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Putting FDI on the G20 Agenda

With the right controls, foreign direct investment can be a reliable source of external finance to help countries meet their economic goals. But with many countries discouraging new FDI flows, rule-making and policy changes are urgently needed to help avoid costly investment wars.

NEW YORK – While much of the world’s attention is focused on the economic damage being wrought by US President Donald Trump’s trade wars, global trade’s twin – foreign direct investment – has largely been neglected. And yet, with FDI flows valued at $1.43 trillion in 2017 – on top of the $28 trillion already invested – how these flows are managed matters.

International investment has become an important source of external finance for many countries; for developing economies, in particular, FDI can exceed official development assistance by wide margins. But if FDI is to contribute meaningfully to economic growth and sustainable development, existing flows must increase even more. For that to happen, international investment policies need better coordination, and we believe that the G20 is the best forum to facilitate this process.

The current FDI framework – a muddled mess of more than 3,000 agreements – is insufficient to attract the level of investment needed to meet the United Nations’ Sustainable Development Goals for the year 2030. For example, some of the world’s largest economies are encouraging domestic firms to “re-shore” their operations and invest more at home. Many countries are also tightening controls on inward FDI; applying stricter screening measures to mergers and acquisitions; and demanding reciprocal market access in return for investment.