Inward investment restrictions: key policy tools and trends

While a significant amount of research and analysis has been dedicated to understanding the policies and strategies that countries use to attract foreign direct investment (FDI) for economic growth and development, less attention has been paid to the policy instruments employed by countries to restrict or limit the participation of FDI in their economy, despite their potential significance in shaping the investment climate and the overall economic development of a country. As highlighted in the chapter, in recent years, the world has witnessed a shift in the investment policy paradigm from the market-driven approach and the liberalization of trade and investment policies that characterized the 1990s and early 2000s, to a market-harnessing approach, in which measures aimed at liberalizing or promoting FDI are increasingly accompanied by measures focused on regulating FDI to make investment work for sustainable development. Global trends, however, mask important differences in the evolution of investment policymaking in developed and developing countries since the end of the 1980s. In this context, this chapter examines the key policy instruments used to regulate the entry of foreign investors, as well as current trends in this field.