International Regulation of Investment by State-owned Enterprises: A Comparative Perspective

Abstract

With more and more State-owned enterprises (SOEs) becoming international investors, SOEs have become the subject of much policymaking concern in a number of major economies. There have been mixed public perceptions towards such investment. Some of these investments are warmly welcomed, while others are met with strong opposition or deep suspicion. While most countries recognize that investment capital from SOEs is helpful for employment and economic growth, they also try to ensure that foreign SOE investors are properly regulated to minimize the potential risks and satisfy community concerns. Accordingly, SOE investors in a foreign jurisdiction are often treated differently from private investors. Their investment activities are generally subject to a more stringent review process. More recently, some free trade and investment agreements have specifically set out various rules to regulate foreign SOE investment. For instance, there is an entire chapter on SOEs in the Trans-Pacific Partnership (TPP) Agreement. This paper examines the regulatory approach to foreign SOE investment in the US, the UK, Canada and Australia. These countries are among the major recipients of foreign SOE investment capital, and foreign SOE investment has received mixed public perceptions in all of these economies. The paper considers why SOEs are treated differently, and reviews common concerns about foreign SOE investment. The discussion focuses on the regulatory differences among these major jurisdictions with various case studies. The reminder of the paper first briefly examines the international investment activities of SOEs from both developed and developing countries. It then considers the common community concerns about foreign SOE investment and the debate over and justifications for such investment. The next section examines important examples of international regulation on foreign SOE investment, such as in the US, the UK, Canada and Australia. The paper concludes that foreign SOE investment regulation is still in its early stage and is likely to continue to evolve as the public debate continues around future transactions.