The United Nations Conference on Trade and Development (UNCTAD) has just released their latest ‘Investment Policy Monitor’ report. Here are some top-line insights relevant for Sri Lanka:

1. 35 countries have taken new national investment policy measures, of which over one-third are new restrictions or regulations. Apparently it is the highest since 2003. Overall, there is a sharp spike in restrictive measures being imposed, and a dip in liberalisation/promotion measures. This signals that more countries are getting hawkish about certain aspects of their investment policy, when approving investments (e.g. national security, as explained in point 5 below). Sri Lankan Government institutions involved in FDI and investment laws would need to be mindful of this trend.

2.Meanwhile, several countries liberalized their investment regimes, notably – Brazil, China, Qatar, India, Philippines. This was mostly related to administrative frameworks approving/governing FDI. Both Philippines and Qatar have removed ownership caps on most sectors, that existed up to now. Meanwhile, a handful of countries expanded fiscal incentives for investment – Cameroon, Peru, Poland, Guatemala.

3. While 16 countries have been highlighted for taking measures to ‘promote and facilitate’ and 5 countries highlighted for ‘improved business climate’, Sri Lanka is not featured in either of these lists even though the country did take positive measures, like the ‘SWIFT’ process for investor applications (May 2018) and the improvement in the ‘Doing Business’ rankings (October 2018). Ideally, Sri Lanka should regularly update UNCTAD and ensure that our reforms are featured in, and recorded positively, in this global report.

4.Saudi Arabia has, in January 2019, released a ‘Guiding Principles for Investment Policymaking’. It covers 7 principles, including non-discrimination clauses, enhanced transparency procedures, protection of public policy concerns (social , environmental, etc) transfer of knowledge and technology from investments, etc. This is something Sri Lanka can possibly look at and see how to adapt/adopt. The BOI already adopts many of these things, but it is not codified and published anywhere, and now would be a good time to do it.

5. A final key insight from the latest report is the rising trend among developed countries in using ’national security’ considerations in putting tighter regulations and restrictions on FDI. This I guess follows the US and Brussels, particularly with regard to Chinese investment. This comes on the back of the WTO ruling just this week that gave Russia the ‘all clear’ for them invoking ‘national security’ considerations in trade with Ukraine. This can have implications on the US’s own trade restrictions citing ’national security’ as the key reason, and embolden President Trump’s stance.

Full report is available here – https://unctad.org/en/PublicationsLibrary/diaepcbinf2019d2_en.pdf