Background

World FDI flows have grown from about $50 billion in the first half of the 1980s to an estimated $1.7 trillion by the end of 2008. The stock of such investment had accumulated to $15 trillion in 2008. This makes FDI the most important vehicle for delivering goods and services to foreign markets: sales of foreign affiliates have grown to some $30 trillion, compared to world exports of $20 trillion. At the same time, one-third of world trade is intra-firm — the lifeblood of the emerging integrated international production system.

Given the importance of FDI, it is not surprising that all countries seek to attract it. This is reflected, for example, in the changes in countries' FDI regulatory regimes. As reported by the United Nations Conference on Trade and Development (UNCTAD), out of 2,650 such changes that took place between 1992 and 2008, 90 percent went toward creating a more favorable investment climate. Complementing this trend at the international level, the number of bilateral investment treaties for the protection and promotion of investment has risen from less than 400 at the end of the 1980s to 2,676 at the end of 2008. At the same time, however, there are signs of a reevaluation of the costs and benefits of FDI, with FDI protectionism on the rise.

Moreover, the number of international investment disputes has risen rapidly: as of the end of 2008, the number of such disputes had reached 317, of which a substantial percentage arose in the past five years.

These developments make FDI one of the most important forces of the world economy. They also raise a host of regulatory and policy issues that need attention at national and international levels. It is precisely this challenge that the VCC takes on through its various activities, focusing especially on sustainability issues related to FDI.