies; social, cultural or political concerns; and regional integration policies.

“The majority of measures, especially in developing countries, have concerned increases of foreign ownership percentages allowed, easing of approvals or admission procedures, or greater access to land for foreign investors.

“UNCTAD identified 98 such measures in developing countries, compared with 26 measures in the direction of restriction or regulation,” says the report.