The latest UNCTAD Investment Policy Monitor (No. 27) focuses on the evolving landscape of outward foreign direct investment (OFDI) policies, increasingly shaped by sustainability considerations, geopolitical tensions, and national security concerns. Through a review of promotional strategies and regulatory frameworks, this IPM delves into the rationale behind outward FDI policies and highlights key trends.

Highlights

• The global landscape of outward foreign direct investment (OFDI) promotion, facilitation and regulation has undergone substantial changes since the early 2000s. This reflects the evolving patterns of global investment and production, the increasing focus on sustainability, and the heightened geopolitical tensions and gradual shift from liberalization to regulation that have characterized FDI policies over the past decade.
• OFDI promotion initiatives are common among developed countries, present in 79 per cent of them, reflecting their role as traditional sources of FDI. Support for companies to invest abroad typically serves two main objectives. First, the development and internationalization of domestic businesses, particularly SMEs. Second, the promotion of international cooperation and development efforts.
• An increasing number of developing countries are also supporting their firms in investing overseas (14 per cent), in line with their expanding role as sources of FDI. Supporting the internationalization of domestic firms and securing access to new markets, resources and technologies are the main objectives of these policies.
• Sustainability considerations and the potential benefits to the host country's development increasingly feature among the qualifying criteria for OFDI policy support, particularly among developed countries. However, despite international commitments in the context of the SDGs, only 18 developed and 5 developing economies have adopted OFDI promotion schemes targeted at promoting investment specifically in developing countries.
• OFDI promotion and regulation policies often coexist within the same country. Nearly half of the world's economies impose restrictions on OFDI, including most developing countries and least developed countries (LDCs). In these countries, restrictions traditionally aim at controlling capital flows to prevent balance of payment difficulties and to ensure that investments abroad do not adversely affect the home country's economic priorities.
• The past decade has seen a surge in OFDI restrictions across economies at all levels of development. Efforts to comply with anti-money laundering standards and concerns over the potential national and economic security risks posed by OFDI have contributed to the rise. The United States and the European Union, for instance, are in the process of adopting OFDI monitoring and screening mechanisms for economic transactions related to sensitive sectors for national security.
• As OFDI restrictions become more widespread, the complexity of applicable rules and regulatory discretion may reduce predictability and increase the administrative burden for home country authorities and investors.

Report by the United Nations Conference on Trade and Development