SPOTLIGHT ON OUTWARD FOREIGN INVESTMENT l 105
100 90 80 70 60 50 40 30 20 10
Liberalization or promotion
18 20
17 20
16 20
15
14
20
20
13 20
12 20
10
09
11 20
20
20
08 20
07 20
06
05
20
20
20
20
04
0
03
Share of liberalizing and restrictive new investment policies (%)
FIGURE 3.6 Global Trends in Inward FDI Policies, 2003–18
Restriction or regulation
Source: UNCTAD, Investment Policy Hub, 2019 (https://investmentpolicy.unctad.org/). Note: The sum of liberalizing and restrictive measures does not add up to 100 because the figure does not include neutral or indeterminate measures. FDI = foreign direct investment.
It is difficult to objectively benchmark the current openness of the FDI regulatory arrangements in South Asia relative to other regions because of the lack of data. In South Asia, foreign investment liberalization started in the late 1980s and early 1990s for most countries, with Sri Lanka having an earlier start (1978) and India gradually liberalizing in the early 1980s.6 Since then, South Asian economies have taken a generally cautious investment liberalizing path, involving increasing foreign equity caps (above 49–50 percent, and subsequently eliminating caps), increasing the coverage of sectors open to FDI, establishing special economic zones, and facilitating investment through single-window approval processes or even automatic approvals. However, relative to other countries, the region does not compare highly in FDI liberalization. The only comparative measure recently reported that includes all South Asian economies is the 2021 investment freedom subindex of the Heritage Foundations’ Index of Economic Freedom, which places all South Asian economies in the bottom half of the 184-country sample. The index incorporates security aspects of investing, and so is not a strict indicator of policy measures.7 The OECD’s FDI Regulatory Restrictiveness Index is based solely on policies such as discriminatory screening or approval mechanisms, restrictions on foreign personnel and operations, and foreign equity restrictions. However, data collection is limited to 69 countries and, for South Asia, includes only India. The 2019 index measures India’s FDI arrangements as being about three times as restrictive as the OECD average.8 A similar regulatory FDI index (excluding security issues) with wider developing economy coverage, with data collected over 2010–12, was the World Bank’s Investing
