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The OECD Investment Committee’s project on “Freedom of Investment, National Security and ‘Strategic Industries’” (FOI) has, since early 2006, provided a forum for intergovernmental dialogue on how governments can reconcile the need to preserve and expand an open international investment environment with their duty to safeguard the essential security interests of their people. With the current crisis, it is all the more important to keep capital inflows moving freely. The Investment Committee is treating the issue of recipient country policies toward Sovereign Wealth Funds (SWFs) and other government-controlled investment entities as an integral part of the FOI project.
OECD guidance complete
The final “tranche” of the OECD guidance on recipient country policies towards SWFs was adopted by OECD members on 8 October 2008 and presented to the International Monetary and Financial Committee meeting in Washington D.C. on 11 October. The guidance has three parts:
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Guidance that reaffirms the relevance of long standing OECD investment principles (first adopted in 1961) for recipient country policies toward SWFs: These are non-discrimination (treat SWFs as well as similar domestic investors); standstill (don’t introduce new measures); progressive liberalisation (make progress of liberalisation); and unilateral liberalisation (don’t insist on reciprocity for liberalisation measures);
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Guidelines for recipient country investment policies relating to national security: OECD investment instruments enshrine the right and the duty of governments to countries to take measures to safeguard essential security interests. This newer guidance, developed over the last year, provides recommendations for recipient country policies that help to make these policies both effective and to ensure that they are not used as disguised protectionism.
Next steps
Participating countries will be using the OECD’s trademark “peer review” process to promote adherence to these standards. This brings peer pressure to bear on the design and implementation of investment policies. Indeed, investment related peer reviews have been going on now for nearly 50 years and have channelled decades of liberalisation in the OECD. The newer guidance on national security-related policy provides a new reference for these discussions among peers. OECD members are already actively involved in this process; for example, several in-depth discussions of proposed changes by several member countries have taken place and these have resulted in changes to draft laws.
Involving non-members
In recognition of the growing importance of the non-OECD world for international investment, OECD discussions of investment policies have been opened up -- the OECD work on SWFs has benefited from the participation of some 20 non-members including Russia, China, South Africa and Brazil. SWFs from China, Russia and Qatar have attended recent discussions. The OECD will continue to make a special effort to invite non-member governments from countries whose investors may feel they have been harmed by an OECD country’s restrictive measures – this will give them direct access to the OECD peer review mechanisms.
Documents and links
Events, reports and declarations
Speeches and news releases
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Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund, Press Release No. 08/78 [ English / français / español ], Washington, 12 April 2008
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News release: OECD countries stay open to commercial investments by sovereign wealth funds [ English / français ], 9 April 2008
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