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Positive investment policies

The United Nations Conference on Trade and Development (UNCTAD) has, after a recent review, found that the G20 countries have in general refrained from taking restrictive policy measures in respect of foreign investment. In fact, its report said, many of them have been actively encouraging capital flows, both inward and outward. The findings of the review that covered the nine-month period, October 2008 to June 2009, are significant in the context of the pledge the G20 cou ntries took at the April summit that they would keep trade and investment channels open and avoid retreating into protectionism. They even sought from UNCTAD, as also the WTO, the OECD, and the IMF, quarterly reviews of their adherence to the summit declaration. Overall, the report gives a good chit to the G20 countries. Among its observations are: very few laws or regulations framed by them could be considered unfriendly to investment; tax laws were harmonised so that the overseas investor is not put to any disadvantage; some countries opened up the closed sectors or eased sectoral caps for foreign investment; and some others provided incentives and tax concessions in specific geographical areas.

Another positive aspect is the growing trend of the G20 countries entering into investment treaties that not only protect and promote but very often liberalise investments among signatory countries. At the international level, G20 countries have, during the review period, concluded 27 bilateral investment treaties, 36 double taxation agreements, and 11 international investment agreements. However it cautions against complacency. Economic stimulus packages have given rise to certain less obvious forms of protectionism. For instance, in the United States, there has been an official push to buy locally produced goods. Visa rules for computer professionals have been tightened. Economic nationalism has surfaced in a number of developed countries. Also in the U.S., security concerns are cited to keep away overseas investors from certain countries in specific sectors. It is unlikely that former “national champions” such as General Motors, now bailed out with tax payers’ money, can be sold to an overseas investor, when the state eventually relinquishes control. The report notes the importance of foreign investment for both the developed and the developing countries to pull out of the economic crisis and achieve growth and stability. An open trade and investment regime would be necessary to realise the desired objectives.

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