Control of Inward Investment

Abstract

Abstract This chapter describes the major techniques of inward investment control used by host states. Such techniques were at the forefront of the policy response to multinational enterprises (MNEs) in the 1970s, when levels of foreign investment in host states were reasonably high but economic nationalism and self-determination were influential. However, as economic globalization evolved, the cost of economic nationalism became too great to sustain, given the resulting loss of access to investment capital and the most modern productive technology. Increasingly, both developed and developing countries have turned away from the strict regulation of foreign investment and are permitting it on less stringent terms. Given the widespread adoption of privatization programmes, the range of industrial sectors reserved for public ownership has decreased. While reservations and controls over levels of foreign investment in privatized companies are a common feature, in many countries, the very purpose of privatization was to increase the overall level of inward foreign investment in the economy. Ultimately, the main prohibitions on foreign investment are to be found in sectors of the national economy relevant to national security. In recent years the number of such prohibitions has risen.