“The many benefits of foreign investment – for economic growth, employment creation, and raising living standards – must be safeguarded through a strong commitment by governments to freedom of investment and avoiding protectionist measures,” said ICC Secretary General Guy Sebban.
Cross-border investment and the openness of markets to receiving such investment are essential to sustaining prosperity, in developed and developing countries alike . But while the world has seen a sharp increase in cross-border investment in recent years, there has also been a worrying rise in investment protectionism.
Even though governments have the right to regulate economic activity and protect national security, ICC believes it is essential they do so in a way that does not impose unnecessary restrictions on the overall flow of cross-border investment.
In its policy statement, ICC recommends that governments ensure their cross-border investment policies are “least-investment restrictive” in the following manner:
- act in ways that keep doors open to foreign investment, and recommit to open investment, essential for preserving and protecting what they have already reaped in benefits from international investment;
- in investment policies, observe the principles of non-discrimination, proportionality, transparency, predictability, and accountability, and avoid unnecessary restrictions to international investment;
- increase multilateral cooperation among countries in intergovernmental forums and involve the private sector, to promote an open and efficient international investment environment and the removal of remaining barriers to foreign investment.
The ICC policy statement also addresses some of the opportunities and challenges posed by the increased activity of Sovereign Wealth Funds (SWFs), entities that manage state savings for investment. Whilst SWFs may offer several benefits for home and host countries, they also pose potential risks due to their current lack of transparency. What is more, some SWFs may operate not only according to commercial interests but also political considerations, and may place private companies at a competitive disadvantage due to the preferential access to capital of SWFs.
To face these challenges, ICC recommends SWFs should:
Be transparent about their investments and investment policies, by disclosing publicly their objectives and main holdings;
Commit as part of their investment management policies to base their investment decisions solely on economic grounds, not on political or foreign policy considerations;
Help contribute to international financial stability, especially during times of market stress;
Support and participate in intergovernmental efforts to develop a set of best practices for SWFs to mitigate potential systemic risks and contribute to a better understanding of the expectations of home and host countries, including SWFs’ preferential access to capital and competitive edge over the private sector. This would demonstrate a willingness by SWFs to continue having a positive impact on the international financial system.