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Dear Colleagues, It is my pleasure to share with you the key findings of the theme chapter of UNCTAD's World Investment Report 2016: Investor Nationality: Policy Challenges. Investor nationality is blurring as a result of complex MNE ownership structures. This has important investment policy implications, because most countries have rules and regulations that distinguish between domestic and foreign investors, and because international investment agreements provide benefits to investors based on their origin. The Report maps MNE ownership links worldwide with 4.5 million data entries, shows how investor nationality is becoming increasingly difficult to ascertain, and presents how policymakers around the world are dealing with the consequences. Highlights: More than 40 per cent of foreign affiliates worldwide have multiple "passports". These affiliates are part of complex ownership chains with multiple cross-border links involving on average three jurisdictions. These types of affiliates are much more common in the largest MNEs: 60 per cent of their foreign affiliates have multiple cross-border ownership links to the parent company. The nationality of investors in and owners of foreign affiliates is becoming increasingly blurred. "Multiple passport affiliates" are the result of indirect foreign ownership, transit investment through third countries, and round-tripping. About 30 per cent of foreign affiliates are indirectly foreign owned through a domestic entity; more than 10 per cent are owned through an intermediate entity in a third country; about 1 per cent are ultimately owned by a domestic entity. These "investor nationality mismatch" cases involve almost half of foreign affiliates in developed economies, and more than a quarter in developing economies. Rules on foreign ownership are widespread: 80 per cent of countries restrict majority foreign ownership in at least one industry. The trend in ownership-related measures is towards liberalization, through the lifting of restrictions, increases in allowed foreign shareholdings, or easing of approvals and admission procedures for foreign investors. However, many ownership restrictions remain in place in both developing and developed countries. The blurring of investor nationality has made the application of rules and regulations on foreign ownership more challenging. Policymakers should be aware that ownership complexity has a multilateralizing effect on bilateral and regional investment treaties. For example, up to a third of apparently intra-regional foreign affiliates in major (prospective) megaregional areas are ultimately owned by parents outside the region, raising questions about the ultimate beneficiaries of these treaties and negotiations. Based on this analysis, the World Investment Report 2016 advocates a re-evaluation of ownership-based regulations. Rethinking ownership-based policies means securing the effectiveness of ownership rules and considering alternatives. On the one hand, policymakers should test the "fit-for-purpose" of ownership rules compared to mechanisms in investment-related policy areas such as competition, tax, and industrial development. On the other, policymakers can strengthen the assessment of ownership chains and ultimate ownership and improve disclosure requirements. However, they should be aware of the administrative burden this can impose on public institutions and on investors. Overall, it is important to find a balance between liberalization and regulation in pursuing the ultimate objective of promoting investment for sustainable development. Please note that the UNCTAD World Investment Forum 2016 will take place in Nairobi, Kenya, 17-21 July 2016. With best regards, James X. Zhan Director, Investment & Enterprise Team Leader, World Investment Report United Nations Conference on Trade & Development Palais des Nations, Geneva Tel: +41 22 9175797 www.unctad.org/diae http://www.worldinvestmentreport.org/ ____ AIB-L is brought to you by the Academy of International Business. For information: http://aib.msu.edu/community/aib-l.asp To post message: [log in to unmask] For assistance: [log in to unmask] AIB-L is a moderated list.