International Investment Perspectives 2004.

184 Pages·1.423 MB·English

by  OECD

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International Investment Perspectives 2
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After already declining dramatically in the previous two years, foreign direct
investment (FDI) flows into OECD countries continued to slip in 2003. Direct
investment into North America was particularly hard hit, whereas flows from OECD
International
countries toward developing and emerging economies held up well. The first article
in this year’s International Investment Perspectives analyses the trends.
Investment
Russia has so far not received much investment beyond the energy sectors. This
edition releases the findings of an OECD Investment Policy Review of Russia, which
Perspectives
notes an improvement of the country’s investment climate, but concludes that more
should be done. Priority areas include a relaxation of remaining obstacles to FDI,
policy coherence, privatisation policies and the fight against corruption.
An article reviews ASEAN countries’ experience with luring investors by means of
special incentives. It concludes that investment incentives may have proliferated in
the region, but that they have not become more generous. It casts doubt on
whether such policies have produced sufficient benefits to justify their budgetary
costs.
Regional and bilateral investment agreements have proliferated over the last
decade, raising questions about the mutual consistency of commitments. The
present issue includes two articles examining aspects of this, namely the overall
relationship between international investment agreements and the challenges that
may arise when countries are party to several agreements including most-favoured In
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ISBN 92-64-01649-X
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2004 2004
International
Investment Perspectives
2004 Edition
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960,
and which came into force on 30th September 1961, the Organisation for Economic
Co-operation and Development (OECD) shall promote policies designed:
– to achieve the highest sustainable economic growth and employment and a
rising standard of living in member countries, while maintaining financial
stability, and thus to contribute to the development of the world economy;
– to contribute to sound economic expansion in member as well as non-member
countries in the process of economic development; and
– to contribute to the expansion of world trade on a multilateral, non-discriminatory
basis in accordance with international obligations.
The original member countries of the OECD are Austria, Belgium, Canada, Denmark,
France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway,
Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States.
The following countries became members subsequently through accession at the dates
indicated hereafter: Japan (28th April 1964), Finland (28th January 1969), Australia
(7th June 1971), New Zealand (29thMay1973), Mexico (18th May 1994), the Czech Republic
(21st December 1995), Hungary (7th May 1996), Poland (22nd November 1996), Korea
(12th December 1996) and the Slovak Republic (14th December 2000). The Commission
of the European Communities takes part in the work of the OECD (Article 13 of the
OECDConvention).
Publié en français sous le titre :
Perspectives d’investissement international
Édition 2004
© OECD 2004
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FOREWORD
Foreword
I
nvestment is essential to global prosperity and stability. Co-operation and dialogue
on policies for improving the investment environment figure prominently in OECD’s
work. This mission has been entrusted to the OECD Investment Committee – the
community of investment policy makers in advanced countries.
The Committee is a forum for mutual learning from experience and developing
good policy practices. It builds on long-standing OECD investment instruments – the
Codes of Liberalisation and the Declaration on International Investment and
Multinational Enterprises – to encourage transparent and non-discriminatory regimes
for investment and monitor progress among countries. The Committee adopted
recently two new policy implementation tools, a Framework on Investment Policy
Transparency which is released in the present issue of the International Investment
Perspectives, and a Checklist on FDI Incentive Policies. The OECD actively shares the
use of these tools with non-member economies. One example is an article in the present
issue on ASEAN countries’ experience with investment incentives.
The Committee is also responsible for the effective implementation of the
OECDGuidelines for Multinational Enterprises, one of the foremost global instruments
for corporate responsibility. The present issue reproduces an article by the OECD
Secretary-General on emerging trends and recent achievements using the OECD
Guidelines.
In recent years, the Investment Committee has engaged in policy dialogue with
Brazil, China, Russia and other non-member major players and regional partners for
designing effective, broad-based policy frameworks for improving the business
environment. One article on Russia in the present issue is an outcome of these
activities.
The Investment Committee works with legal experts and treaty negotiators to
enhance common understanding of emerging issues relating to international
investment treaties and arbitration. Two articles in the present issue on the
relationship between investment agreements and most favoured nation treatment
attest to this work.
The Investment Committee works with the IMF as joint guardians of international
definitions of foreign direct investment (FDI) and collects international investment
statistics to assist policy making in member countries. The first article in this publication
describes recent trends in FDI on the basis of these statistics.
INTERNATIONAL INVESTMENT PERSPECTIVES – ISBN 92-64-01649-X – © OECD 2004 3
NOTE BY THE EDITOR
Note by the Editor
I
nternational Investment Perspectives is an annual publication. Each issue
includes an update of recent trends and prospects in international direct
investment and provides analyses of investment policy questions of topical
interest. Articles are based principally on contributions by the OECD Secretariat,
which have been developed within the framework of the activity programmes of
the OECD Investment Committee.
International Investment Perspectives is published on the responsibility of
the Secretary-General and the views expressed therein are not necessarily
those of the Organisation for Economic Co-operation and Development and its
members. Queries concerning the contents of this publication should be
addressed to the Investment Division of the OECD Directorate for Financial
and Enterprise Affairs (Hans Christiansen, Editor. Tel.: [phone];
Fax:[phone]; E-mail: [email protected]).
4 INTERNATIONAL INVESTMENT PERSPECTIVES – ISBN 92-64-01649-X – © OECD 2004
TABLE OF CONTENTS
Table of Contents
Chapter 1. Trends and Recent Developments inForeignDirect
Investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Annex 1.A1. International Direct Investment Statistics . . . . . . . . . . . . 31
Chapter 2. Russia’s Policies towards Foreign Investment:
Clearing the Path. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Chapter 3. Investment Incentives and FDI inSelectedASEAN
Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Annex 3.A1. The OECD Checklist for Foreign Direct Investment
Incentive Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Chapter 4. Relationships between International Investment
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Annex 4.A1. The Discussions during the MAI Negotiations
on Compatibility with other International Investment
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Annex 4.A2. Vienna Convention on the Law of Treaties. . . . . . . . . . . . 134
Annex 4.A3. Main Elements/Overlapping Provisions between
International Investment Agreements . . . . . . . . . . . . . . . 137
Chapter 5. Most-Favoured-Nation Treatment inInternational
Investment Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Annex 5.A1. Vienna Convention on the Law of Treaties. . . . . . . . . . . . 169
Chapter 6. A Framework for Investment Policy Transparency. . . . . . . . . . 171
Chapter 7. Promoting Corporate Responsibility: TheOECD Guidelines
for Multinational Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
INTERNATIONAL INVESTMENT PERSPECTIVES – ISBN 92-64-01649-X – © OECD 2004 5
TABLE OF CONTENTS
List of Boxes
1.1. FDI in developing countries: a shift to services. . . . . . . . . . . . . . . . . . . 28
2.1. The OECD Principles of Corporate Governance . . . . . . . . . . . . . . . . . . . 47
3.1. Japanese direct investment in ASEAN and China . . . . . . . . . . . . . . . . . 83
3.2. Rationales for offering investment incentives. . . . . . . . . . . . . . . . . . . . 86
3.3. Investment incentive instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
3.4. Priority areas for investment promotion in ASEAN . . . . . . . . . . . . . . . 89
3.5. Investment incentives in Malaysia: proliferation,notescalation. . . . 94
List of Tables
1.1. Direct investment flows to and from OECD countries: 2000-03. . . 11
1.2. Cumulative FDI flows in OECD countries1994-2003. . . . . . . . . . . . 14
1.3. Distribution of FDI inflows to the service sector, OECD totals. . . . 22
1.A1.1. OECD direct investment abroad: outflows . . . . . . . . . . . . . . . . . . . . 32
1.A1.2. OECD direct investment from abroad: inflows. . . . . . . . . . . . . . . . . 33
1.A1.3. OECD direct investment abroad: outward position. . . . . . . . . . . . . 34
1.A1.4. OECD direct investment from abroad: inward position . . . . . . . . . 35
2.1. FDI inflows to Russia and Central European OECD members,
1994-2003. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.2. FDI inflow per head in Russia and Central European
OECDmembers, 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.3. Cumulative foreign direct investment flows intotheRussian
Federation up to end-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.4. FDI by Federal District, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.1. FDI inflows into ASEAN by source country, 1995-2001 . . . . . . . . . . 79
3.2. Sales patterns of affiliates of US MNEs in ASEAN, 2001. . . . . . . . . 80
3.3. FDI inflows into ASEAN by sector and country of origin,
1999-2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
3.4. Investment incentives in the ASEAN5 . . . . . . . . . . . . . . . . . . . . . . . 90
3.5. Incentive legislation in ASEAN countries. . . . . . . . . . . . . . . . . . . . . 96
3.6. Estimates of revenue implications of incentives in Thailand,
1980. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
3.7. Studies on the effectiveness of investment incentives
inAsiancountries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
3.8. Survey of MNEs in ASEAN concerning the potential removal
ofincentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
6 INTERNATIONAL INVESTMENT PERSPECTIVES – ISBN 92-64-01649-X – © OECD 2004
TABLE OF CONTENTS
List of Figures
1.1. FDI inflows to developing and other countries . . . . . . . . . . . . . . . . . . . 15
1.2. Quarterly foreign direct investment inflows . . . . . . . . . . . . . . . . . . . . . 18
1.3. Total OECD area FDI inflows, by main sector. . . . . . . . . . . . . . . . . . . . . 20
1.4. Service sector FDI in selected OECD countries, 1990-2002. . . . . . . . . . 22
1.5. Inward FDI in different sectors, 1990-2002. . . . . . . . . . . . . . . . . . . . . . . 24
1.6. Net capital flows from all donors to all developing countries. . . . . . . 25
1.7. Net capital flows from all donors to all developing countries. . . . . . . 26
1.8. The major recipients of FDI as percentage of GDP, 1992-2001. . . . . . . 27
3.1. FDI inflows into the ASEAN 5, 1985-2002 . . . . . . . . . . . . . . . . . . . . . . . . 77
3.2. FDI flows to China and ASEAN5, 1988-2002. . . . . . . . . . . . . . . . . . . . . . 82
7.1. Policy statements by issue area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
7.2. Anti-corruption statements by sector of activity . . . . . . . . . . . . . . . . . 182
INTERNATIONAL INVESTMENT PERSPECTIVES – ISBN 92-64-01649-X – © OECD 2004 7
ISBN 92-64-01649-X
International Investment Perspectives
2004 Edition
© OECD 2004
Chapter 1
Trends and Recent Developments
in Foreign Direct Investment*
Foreign direct investment (FDI) in the OECD continued to fall
in 2003. Total inflows were USD 384 billion, down from USD 535
the year before. A reason for this appears to be the sluggish
macroeconomic performance of many of the larger OECD
economies, not least in Europe. Another factor contributing to the
moderate FDI activity in2003 is that several sectors that saw
rampant cross-border investment in the late1990s and2000 have
entered into a phase of consolidation.
The contraction of FDI in recent years does not imply that FDI
activity is low by any longer-term historic standard. OECD area
inflows, for example, compare favourably with the early and
mid-1990s, even if they are much below the levels recorded in the
peak year2000.
Outflows of direct investment to non-OECD countries has held up well
in recent years, and net outflows to developing, emerging and
transition economies in2003 stood at an all time high. China, in
particular, positioned itself as the world’s foremost destination for FDI.
* This article was prepared by Hans Christiansen and Ayse Bertrand of the Investment
Division, OECD. Thanks are due to the OECD Development Co-operation Directorate
for statistical inputs into parts of the article.
INTERNATIONAL INVESTMENT PERSPECTIVES – ISBN 92-64-01649-X – © OECD 2004 9
1. TRENDS AND RECENT DEVELOPMENTS INFOREIGNDIRECT INVESTMENT
1. Recent developments
Low growth in Europe and corporate consolidation
depress FDI
Foreign direct investment (FDI) in the OECD continued to fall in2003. One
reason for this appears to be the sluggish macroeconomic performance of
many of the larger OECD economies, not least in Europe. This would appear to
have depressed outward as well as inward investment. Companies operating
in economies with poor macroeconomic performance are less attractive to
outside investors, and may at the same time– at least insofar as their
profitability is affected –scale back their outward investment as well.
A further reason for the moderate FDI activity in2003 is that several
sectors that saw rampant cross-border investment in the late1990s and2000
have entered into a phase of consolidation. Enterprises tend to be disinclined
to embark on new purchases while still in the process of integrating foreign
acquisitions of recent years into their corporate strategies. This caution may
be further strengthened by the fact that, in certain sectors, (notably the “new
economy” activities) investors would seem to have paid excessively for some
of their acquisitions. Finally, companies who have acquired corporate “prized
assets” in other countries have in some cases progressed to sell off some of the
non-core activities of their acquisitions. Insofar as they sell these corporate
assets to domestic investors in the host economy, such disinvestment weighs
down on the overall inward FDI figures.
All the same, the contraction of FDI in recent years does not imply that
FDI activity is low by any longer-term historic standard. OECD area inflows, for
example, compare favourably with the early and mid-1990s, even if they are
much below the levels recorded in the peak year2000.
1.1. Further declines in most OECD countries’ FDI
Inward FDI dropped by 28per cent in2003
FDI to and from the OECD countries continued to decline in2003. FDI into
the OECD area dropped from 535billion US dollars (USD) in2002 to an
estimated USD 384 billion in 2003 (Table1.1) – a decline of around 28per cent.
The figure is consistent with projections in last year’s International Investment
10 INTERNATIONAL INVESTMENT PERSPECTIVES – ISBN 92-64-01649-X – © OECD 2004