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:

• OECD Declaration on sovereign wealth funds and recipient country policies, made by Finance Ministers meeting at the OECD in June 2008: This provides high level political support for OECD guidance and increases its weight as a source of international investment law;
• 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);
• 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

• OECD guidance, which was made available to participants at the meeting of the IMFC and the Ministerial Roundtable on the Santiago Principles, 11 October 2008  
• References to the OECD Guidance made by high-level officials at the IMFC, Washington, 11 October 2008
• , 5 June 2008
• , 3-4 June 2008
• Sovereign Wealth Funds (SWFs) and Recipient Country Policies [ Sovereign Wealth Funds (SWFs) and Recipient Country Policies / français ], 4 April 2008 
• Conference on Sovereign Wealth Funds in the Global Investment Landscape: Building Trust, London, United Kingdom, 31 March 2008

Speeches and news releases

• , remarks by OECD Secretary-General Gurría at a briefing with the United States Council for International Business (www.uscib.org), Washington, 13 October 2008
• Message by the OECD Secretary-General to the IMF , Washington, 11 October 2008
• IMF Ministerial-level Roundtable on the “Santiago Principles” for Sovereign Wealth Funds, remarks by OECD Secretary-General, Washington, 11 October 2008
• Statement by Secretary-General Gurría to the International Monetary and Finance Committee (IMFC)
• 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
• Statement of G-7 Finance Ministers and Central Bank Governors, Washington, 11 April 2008
• News release: OECD countries stay open to commercial investments by sovereign wealth funds [ English / français ], 9 April 2008