International investment perspectives : 2006 edition

264 Pages·2006·2.394 MB·English

by  OECD

«
International Investment Perspectives 2
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The global environment for foreign direct investment (FDI) improved in 2005.
Macroeconomic growth, traditionally one of the main drivers of direct investment,
gained momentum in several OECD countries. In addition, corporate profitability was International
generally strong, interest rates were low and equity valuation in most countries was
firm so ample liquidity was available to companies wanting to invest abroad. In this Investment
benign environment, overall FDI inflows to OECD countries grew by 27 per cent to
reach USD 623 billion in 2005. At the same time, OECD economies remained strong
Perspectives
net contributors of direct investment capital to the rest of the world. Estimated new
outflows in 2005 were USD 95 billion.
The special focus of this International Investment Perspectives volume is on legal and
policy issues arising from international investment agreements. The articles in this
section, which were prepared for the OECD Investment Committee, investigate novel
features of recent bilateral investment treaties; options for improving the system of
investor-state dispute settlement; and the consolidation of claims as an avenue for
improving investment arbitration.
This volume contains several more articles on topical investment issues. One takes
stock of how new technologies are a force advancing the closer integration of
national economies. Another reviews the challenges and opportunities for policy
makers that arise from international investor participation in infrastructure. A third In
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summarises recent evidence of source (or “home”) country benefits of outward direct r
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investment. The final article explains the role of the OECD peer review process in a
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building investment policy capacity. io
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ISBN 92-64-02689-4 -:HSTCQE=UW[]^[:
2006 20 2006 06 1 P 2006

International
Investment Perspectives
2006 Edition
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
The OECD is a unique forum where the governments of 30 democracies work
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Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand,
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of its member countries.
Also available in French under the title:
Perspectives d’investissement international
Édition 2006
© OECD 2006
No reproduction, copy, transmission or translation of this publication may be made without written permission.
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FOREWORD
Foreword
I
nternational Investment Perspectives is an annual publication. Each issue contains
an update of trends and prospects in international investment and provides analyses of
investment policy questions of topical interest. The publication aims to provide timely
information to members of the investment policy community, academia and members of
the public with an interest in international investment.
Most of the contributions to International Investment Perspectives are
prepared by the OECD Secretariat, based on work undertaken for the OECD Investment
Committee and reviewed by the Committee or its Working Party.
Queries concerning the contents of this publication should be addressed to the
Investment Division of the OECD Directorate for Financial and Enterprise Affairs
(HansChristiansen, Editor, Tel.: [phone], e-mail: [email protected];
Pamela Duffin, Communications Officer, e-mail: [email protected]).
INTERNATIONAL INVESTMENT PERSPECTIVES: 2006 EDITION – ISBN 92-64-02689-4 – © OECD 2006 3

TABLE OF CONTENTS
Table of Contents
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Part I
Chapter 1. Trends and Recent Developments inForeign
Direct Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Annex 1.A1. International Direct Investment Statistics . . . . . . . . . . . . 37
Annex 1.A2. National Security and Strategic Sectors:
Regulatory Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Chapter 2. Globalisation, New Technology andInternational
Investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Chapter 3. International Investor Participation inInfrastructure:
ChallengesforPolicyMakers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Chapter 4. Outward Direct Investment: What Benefits
tothe Home Countries?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Chapter 5. Building Investment Policy Capacity:
TheOECD Peer Review Process . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Part II
Special Focus on International Investment Agreements
Chapter 6. Novel Features in Recent OECD Bilateral Investment
Treaties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Chapter 7. Improving the System of Investor-state Dispute Settlement:
An Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
Chapter 8. Consolidation of Claims: A Promising Avenue
for Investment Arbitration?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
Annex 8.A1. Jurisprudence in Commercial Arbitration. . . . . . . . . . . . . 245
Annex 8.A2. Institutional Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
Annex 8.A3. National Arbitration Laws. . . . . . . . . . . . . . . . . . . . . . . . . . 252
Annex 8.A4. Investor-state Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . 257
INTERNATIONAL INVESTMENT PERSPECTIVES: 2006 EDITION – ISBN 92-64-02689-4 – © OECD 2006 5
TABLE OF CONTENTS
List of boxes
1.1. Foreign direct investment statistics: main concepts . . . . . . . . . . . . 20
2.1. New technology is strengthening the relationship
between trade and investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
2.2. FDI statistical challenges arising fromnewtechnology . . . . . . . . . 55
2.3. Technology is favouring Eastern Europe asacarproduction
and assembly location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
2.4. The supply side of technological innovation isgoingglobal. . . . . . 60
3.1. Water services in Buenos Aires. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
3.2. The Lesotho Highlands Water Project (LHWP) . . . . . . . . . . . . . . . . . 92
4.1. Past observations on delocalisation . . . . . . . . . . . . . . . . . . . . . . . . . . 100
4.2. “Stylised facts” based on the experience withUS-based
multinational enterprises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
4.3. The worldwide R&D operations of US MNEs. . . . . . . . . . . . . . . . . . . 114
5.1. Peer learning and compliance withinternationalagreements . . . 125
7.1. Fork in the road . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
List of tables
1.1. Direct investment flows to and from OECD countries: 2002-05 . . . 17
1.2. Cumulative FDI flows in OECD countries1996-2005 . . . . . . . . . . . . 21
1.3. Foreign direct investment flows in selected non-member
economies: 2001-05. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
1.4. Cross-border M&As to and from OECD countries, total. . . . . . . . . . 27
1.5. Inward cross-border M&As valued at more than USD 1.5billion
fromJanuary2005 to May2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
1.A1.1. OECD direct investment abroad: outflows. . . . . . . . . . . . . . . . . . . . . 38
1.A1.2. OECD direct investment from abroad: inflows . . . . . . . . . . . . . . . . . 39
1.A1.3. OECD direct investment abroad: outward position . . . . . . . . . . . . . 40
1.A1.4. OECD direct investment from abroad: inward position. . . . . . . . . . 41
2.1. Motor vehicle FDI in Eastern Europe has expanded rapidly . . . . . . 57
3.1. Arbitral decision and negotiated settlements in cases related
toinfrastructure operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
4.1. Outward FDI positions of selected OECD countries vis-à-vis
non-OECD countries, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
6.1. BIT models in OECD countries and non-member adherents
totheDeclaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
6.2. Substantive provisions in recent BITs . . . . . . . . . . . . . . . . . . . . . . . . 147
6.3. Dispute settlement in recent BITs. . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
6 INTERNATIONAL INVESTMENT PERSPECTIVES: 2006 EDITION – ISBN 92-64-02689-4 – © OECD 2006
TABLE OF CONTENTS
List of figures
1.1. FDI flows to and from OECD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.2. Inward FDI in selected countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.1. The drivers and dimensions of globalisation bear
oninternational investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
2.2. The share of ICT patents has increased in virtually
allOECDcountries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
2.3. Manufacturing production is becoming moreglobally
integrated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
2.4. Organisational modes for cross-border production
andinvestment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
2.5. Large non-member economies have increased investment
inmost OECD countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
2.6. The composition of OECD FDI has shifted massively
towardsservices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
2.7. Foreign ownership of domestic inventions varies widely
across countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
2.8. SMEs are increasingly involved in cross-border alliances. . . . . . . . 62
3.1. FDI Restrictiveness Index: Electricity . . . . . . . . . . . . . . . . . . . . . . . . . 73
4.1. R&D in foreign-owned enterprises, 2003
(asshareoftotalindustrial R&D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
INTERNATIONAL INVESTMENT PERSPECTIVES: 2006 EDITION – ISBN 92-64-02689-4 – © OECD 2006 7