Background

World FDI flows have grown from about $40 billion at the beginning of the 1980s to an estimated $1.5 trillion by the end of 2007. The stock of such investment has accumulated to more than $12 trillion in 2006. This makes FDI the most important vehicle in delivering goods and services to foreign markets: sales of foreign affiliates have grown to some $25 trillion, compared to world exports of $14 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 2,533 such changes that took place between 1991 and 2006, some 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 nearly 2,600 at the end of 2006.

At the same time, the number of international investment disputes has risen rapidly: as of the end of 2006, the number of such disputes had reached 259, of which more than two-thirds arose in the past four 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 CPII takes on through its various activities.