rcookie says():FDI...FOREIGN DIRECT INVESTMENT AND THE LAWS SUPPORTING..
rcookie says to magnetlady():(y)
rcookie says():OK.....HAVE SOMETHING THAT REALLY EXPLAINS AND OUTLINES EXACTLY WHAT THEY ARE TALKING ABOUT.....
loop says to rcookie():Does it require reading??
rcookie says to loop()::D
rcookie says to loop():IT IS FROM OECD ORGANIZATION FOR ECONOMIC COOPERATION & DEVELOPMENT...
rcookie says():New Generationof Foreign Investment Laws:MENA-OECD Good Practice and the New Iraqi Investment Regime
rcookie says():THIS IS FROM THE INTRODUCTION.......AND IS AWESOME..........
rcookie says():REQUIRED DU READING...........
rcookie says():1. Under international public law, states are sovereign in determining the entry and stay of foreigners including foreign investors. In the global market place, however, countries compete to attract high value- added foreign investment as a key development tool for their economies.
In order to effectively make use of their sovereign rights and concurrently attract much needed intra-regional and other foreign investment, a new generation of foreign investment laws1 are currently emerging in Middle East and North Africa (MENA) countries participating in the MENA-OECD Investment Programme.
2. Qatar (2000), Yemen (2002), Saudi Arabia (2000), Algeria (2001), and Kuwait (2003) have revised their investment laws recently. Egypt has issued a substantial revised law in 2005 and a new Syrian investment law entered into force in 2007. Iraq issued a new federal investment law in the summer of 2006. Morocco, Tunisia, the United Arab Emirates (UAE) and Oman are considering revising their current investment laws.
Jordan‟s revised investment law is pending parliamentary approval, and some countries are considering revising their investment regimes in light of emerging international good practice. Finally, other countries (for example Bahrain) do not regulate foreign investment through a special law, but deal with foreign investment regulation issues as a part of their overall commercial law.
3. Ministers and delegations from 16 MENA countries concluding the first Ministerial meeting of the MENA-OECD Investment Programme in February 2006 have recognised in a Ministerial Declaration “openness to foreign investment and access by investors to facilities necessary for investment and the movement of key personnel for the purpose of investment” as good practice.
The Ministerial Declaration equally recognises the principles of “national treatment for established foreign investments, fair and equitable treatment of investment, protection of investors rights and compensation for all categories of expropriation”.2
4. As a matter of fact, MENA countries‟ restrictions on foreign ownership of enterprises have been relaxed, as have restrictions on foreign ownership of land and real estate, and on foreign purchases of shares in local stock markets. In many MENA countries, foreigners can participate in the privatisation of state- owned enterprises.
5. Figure 1 demonstrates, however, that for selected MENA countries (Algeria, Egypt, Morocco, Qatar, KSA, Tunisia) the regulatory restrictiveness for Foreign Direct Investment (FDI) in the business services, telecommunications, construction, distribution, finance, tourism, transport and electricity sectors is still above the Organisation for Economic Co-operation and Development (OECD) countries‟ average and certainly above the OECD countries‟ minimum.
Figure 1 is based on the OECD‟s FDI Regulatory Restrictiveness Index computed for 29 OECD countries and extended by United Nations Conference on Trade and Development (UNCTAD) to cover six MENA countries. 3
6. The indicators primarily aim to measure deviations from „national treatment‟, i.e. discrimination against foreign investment expressed in laws, regulations, and schedules of international agreements to which the country is a party to (for example General Agreement on Trade in Services (GATS), OECD Declaration on International Investment, and OECD Codes on Liberalisation of Capital Movements), rather than to measure the institutional environment and administrative practices in general.
7. The Index scores foreign direct equity investment restrictions, screening and approval procedures and other restrictions including nationality requirements for boards of directors, movement of personnel, domestic content and other performance requirements. Entry restrictions are weighted particularly high and scores are attributed for all sectors mentioned, where 1 equals closed and 0 equals open.
8. Against this background, the new generation of investment laws emerging in MENA countries and in most emerging market economies, demonstrate a tendency to further converge with OECD average standards of liberalisation of investment entry requirements.
This does not, of course, imply that restrictions, screening, and approval procedures for foreign investment will be completely abolished. Rather, it means that remaining restrictions to FDI tend to become more transparent and converge towards an international best practice standard.
9. Over the past 20 years, most countries followed the shift from an approach which restricted the entry of FDI to an approach which maintains a limited number of sectoral restrictions or has no specific regulation for foreign investors (Exhibit 1).
10. Traditionally, total or comprehensive sectoral restrictions to FDI were used by countries pursuing a policy of economic nationalism. The socialist states of Eastern Europe and the former Union of Soviet Socialist Republics (USSR) were the most prominent examples of this approach.
This approach has become obsolete today. On the other end of the spectrum stand economies which have little or no specific entry regulations for FDI and follow a stringent national treatment approach, whereby foreign investors are granted the same treatment as domestic investors in like circumstances.
11. Currently, there are hardly any economies in the world which pursue a policy of total exclusion of FDI. Sectoral exclusions of FDI, on the other hand, are a common characteristic of various jurisdictions. Most states have restrictions in sectors which encompass industries relevant to national security, industries regarded as strategic, culturally significant industries and public utilities.
An example is the Exxon-Florio amendment which empowers the United States (US) president to prohibit the takeover of a US firm by a foreign firm where there exists „credible evidence that the foreign interest exercising control might take action that threatens to impair national security‟4.
Countries trying to enhance the transparency of their regulatory investment regime tend to publish so-called negative lists which allow the investor easy access to information about remaining horizontal or sectoral restrictions to FDI.
12. Finally, restrictions on foreign ownership in privatized companies in some countries have been following a so-called „golden share‟ approach whereby the government retains control over certain matters in recently privatised companies.
A golden share is a nominal share which is able to outvote all other shares in certain specified circumstances, often held by a government organization, in a government company undergoing the process of privatisation and transformation into a stock-company. The United Kingdom (UK), France and Germany have used this approach in the past.
13. Following a period of investment entry liberalisation, relatively few OECD member countries maintain general screening and authorisation procedures for FDI. However, sectoral restrictions are maintained for the protection of security and other essential interests.
Recently, existing regulatory frameworks for screening and approval procedures have been used more often in OECD countries to regulate investment in infrastructure and energy sectors as well as investment by enterprises controlled by foreign states (often managed by so-called sovereign funds).
The debate on the scope of exceptions to the free entry of foreign investment, following concerns of „national security‟ or „strategic industry,‟ in several OECD countries has re-emerged and led to plans for revisions of foreign investment entry procedures with the aim to potentially tighten requirements.
14. With a view to retain a strong liberalised international investment regime, the OECD‟s Investment Committee is currently studying this new tendency in its „Freedom of Investment project‟; the G8 meeting in Heiligendamm 2007 concluded the discussion on investment “with a strong commitment to the freedom of open and transparent investment”.
15. The absence of any specific regulatory treatment designed for foreign investment would render investment laws useless. Indeed, some countries in the OECD and in the MENA region made the policy choice to regulate the treatment of foreign investment only in their commercial laws and regulations, either on the basis of full national treatment, or with sectoral and other exceptions.
However, many economies striving to attract more high-quality foreign investment, still decide to issue special foreign investment laws, for internal policy reasons, either as a communication tool towards foreign investors, or for other motives.
16. Investors are looking for transparency and predictability, especially when investing in countries with regulatory traditions different from their own and where there are no fully modernised institutions and enforcement structures.
A „state of the art‟ investment law can serve investors, domestic or foreign, as one among many others indications that the investment climate in a given country is transparent and predictable with respect to issues like regulation of entry, investor guarantees, incentive systems and procedural and legal recourse issues.
Domestic best practice investment laws together with binding international investment instruments such as Bilateral Investment Treaties (BITs), World Trade Organisation (WTO) obligations, investment chapters of Free Trade Agreements (FTAs) and the OECD Declaration on International Investment, can reassure investors that basic standards protecting property rights and administrative treatment are in line with international standards.
17Figure 1.In this respect, the key themes which are covered in most investment laws encompass:entry regulations including, lists of exceptions to national treatment (refer to the negative list approached alluded to earlier);screening and approval requirements for foreign investments;
expropriation/national treatment/free transfer guarantees for investors; potentially a chapter on regulatory/fiscal/financial investment incentives; and,institutional provisions regarding an investment promotion agency or/and a high level investment commissions (see Exhibit 3).
18. Many „new generation‟ investment laws of MENA countries follow a „middle ground‟ approach between restricted entry and national treatment regulation of investment; fully open entry with varying degrees of entry regulation; investment encouragement through incentive systems; and, institutional and procedural arrangements with a view to promote investment.
II. REGULATION OF ENTRY IN MENA COUNTRIES’ INVESTMENT LAWS
19. Under international law, every state is sovereign in controlling entry and establishment of foreign entities within its territory. States may exercise this right in different ways as referred to in Exhibit 4.
First, there may be restrictions excluding FDI from the whole economy, or from specific sectors and industries.
Secondly, FDI may be permitted only after screening and approval procedures have been applied. These procedures may condition investments on the fulfilment of specific performance requirements (e.g. local content and sourcing requirements).
They may also serve as selection procedures for the granting of regulatory, financial or fiscal incentives for a foreign investor‟s project.
20. The Agreement on Investment and Free Movement of Arab Capital among Arab Countries of 1970, reiterates the principle of sovereignty in Article 3, highlighting each signatory „s sovereignty over its resources and its right to determine the procedures, terms and limits that govern Arab investment.5
Similarly, the Unified Agreement for the Investment of Arab Capital in the Arab States of 1980 controls the rights of entry and establishment6, as does Article 2 of the Agreement on Promotion, Protection and Guarantee of Investments among Member States of the Organisation of the Islamic Conference of 19817.
21. The principle that the state is sovereign in controlling entry of FDI into its territory is qualified by international obligations the state has agreed upon. Almost all MENA countries have joined major multilateral agreements covering investment related aspects.
As of December 2006, 11 out of the 18 MENA countries and territories participating in the MENA-OECD Investment Programme were members of the WTO. As such, they are obliged to implement the obligations of GATS, Trade-related aspects of intellectual property rights (TRIPs) and Trade-Related Investment Measures (TRIMs).
The GATS provides, for certain investors, the right of establishment if the member of the GATS makes specific commitments on market access. TRIPs accords national treatment and „most favoured nation treatment‟ to foreign firms‟ intellectual property rights, while TRIMs provide that certain categories of trade related investment measures infringe the principles of the General Agreement on Tariffs and Trade (GATT).